UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB




(X)QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from              to
                                           -------------    ----------------

Commission File Number: 000-49679


                                LitFunding Corp.
                                ----------------
             (Exact name of registrant as specified in its charter)

Nevada                                                               93-1221399
------
(State of incorporation or                      (I.R.S. Employer Identification
organization)                                                              No.)

3760 Pecos McLeod Dr. Suite 14, Las Vegas, NV                             89121
---------------------------------------------                             -----
(Address of principal executive offices)                             (Zip Code)

                                  702 317 1610
                                  ------------
              (Registrant's Telephone Number, Including Area Code)



Check whether the issuer filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.   Yes (x)   No  ( )


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of November 3, 2004, there were
11,467,333 of the issuer's $.001 par value common stock issued and outstanding.
Of these, 100,000 shares are to be cancelled pursuant to a change in the
agreement underlying their issuance.


                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS


Check whether the registrant filed all documents and reports required to be
filed by section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.    Yes     No n/a

Transitional Small Business Disclosure Format (Check One):   Yes    No  (x)



                                       1
<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

LITFUNDING, CORP.

Consolidated Balance Sheet at September 30, 2004 (UNAUDITED)

<TABLE>
<CAPTION>
ASSETS
<S>                                                                                                   <C>
   Cash and cash equivalents                                                                $          307,514
   Accounts receivable, net of allowance for doubtful accounts of $923,995                           1,385,992
   Contingent advances less reserve for unsuccessful
        resolutions of lawsuit of $2,861,074                                                         8,639,226
   Property and equipment, net of accumulated depreciation of $58,874                                   60,065
   Other assets                                                                                          9,579
                                                                                             ------------------
TOTAL ASSETS                                                                                       $10,402,376
                                                                                             ==================

LIABILITIES AND STOCKHOLDERS' DEFICIT:
 Liabilities Not Subject to Compromise -
  Accounts payable                                                                          $          352,451
  Accrued liabilities                                                                                  371,874
  Notes payable                                                                                         25,000
  Investor participation obligations                                                                   175,000
                                                                                             ------------------
     Total liabilities not subject to compromise                                                       924,325
                                                                                             ------------------

 Liabilities Subject to Compromise -
  IEP plan note                                                                                     26,275,709
  Trade and other miscellaneous claims                                                                 539,772
  IEP plan note interest                                                                             1,751,713
  Debentures                                                                                           200,000
                                                                                             ------------------
     Total liabilities subject to compromise                                                        28,767,194

                                                                                             ------------------
      Total liabilities                                                                             29,691,519
                                                                                             ------------------

STOCKHOLDERS' DEFICIT:
   Preferred stock, $0.001 par value, 10,000,000 shares
     authorized, none issued and outstanding                                                                 -
   Common stock,$0.001 par value, 50,000,000 shares
     authorized, 9,812,447 issued and outstanding                                                        9,812
   Additional paid-in capital                                                                        3,685,819
   Accumulated deficit                                                                             (22,984,774)
                                                                                             ------------------
      Total stockholders' deficit                                                                  (19,289,143)
                                                                                             ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                 $       10,402,376
                                                                                             ==================
</TABLE>




   The accompanying notes are an integral part of these unaudited consolidated
                             financial statements.

                                       2
<PAGE>


LITFUNDING CORP.

Consolidated Statements of Operations for the Three
and Nine Month Periods ended September 30, 2004 and 2003 (UNAUDITED)




<TABLE>
<CAPTION>
                                                               THREE MONTHS                           NINE MONTHS
                                                             ENDED SEPTEMBER 30                    ENDED SEPTEMBER 30
                                                          2004              2003                 2004              2003
                                                     ----------------  ----------------     ----------------  ---------------
<S>                                                       <C>                <C>                  <C>                <C>
NET REVENUE                                          $       283,805   $       134,505      $     2,099,484   $    1,095,823

OPERATING EXPENSES
   Selling                                                    28,301           498,809               28,301          923,029
   Reserve for doubtful accounts receivable                  194,606           520,428              840,689          779,749
   General and administrative expenses                       122,320           727,776            2,119,188        2,777,113
                                                     ----------------  ----------------     ----------------  ---------------
     Total expenses                                          345,227         1,747,013            2,988,178        4,479,891
                                                     ----------------  ----------------     ----------------  ---------------

LOSS FROM OPERATIONS                                         (61,422)       (1,612,508)            (888,694)      (3,384,068)

OTHER (INCOME) AND EXPENSES
   Interest (expense), net of interest income             (1,319,471)         (952,084)          (3,352,828)      (2,858,731)
   Rental income                                                   -                 -                6,609                -
  Other income (expense)                                      17,188                 -               91,446                -
                                                     ----------------  ----------------     ----------------  ---------------
     Total other income (expenses)                        (1,302,283)         (952,084)          (3,254,773)      (2,858,731)
                                                     ----------------  ----------------     ----------------  ---------------
(LOSS) BEFORE REORGANIZATION
ITEMS AND INCOME TAXES                                    (1,363,705)       (2,564,592)          (4,143,467)      (6,242,799)

REORGANIZATION ITEMS
Professional fees                                                  -                 -             (140,000)               -
                                                     ----------------  ----------------     ----------------  ---------------

(LOSS) INCOME BEFORE INCOME TAXES                         (1,363,705)       (2,564,592)          (4,283,467)      (6,242,799)

INCOME TAX (BENEFIT) PROVISION                                     -                 -                    -            1,600
                                                     ----------------  ----------------     ----------------  ---------------

NET INCOME (LOSS)                                    $    (1,363,705)  $    (2,564,592)     $    (4,283,467)  $   (6,244,399)
                                                     ================  ================     ================  ===============

NET (LOSS) PER SHARE
   Basic                                             $         (0.14)  $         (0.28)     $         (0.45)  $        (0.73)
                                                     ================  ================     ================  ===============
   Diluted                                           $         (0.14)  $         (0.28)     $         (0.45)  $        (0.73)
                                                     ================  ================     ================  ===============

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
   Basic                                                   9,681,491         9,165,250            9,501,722        8,591,532
                                                     ================  ================     ================  ===============
   Diluted                                                 9,681,491         9,165,250            9,501,722        8,591,532
                                                     ================  ================     ================  ===============
</TABLE>







   The accompanying notes are an integral part of these unaudited consolidated
                             financial statements.

                                       3
<PAGE>




LITFUNDING CORP.

Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 2004 and 2003 (UNAUDITED)



<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:                                         2004              2003
<S>                                                                            <C>              <C>
  Net loss                                                               $    (4,283,467)  $    (6,244,399)
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
  Depreciation and amortization                                                   20,128            23,955
  Reserve for unsuccessful resolution of lawsuits                                (48,393)          779,749
  Shares issued for compensation                                                       -            89,500
  Shares issued to creditors                                                      80,320
  Reserve for bad debts                                                          435,920                 -
  Gain on discount of pre-petition debt                                          (74,258)                -
  Loss on disposal of assets                                                       6,155
  Gain on forgiveness of debt                                                    (20,734)
  Deferred compensation                                                                -            29,250
  Changes in assets and liabilities:
    Trade and other accounts receivable                                       (1,081,809)          342,136
    Contingent advances                                                        1,132,050           525,978
    Prepaid commissions on contingent advances                                         -           871,699
    Deposits and other assets                                                      9,856             5,604
    Accounts payable and accrued expenses                                         12,716           411,765
    Interest payable                                                           1,582,930         2,717,770
    IEP note accrued interest                                                  1,751,713                 -
    Trade and other claims subject to compromise                                 539,772
                                                                         ----------------------------------
          Net cash provided by (used in) operating activities                     62,899          (446,993)
                                                                         ----------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Receipt of cash on acquisition                                                       -            25,000
  Purchases of property and equipment                                             (2,547)          (15,899)
                                                                         ----------------  ----------------
          Net cash used in investing activities                                   (2,547)            9,101
                                                                         ----------------  ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from investor participation borrowings                                175,000           118,507
  Acquisition of treasury stock                                                        -            (7,000)
  Proceeds from note payable                                                      25,000
  Principal payments on capital lease obligations                                 (4,514)                -
  Debenture                                                                            -            70,000
                                                                         ----------------------------------
          Net cash  provided by financing activities                             195,486           181,507
                                                                         ----------------  ----------------

INCREASE (DECREASE) IN CASH                                                      255,838          (256,385)
                                                                                       -
CASH, BEGINNING OF PERIOD                                                         51,676           274,715
                                                                         ----------------  ----------------

CASH, END OF PERIOD                                                      $       307,514   $        18,330
                                                                         ================  ================






  The accompanying notes are an integral part of these unaudited consolidated
                             financial statements.


                                       4
<PAGE>


LITFUNDING CORP.

Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 2004 and 2003 (UNAUDITED), continued




SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                             2004              2003
                                                                         ----------------  ----------------

         Income tax paid                                                 $             -   $         1,600
                                                                         ================  ================
         Interest paid                                                   $         8,975   $       123,262
                                                                         ================  ================


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
FINANCING ACTIVITIES:
       Assets acquired under capital lease obligation                    $             -   $        27,001
                                                                         ================  ================
       Note payable issued for relief of debt and interest payable       $    26,275,709   $             -
                                                                         ================  ================
       Accrued interest added to bankruptcy liabilities                  $     1,751,713   $             -
                                                                         ================  ================
       Issuance of shares for compensation                               $             -   $        89,500
                                                                         ================  ================
       Shares issued to creditors                                        $        80,320   $             -
                                                                         ================  ================
</TABLE>





  The accompanying notes are an integral part of these unaudited consolidated
                              financial statements.

                                       5
<PAGE>




NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

LitFunding Corp. ("The Company") was incorporated in the state of Nevada under
its original name of RP Entertainment. The Company serves as a holding company
for its wholly owned subsidiaries, California LitFunding ("California
LitFunding"), LitFunding USA, and E.Evolution Expeditions,Inc. (together the
Company, LitFunding USA and California LitFunding are referred to herein as the
"LitFunding Companies"). All operations of the Companies are conducted through
California LitFunding California LitFunding owns substantially all of operating
assets, employs all of the personnel, and pays the obligations of the LitFunding
Companies. LitFunding USA will assume all operations in the last quarter of
2004. The Company's board of directors intends to spin off E.Evolution
Expeditions, Inc. to the Company's shareholders in the fourth quarter of 2004.
Litfunding USA, formed March 22, 2004, has itself formed and become the managing
member of two wholly owned Limited Liability Companies, LFC 100, LLC and LFC
101, LLC formed July 28 and August 5, 2004, respectively, whose purpose is
investing in litigation recoveries by advancing capital to various law firms.

California Litfunding is the successor-in-interest by merger to the "LitFunding
Corp., a California corporation ("Litfunding I"). This merger resulted in the
two entity corporate structure that now exists. LitFunding I began investing in
litigation recoveries in 2000, by raising capital and advancing this capital to
various law firms pursuant to "Settlement Agreements". These Settlement
Agreements provide that the funds advanced shall be repaid, plus a fee, when the
lawsuits referenced in the agreement ultimately settle. The exact amount of the
fee payable on the funds advanced depends upon the length of time the funds are
outstanding, up to a fixed limit. Pursuant to the terms of the Settlement
Agreements, California Litfunding's contractual right to payment (as successor
to LitFunding I) is limited to the funds ultimately paid to the law firm from
the specified lawsuit, or lawsuits, in which the funds are invested or expended.

 The merger referenced above was implemented in January of 2003. To implement
this merger, the Company formed a wholly owned subsidiary (a Nevada corporation)
called RP Acquisition Corp. The Company then acquired all of the common stock of
LitFunding I. This merger was finalized on January 23, 2004, through the filing
of the Articles of Merger for RP Acquisition Corp. Upon this filing, LitFunding
I was merged into RP Acquisition Corp, which assumed title to all of its assets
and liabilities. RP Acquisition Corp. then changed its name to California
Litfunding. California LitFunding is now a wholly owned subsidiary of the
Company, which serves as the publicly listed holding company.

As a result of the merger transaction with the Company, the former LitFunding I
stockholders obtained control of the Company's voting stock. For financial
accounting purposes, the acquisition was a reverse acquisition of the Company by
California LitFunding, under the purchase method of accounting, and was treated
as a recapitalization with California LitFunding as the acquirer. Accordingly,
the historical financial statements have been restated after giving effect to
the January 23, 2003, acquisition of the Company. The financial statements have
been prepared to give retroactive effect to January 1, 2002, of the reverse
acquisition completed on January 23, 2003, and represent the operations of
California LitFunding. Consistent with reverse acquisition accounting: (i) all
of California LitFunding's assets, liabilities, and accumulated deficit, are
reflected at their combined historical cost (as the accounting acquirer) and
(ii) the preexisting outstanding shares of the Company (the accounting acquiree)
are reflected at their net asset value as if issued on January 23, 2003.

On April 2, 2003 certain individuals and entities filed an involuntary
bankruptcy petition against the Company in the United States Bankruptcy Court,
Central District of California. After numerous legal proceedings, in November
2003, the Company stipulated to the entry of an order for relief, thereby
placing the Company into a Chapter 11 proceeding. In January 2004, the Company's
wholly owned operating subsidiary, California LitFunding, filed a voluntary
Chapter 11 bankruptcy petition. In February of 2004, an order was entered
substantively consolidating the Company's Chapter 11 estate with the Chapter 11
estate of California LitFunding. However, this order did not effectuate a merger
between these two corporate entities. The bankruptcy plan was confirmed by the
bankruptcy court in May 2004 and became effective on June 17th, 2004.

The Company incurred material net losses for the nine months ended September 30,
2004 and liabilities exceeded assets by approximately $19,000,000 at September
30, 2004. As discussed in Note 3, the Company has entered into a Chapter 11 Plan
of Reorganization under the United States Bankruptcy Code. The ability of the
Company to continue as a going concern is dependent upon successful operation
under the bankruptcy plan, obtaining additional capital and financing, and
generating positive cash flow from operations. The Company intends to seek
additional capital either through debt or equity offerings and believes that
increased volume and reduction in its lead time to finance and collect on funded
cases will ultimately lead to profitability and positive cash flows. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.



                                       6
<PAGE>


NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of twelve
months or less. At times cash deposits may exceed government insured limits. At
September 30, 2004, cash deposits exceeded those limits by approximately
$140,000.

The statement of cash flows for the period ended September 30, 2004, includes an
increase in accounts payable and accrued expenses of $415,000 related to
professional fees associated with the Reorganization. The Company had
expenditures of $125,500 and $180,000 related to the Reorganization professional
fees during the nine month period ended September 30, 2004.

Principles of consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, California
LitFunding, Litfunding USA, Inc., LFC 100, LLC, LFC 101, LLC and E.Evolution
Expeditions. All significant intercompany accounts and transactions have been
eliminated.

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is recorded on a straight-line basis over the estimated useful
lives of the assets ranging from 3 to 5 years. Depreciation expense for the
three and nine months ended September 30, 2004 was $6,628 and $20,128.

Revenue recognition -The Company recognizes revenues earned in relation to the
fees charges on the contingent advances upon successful resolution of the funded
lawsuit. In accordance with the guidelines of Staff Accounting Bulletin (SAB)
101 and 104 and Statement of Financial Accounting Concepts (SFAC) No. 5, upon
successful resolution of the lawsuit, including appeals, the fees become
realizable and earned. At this time the fee is determinable and the collection
ensured.

Income taxes - The Company provides for income taxes based on the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which, among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
financial statements. The company is a cash basis tax payer.

Financial Instruments - Financial instruments consist primarily of cash,
accounts receivable, contingent advances, and obligations under accounts
payable, accrued expenses, notes payable, debentures and the IEP plan note. The
carrying amounts of cash, accounts receivable, accounts payable and accrued
expenses approximate fair value because of the short maturity of those
instruments. The carrying value of the Company's contingent advances approximate
fair value because the Company provides allowances for any estimated
uncollectible amounts (see Note 4). The carrying value of notes payable and
debentures approximate fair value because they contain market value interest
rates and have specified repayment terms. The investor participation obligations
are carried at the expected repayment amounts as determined by the individual
contracts and most recently at the expected amounts allowed through the
bankruptcy proceedings. Obligations under capital leases approximate fair value
because the original balances approximated the fair value of the underlying
equipment at the time the obligations were incurred. The Company has applied
certain assumptions in estimating these fair values. The use of different
assumptions or methodologies may have a material effect on the estimates of fair
values.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates made in connection with the preparation of the accompanying financial
statements include the carrying value of accounts and contingent advances
receivable,

Stock-Based Compensation - Statements of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, ("SFAS 123") established accounting and
disclosure requirements using a fair-value based method of accounting for
stock-based employee compensation. In accordance with SFAS 123, the Company has
elected to continue accounting for stock based compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and has opted for the disclosure
provisions of SFAS N.123

Impairment of long-lived assets is assessed by the Company whenever there is an
indication that the carrying amount of the asset may not be recoverable.
Recoverability of these assets is determined by comparing the forecasted
undiscounted cash flows generated by those assets to the assets' net carrying
value. The amount of impairment loss, if any, is measured as the difference
between the net book value of the assets and the estimated fair value of the
related assets.

Net Loss Per Share: Net loss per share is calculated using the weighted average
number of shares of common stock outstanding during the year. The Company has
adopted the provisions of SFAS No. 128, Earnings Per Share.

Business Cycle: Because the nature of the Company's operations is such that the
investment in contingent advances and ultimate resolution of cases and
completion of the earnings process is generally longer than one year, an
unclassified balance sheet is presented.



                                       7
<PAGE>



Recently Issued Accounting Pronouncements: In May 2003, the FASB issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. SFAS No.
150 requires the classification as a liability of any financial instruments with
a mandatory redemption feature, an obligation to repurchase equity shares, or a
conditional obligation based on the issuance of a variable number of its equity
shares. The Company does not have any financial instruments with a mandatory
redemption feature. The Company believes the adoption of SFAS No. 150 will not
have a material effect on the Company's financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 clarifies the
requirements for a guarantor's accounting for and disclosure of certain
guarantees issued and outstanding. The initial recognition and initial
measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements for periods ending after December 15, 2002. The adoption of
FIN 45 did not have a significant impact on the Company's financial statements.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities" (FIN 46). FIN No. 46 states that companies that have exposure to the
economic risks and potential rewards from another entity's assets and activities
have a controlling financial interest in a variable interest entity and should
consolidate the entity, despite the absence of clear control through a voting
equity interest. The consolidation requirements apply to all variable interest
entities created after January 31, 2003. For variable interest entities that
existed prior to February 1, 2003, the consolidation requirements are effective
for annual or interim periods beginning after June 15, 2003. Disclosure of
significant variable interest entities is required in all financial statements
issued after January 31, 2003, regardless of when the variable interest was
created. The Company is presently reviewing arrangements to determine if any
variable interest entities exist but does not anticipate the adoption of FIN 46
will have a significant impact on the Company's financial statements.


NOTE 3: BANKRUPTCY PETITION AND REORGANIZATION

    On April 2, 2003, certain creditors filed an involuntary bankruptcy petition
under Chapter 7 of the United States Bankruptcy Code against the Company. In the
Petition, the Petitioning Creditors alleged that the Company was generally not
paying its debts as they became due. The Company disputed this allegation. The
Company and the Petitioning Creditors engaged in litigation regarding the merits
of the involuntary petition, and the Petitioning Creditors rights under disputed
contracts.

Pursuant to the terms of a stipulation with the Petitioning Creditors, the
Company entered Chapter 11 effective November 19, 2003. The costs of litigating
the merits of the Involuntary Petition, and the financial impact of the pending
involuntary, so materially damaged both the Company and California LitFunding
that it ultimately became necessary for both companies to enter into Chapter 11.
Accordingly, California LitFunding entered into a Chapter 11 proceeding on
January 26, 2004.

     In February of 2004, the litigation relating to the involuntary petition
was settled. The settlement reached by and among the Company and the petitioning
creditors has been incorporated into a reorganization plan that was confirmed at
a court hearing on May 26, 2004 and became effective on June 17th, 2004.

    California Litfunding, as the operating entity, holds title to substantially
all of the assets of the LitFunding Companies. The core assets within California
Litfunding, and those with most of the value, are the Settlement Agreements. A
total of approximately $18.6 million dollars was invested through the Settlement
Agreements, approximately $9.2 million dollars in fees and principal have been
recovered, approximately $2.2 million dollars are receivable, and approximately
$2.1 million dollars in losses have been suffered. A principal balance of
approximately $11.2 million dollars remains.

    Based upon the current status of the underlying lawsuits, the Company
projects that between $25.0 million and $30.0 million dollars will be collected
over the next three years on the lawsuits subject to Settlement Agreements.

The Company's primary liabilities are summarized in the following paragraphs:

          A.   Administrative and Priority Claims. The claims within this class
               total approximately $360,000 through September 30, 2004. Most of
               this amount represents the fees and costs payable to the
               LitFunding Companies' general insolvency counsel, Winthrop
               Couchot, P.C. The balance represents sums owed to accountants,
               and approximately $10,000 in priority wages owed to two officers
               of the LitFunding Companies;



                                       8
<PAGE>


          B.   Gap Claims. During the period between the filing of the
               involuntary petition and the date on which the Company stipulated
               to the entry of an order for relief, certain claims accrued.
               Substantially all of these claims accrued in favor of two law
               firms that were defending the Company against the involuntary
               filing. The LitFunding Companies have reached an agreement with
               these claimants. In summary, 40% of those claims were paid in
               July 2004 and the balance of their claims will be paid over the
               next twelve months;

          C.   Debenture Claims. In calendar years 2002 and 2003 California
               Litfunding issued debentures to seven individuals, creating
               approximately two hundred thousand dollars ($200,000) in debt
               obligations. These claims are unsecured and they are undisputed.

          D.   Unsecured Claims Other Than Debenture Claims and IEP Claims. The
               Debtors have approximately $500,000 in allowed unsecured claims.
               Approximately 5% of this amount was paid in July 2004 and
               approximately 400,000 shares were issued to debtors in accordance
               with the Plan of Reorganization.

          E.   IEP Claims. Pursuant to the Settlement Agreement entered into by
               and between The Company and the IEP petitioning creditors, each
               and every claim held by the IEP petitioning creditors has been
               fixed in the Plan. The totality of all claims held by the IEP
               petitioning creditors has been incorporated into the Plan Note.
               The Plan Note has an opening balance of $26,275,709 as of May 1,
               2004. Except as set forth in the Plan of Reorganization, the
               Debtors are not responsible for payment of the indebtedness and
               the creditors can only look to the specific collateral granted in
               the note for repayment of the note. Collateral does not extend to
               any Settlement Agreements entered into after February 26, 2004.

          F.   Interest Holders. Interest holders are the parties who hold
               ownership interest (i.e., equity interest) in The Company. The
               Plan creates two classes of interests. Class 7, which is
               comprised of the Company, as the holder of all of the common
               stock of California Litfunding, and Class 8, which is comprised
               of all of the holders of common stock interests in the Company.
               These classes are not impaired under the terms of the Plan.

         The Plan presented to the court and ruled in favor of on May 26, 2004
incorporates both a business plan, and a legal framework for the payment of
claims. The business plan sets forth how the Company intends to generate the
funds necessary to meet the monetary obligations fixed in the Plan. The legal
framework details what each class of creditors will receive under the terms of
the Plan.

         The business plan incorporated into the Plan is designed to accomplish
two core objectives. The first core objective is to maximize the funds collected
to be collected. The second core objective is to essentially restart The
LitFunding Companies' business model by raising and investing additional capital
in new lawsuits.

The Company intends to repay all obligations in full. However, the Company has
rejected capital lease and an operating lease. Claims are impaired as that
termed is used in the Bankruptcy Code because obligations will be paid out over
specified long term periods different from the original terms of the agreements.
However, for accounting purposes, the Company does not believe any of the
obligations are compromised at September 30, 2004, based on the expected amount
of allowed claims.



                                       9
<PAGE>


NOTE 4: ACCOUNTS RECEIVABLE AND CONTINGENT ADVANCES

Accounts receivable represents unpaid amounts due for the return on contingent
advances and fees earned on cases in which there have been positive resolutions.
Allowances for bad debts amounted to $923,995 as of September 30, 2004.

The Company enters into agreements with lawyers and law firms whereby the
Company underwrites and funds litigation costs on selected cases. Generally, the
Company will be repaid those amounts plus negotiated fees when a case is settled
and awards are received by the plaintiffs. These agreements are non-recourse but
are secured by a lien against any awards in the case. Fees are generally based
on the length of time the advances are outstanding. If the fee is less than the
award or settlement, the fees are reduced to the amount of the recovery.

Management estimates the net realizable value of contingent advances by
periodically reviewing the progress of the cases with the attorneys trying them
and past experience with similar cases. Management believes that on a portfolio
wide basis, the Company has historically achieved a success rate of
approximately 85% on cases that it has funded. This success rate may have been
materially affected by the bankruptcy litigation in that the Company has had to
institute several law suits against attorneys that took advantage of the
litigation to not meet their obligations. Management monitors all cases and
provides an allowance if it believes that any advances have been impaired. At
September 30, 2004, there were contingent advances outstanding of $11,500,300
and a corresponding impairment allowance of $2,861,074.


NOTE 5: INVESTOR EQUITY PARTICIPATION OBLIGATIONS

The Company has raised capital to enable it to engage in the practice of funding
the contingent advances by entering into so called Investor Equity Participation
("IEP") agreements. These agreements, the nature of which has been redefined and
fixed as part of plan of reorganization, and the totality of all claims held by
the IEP petitioning creditors has been incorporated into the Plan Note. The Plan
Note had an opening balance of $26,275,709 as of May 1, 2004 and as of May 1,
2004 included an approximate $2,000,000 from the cancelled sale of stock and a
predetermined retroactive return. This Plan note accrues interest at 20% per
annum, and interest accrued on this note in the three and nine months ended
September 30, 2004 was $1,313,785 and $1,751,713, respectively. Under the
bankruptcy plan these obligations are to be repaid only to the extent the
Company successfully collects funds from accounts receivable and contingent
advances that were entered into and up to February 26, 2004. There is no other
recourse. There is no specific schedule of repayment but the Company anticipates
collections to be adequate to fully repay the IEP Note

In the three months ended September 30, 2004, the Company obtained new fundings
of $175,000 that are presently structured as debt obligations. The Company and
the investors are structuring the fundings in a manner that will result in the
obligations only being repaid upon a successful resolution to the legal cases
for which the fundings were advanced. Under these terms, the participant lender
would be repaid the principal obligation plus 50% of the Company's remaining
proceeds of the award upon successful resolution of the case. The structure is
also anticipated to have no recourse to the Company should the case being
funded, have an unsuccessful resolution, in that instance, the Company would not
be obligated to the repay the original principal balance of the investment.

NOTE 6: DEBENTURES AND NOTE PAYABLE

During the years ended December 31, 2003 and 2002, the Company issued 5-year 9%
convertible debentures amounting to $200,000, due January 1, 2007. Interest is
due semi-annually on the first day of June and December of each year, commencing
June 1, 2003 until fully paid. As part of the plan of reorganization, these
debentures will have an amended maturity to June 15, 2008.

The registered holders of the debentures have the right, in the year prior to
maturity, to convert the principal at the original conversion price of $10 for
one Common share or at the adjusted conversion price. If and whenever on or
after the date of this debenture, the Company issues or sells any share of
common stock for a consideration per share less than the initial conversion
rate, then upon such issue or sale, the initial conversion rate shall be reduced
to the lowest net price per share at which such share of common stock have been
issued. The debentures are subordinated to all the senior indebtedness,
including debts under Equity Participation Agreement.

During the three months ended September 30, 2004, the Company issued a $25,000
note payable. This note accrues interest at 10% and is due when certain
performance criteria are met.

NOTE 7: STOCKHOLDERS' DEFICIT

As discussed in Note 1, the Company entered into a merger agreement in January
2003, whereby 7,592,250 shares of its common stock were issued in exchange for
all the issued and outstanding shares of the common stock of California
LitFunding. The acquisition was a reverse acquisition of the Company by
California LitFunding, under the purchase method of accounting, and was treated
as a recapitalization with California LitFunding as the acquirer. Accordingly,
the historical financial statements have been restated after giving effect to
the January 23, 2003, acquisition of the Company.

During the nine months ended September 30, 2004 and 2003, the Company granted
-850,000 and 100,000 stock options to officers and employees. The exercise price
of these options is $0.10 per share. They vest immediately and expire in three
years.

In July, 2004, in accordance with the Plan of reorganization, the Company issued
approximately 400,000 ordinary shares to general creditors of the company.




                                       10
<PAGE>



NOTE 8: COMMITMENTS AND CONTINGENCIES

The Company is a defendant in several matters in litigation, many of which are
in the normal course of business, including litigation for refunds of funds
invested. The Company believes these suits are without merit and intends to
defend these litigations in court of law.

The Company is involved in a suit alleging breach of contract, fraud, conspiracy
and defamation. The claimants allege there was a finder's fee agreement between
them and the founding officers/shareholders of the Company. The Company's
position is that there was a negotiated agreement with the claimants that was
honored. The claimants allege damages of $16 million. A hearing on objections to
theses claims was heard on May 24, 2004 and an Order entered on October 28,
2004. Both claimants' claims for money were disallowed. Claims based upon a
claim of debt or payment of money and/or claims for additional common stock were
temporarily disallowed pending further hearings. Claimants have filed adversary
complaints seeking the same relief. Motions to dismiss will be heard in February
2005. State claims for the same relief are pending but stayed. They are subject
to res judicata dismissal upon conclusion of Federal proceedings.
..

The Company believes that all alleged claims will be settled through the
bankruptcy court.

The Company has rejected the operating and capital leases through the bankruptcy
proceeding.

NOTE 9: NET LOSS PER SHARE

Net loss per share is calculated using the weighted average number of shares of
common stock outstanding during the period. Options to purchase 2,332,500 common
shares were not considered in the calculation for diluted earnings per share for
the nine month period ended September 30, 2004 because the effect of their
inclusion would be anti-dilutive.

A summary of the net loss per share calculation for the nine month periods ended
September 30, is presented below:
<TABLE>
<CAPTION>
                                                2004                        2003
                                  ----------------- ------------- --------- -------------- ------------- --------
                                                                    Per                                    Per
                                   Income (Loss)       Shares      share    Income (Loss)     Shares      share
                                  ----------------- ------------- --------- -------------- ------------- --------
<S>                                      <C>             <C>        <C>          <C>            <C>        <C>
Net (Loss) Income                 $  (4,283,467)                            $(6,244,399)
Preferred stock dividends               (-0-)                                    (-0-)

BASIC EARNINGS PER SHARE

Loss available to common
stockholders                      $  (4,283,467)    9,501,722     $(0.45)   $(6,244,399)   8,591,532     $(0.73)

Effect of dilutive securities           N/A                                                                N/A


DILUTED EARNINGS PER SHARE        $  (4,283,467)    9,501,722     $(0.45)   $(6,244,399)   8,591,532     $(0.73)
</TABLE>


NOTE 10: CONCENTRATION OF CREDIT RISK

The Company maintains cash balances at banks in California. Accounts are insured
by the Federal Deposit Insurance Corporation up to $100,000. At times, the
Company's cash balances may exceed insured limits. At September 30, 2004, the
Company exceeded those limits by approximately $140,000.

Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily contingent advances and trade accounts receivable. The
trade accounts receivable are due primarily from customers concentrated in
California.

The Company's contingent advances are generally due from clients when the
litigating case in question is settled favorably. Substantially all cases are
being tried by lawyers in the state of California. Monies invested by the
Company plus fees become part of the Companies accounts receivable and are due
at that time less any settlement discount. The contingent advances balance at
September 30, 2004 is comprised of numerous debtors. However, one debtor
represents approximately 58% of the total balance at September 30, 2004. No
other single note or debtor comprises greater than 10% of the total balance at
September 30, 2004.


                                       11
<PAGE>


NOTE 11:  SUBSEQUENT EVENTS

On October 6, 2004, the Company announced that it had signed an additional non
-binding letter of intent for a multi-stage $2.5 million dollar round of
funding, for the purpose of funding litigation cases.


On November 2, 2004 The Company completed a previously announced stock dividend
of one share for each ten shares of common stock held by stockholders of record
as of the close of business on October 28, 2004. Fractional shares were rounded
up. The dividend increased the total number of shares outstanding to 11,467,333.


                                   * * * * * *













                                       12
<PAGE>




ITEM 2.  PLAN OF OPERATION

THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF
MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT
ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE",
"ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR
SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN
COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,
HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY
IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.

THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT
TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND
OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA
AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM
AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE
EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY
FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED
ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. WE CANNOT GUARANTY
THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED
IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE
ANY SUCH FORWARD-LOOKING STATEMENTS.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. These accounting policies are described at
relevant sections in this discussion and analysis and in the notes to the
financial statements included in our Quarterly Report on Form 10-QSB for the
period ended September 30, 2004. We do not anticipate material changes in the
carrying value of the Company's assets and liabilities as a result of the
bankruptcy proceeding. It is possible that the classification and amount
of the IEP obligations may change as a result of future negotiation. There may
also be changes as disputed claims are resolved.

LitFunding Corp. (we, or "the Company") was incorporated in the state of Nevada
under its original name of RP Entertainment. The Company serves as a holding
company for its wholly owned subsidiaries, California LitFunding ("California
LitFunding"), LitFunding USA, and E.Evolution Expeditions,Inc. (together the
Company, LitFunding USA and California LitFunding are referred to herein as the
"LitFunding Companies"). All operations of the Companies are conducted through
California LitFunding. California. LitFunding owns substantially all of
operating assets, employs all of the personnel, and pays the obligations of the
LitFunding Companies. During the fourth quarter of 2004, LitFunding USA will
begin assuming all of our future operations. The Company's board of directors
intends to spin off E.Evolution Expeditions, Inc. to the Company's shareholders
in the fourth quarter of 2004. Litfunding USA, formed March 22, 2004, has itself
formed and become the managing member of two wholly owned Limited Liability
Companies, LFC 100, LLC and LFC 101, LLC formed July 28 and August 5, 2004,
respectively, whose purpose is investing in litigation recoveries by advancing
capital to various law firms.




                                       13
<PAGE>


California Litfunding is the successor-in-interest by merger to the "LitFunding
Corp., a California corporation ("Litfunding I"). This merger resulted in the
two entity corporate structure that now exists. LitFunding I began investing in
litigation recoveries in 2000, by raising capital and advancing this capital to
various law firms pursuant to "Settlement Agreements". These Settlement
Agreements provide that the funds advanced shall be repaid, plus a fee, when the
lawsuits referenced in the agreement ultimately settle. The exact amount of the
fee payable on the funds advanced depends upon the length of time the fund are
outstanding, up to a fixed limit. Pursuant to the terms of the Settlement
Agreements, California LitFunding's contractual right to payment (as successor
to LitFunding I) is limited to the funds ultimately paid to the law firm from
the specified lawsuit, or lawsuits, in which the funds are invested or expended.

The merger referenced above was implemented in January of 2003. To implement
this merger, we formed a wholly owned subsidiary (a Nevada corporation) called
RP Acquisition Corp. We then acquired all of the common stock of LitFunding I.
This merger was finalized on January 23, 2004, through the filing of the
Articles of Merger for RP Acquisition Corp. Upon this filing, LitFunding I was
merged into RP Acquisition Corp, which assumed title to all of its assets and
liabilities. RP Acquisition Corp. then changed its name to California
Litfunding. California Litfunding is now a wholly owned subsidiary of the
Company, which serves as the publicly listed holding company.

As a result of the merger transaction with us, the former LitFunding I
stockholders obtained control of our voting stock. For financial accounting
purposes, the acquisition was treated as a reverse acquisition by California
LitFunding, under the purchase method of accounting, and was treated as a
recapitalization with California LitFunding as the acquirer. Accordingly, the
historical financial statements have been restated after giving effect to their
January 23, 2003, acquisition of us. The financial statements have been prepared
to give retroactive effect to January 1, 2002, of the reverse acquisition
completed on January 23, 2003, and represent the operations of California
LitFunding. Consistent with reverse acquisition accounting: (i) all of
California LitFunding's assets, liabilities, and accumulated deficit, are
reflected at their combined historical cost (as the accounting acquirer) and
(ii) our preexisting outstanding shares (the accounting acquiree) are reflected
at their net asset value as if issued on January 23, 2003. We do own one other
dormant subsidiary besides California LitFunding and LitFunding USA. E.Evolution
Expeditions, a Nevada company was previously formed on February 25, 2000 by RP
Entertainment (now LitFunding Corp. discussed above). LitFunding USA was formed
on March 22, 2004 expressly for the purpose of restarting business and has
itself formed and become the managing member of two wholly owned Limited
Liability Companies, LFC 100, LLC and LFC 101, LLC whose purpose has been to
begin investing in litigation recoveries by advancing capital to various law
firms.

On April 2, 2003 certain individuals and entities filed an involuntary
bankruptcy petition against us in the United States Bankruptcy Court, Central
District of California. After numerous legal proceedings, in November 2003, we
stipulated to the entry of an order for relief, thereby placing us into a
Chapter 11 proceeding. In January 2004, our wholly owned operating subsidiary,
California LitFunding, filed a voluntary Chapter 11 bankruptcy petition. In
February of 2004, an order was entered substantively consolidating our Chapter
11 estate with the Chapter 11 estate of California LitFunding. However, this
order did not effectuate a merger between these two corporate entities. On May
26, 2004 the bankruptcy court ruled in favor of our plan of reorganization and
it became effective on June 17, 2004.

We incurred material net losses for the Nine months ended September 30, 2004 and
liabilities exceed assets by approximately $19.2 million at September 30, 2004.
As discussed in Note 3 to the financial statements, we did enter into a Chapter
11 Plan of Reorganization under the United States Bankruptcy Code. Our ability
to continue as a going concern was dependent upon successful confirmation and
operation under the bankruptcy plan, and remains dependent upon obtaining
additional capital and financing and generating positive cash flow from
operations. We intend to seek additional capital either through debt or equity
offerings and believe that increased volume and reduction in our lead time to
finance and collect on funded cases will ultimately lead to profitability and
positive cash flows. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should we be
unable to continue as a going concern.



                                       14
<PAGE>


In February 2004, we entered into a settlement agreement with the petitioning
creditors. The terms of this settlement are currently incorporated and made a
part of, our Joint Chapter 11 Plan of Reorganization and a confirmation hearing
for that plan was held and approved on May 26, 2004 and became effective on June
17, 2004. The Settlement Agreement provides, among other things, for the
dismissal of all litigation between the parties promptly after the confirmation
of the reorganization Plan. This resolution will bring to a close of over
thirteen months of acrimonious, debilitating and expensive litigation between
the parties and will allow us to restart the business which was effectively
stalled and damaged by the litigation. An integral part of our prospective
business plan involves raising additional funds for investment in lawsuits.
Since different segments of the capital markets may desire different investment
structures and investment vehicles, we cannot predict exactly how funds will be
invested with us after the effective date of the reorganization plan in each
instance. Initially, we anticipate that the new funding will be obtained from
private parties and investment groups, and that this funding will be in the form
of loans. We have restarted the business using LitFunding USA, a new subsidiary
formed in March of 2004 specifically for this purpose. LitFunding USA received a
non binding letter of Intent for just this purpose in the amount of $2,500,000
on August 5, 2004 and a further non binding letter of intent for an additional
$2,500,000 on September 29, 2004. The financing party will be granted a first
priority lien on all of the lawsuits that they invest in. Once the obligations
owed to the capital source are satisfied, LitFunding USA will receive the
balance of the distributions.

LIQUIDITY AND CAPITAL RESOURCES.

Our principal capital requirements during the year 2004 are to fund the internal
operations, pay for the defense of the litigation described in Part II, Item 1,
below and fund the restart of the business subsequent to the confirmation of the
reorganization plan. We had approximately $300,000 in cash on hand at September
30, 2004 and approximately 2.3 million in receivables including fees and
principal resulting from the resolution of cases funded. Approximately $11.5
million dollars in principal remain outstanding on advances made related to
cases for which there has not yet been resolution. We anticipate that when
collected, the gross value of this principal plus earned fees will range between
$25 and $30 million. Our largest liability is a $26,275,709 note that was
defined and fixed as part of our plan of reorganization. Under the bankruptcy
plan, this obligation together with the interest that it accrues at 20% per
annum, are to be repaid only to the extent that the Company successfully
collects funds from accounts receivable and contingent advances that were
entered into up to and including February 26, 2004. There is no other recourse
to the Company or its affiliates. There is no specific schedule of repayment but
the Company anticipates collections to be adequate to fully repay this note. In
the three months ended September 30, 2004, we obtained new fundings of $175,000
that are presently structured as debt, under the terms of a non-binding letter
of intent in the amount of $2.5 million. That letter of intent was disclosed and
discussed in previous filings. A similar letter of intent from another investor
was reported in a filing on October 6, 2004, bringing the total funds available
to the Company under these letters of intent to $5 million, at the time of this
filing. The Company and the investors are structuring the fundings in a manner
that will result in the obligations only being repaid upon the successful
resolution to the cases for which the fundings were advanced. Under these terms,
the participant lender would be repaid the principal obligation plus 50% of the
Company's remaining proceeds of the award upon successful resolution of the
cases. Although we have cash of approximately $300,000 as of September 30, 2004,
it is the opinion of management, that the available funds will not satisfy our
working capital requirements for the next twelve months. Nevertheless, we
believe our reorganization plan does provide for sufficient revenue to sustain
operations. Our forecast for the period for which our financial resources will
be adequate to support our operations involves significant risks and
uncertainties and actual results could fail as a result of a number of factors.
We plan to raise necessary funds by selling shares of our common stock or
through the sale of interest bearing debentures to selected investors or a
combination of these.

We will also consider establishing relationships with selected business partners
whose contributions include necessary cash. As discussed below, we believe that
we will generate sufficient cash flow to make payments on the bankruptcy
liabilities in accordance with the Plan.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004.

REVENUES AND RESULTS OF OPERATIONS.

As shown in the accompanying financial statements, we had gross revenues of $
2,099,404 and incurred a net loss of $4,283,467 for the nine months ended
September 30, 2004 as compared to gross revenues of $ 1,095,823 and a net loss
of $ 6,244,399 for the same period in 2003. The increase in revenues in 2004
compared to 2003 is primarily attributable to more cases reaching resolution and
to the cessation of litigation after confirmation of the Plan of Reorganization
thereby making it easier to collect funds from clients who we believe previously
tried to use the bankruptcy litigation as a way to avoid communicating with the
Company and a way to avoid paying their obligations. Similarly, the decrease in
losses in 2004 as opposed to 2003 reflect the fact that fewer legal bills and
expenses were generated and the fact that we significantly reduced operations in
an effort to sustain resources for the bankruptcy litigation. Because of the



                                       15
<PAGE>

bankruptcy proceedings, we were forced to curtail our marketing activities. Our
operating cycle is typically longer than one year. We anticipate lower revenue
volumes in the near term as we begin our fund raising efforts and begin the
booking of new advances on cases. Our total liabilities exceeded our total
assets by $19,289,143 at September 30, 2004. As discussed in Note Five to the
financial statements, the largest portion of our liabilities relate to an
approximate $26.3 million note arising from the reorganization plan. This Note
has no specific schedule of repayment and we are required to repay only to the
extent the Company successfully collects funds from accounts receivable and
contingent advances that we entered into and up until February 26, 2004. The
holders of this Note have no other recourse to the Company for repayment.
Further, in the ordinary course of events, this would raise substantial doubt
about our ability to continue as a going concern. However, we believe that it is
important to note that we recognize revenue from advances only when a case has
been resolved and when we are reasonably confident that fees calculated will in
fact be realized. As of the nine months ended September 30, 2004, if we made no
further advances to plaintiffs or their attorneys, our management estimates that
we can reasonably expect to collect approximately $25 to $30 million in fees and
return of principal over the next 12-24 months from open cases. The estimate is
based on historical performance and other factors affecting each case. The
litigation that resulted in the filings under the Chapter 11 statutes has
directly affected our ability to collect on receivables primarily because some
clients felt emboldened by the overarching threat of dissolution during that
time to challenge their obligations to pay amounts due to us. This has resulted
in the filing of numerous lawsuits in the Federal Bankruptcy Court. Strenuous
legal collection activity seems to have stemmed this trend and we are having
success in collecting on judgments from previously recalcitrant clients. Some of
those clients felt that it would be advantageous to try to negotiate with a
trustee to pay pennies on the dollar if anything at all.

OPERATING EXPENSES.

OPERATING ACTIVITIES: During the nine months ended September 30, 2004, net
cash provided by operating activities increased by $62,899, compared to net
cash used in operating activities of $446,993 during the same period in
2003. The increase in net cash provided by operating activities resulted
primarily because of the successful confirmation of the reorganization plan
and significant slow down in operations as we devoted our energy and
resources to restructuring the Company. Expenses related to the
reorganization accumulated to more than $480,000. Other factors include the
successful collection of accounts receivable that we previously considered
lost. Selling expenses of $28,301 showed a significant decrease for the
nine months ended September 30, 2004 compared to selling expenses of
$923,029 during the same period in 2003. This was largely attributable to
the fact that no new business could be solicited during the bankruptcy
litigation and, additionally, to the fact some selling expenses that were
capitalized in 2003 were written off in the nine months ended September 30,
2003. The lower general and administrative expenses of approximately $2.1
million for the nine months ended September 30, 2004, compared to
approximately $2.8 million dollars in the same period in 2003, reflects the
slow down in operations and reduction in overhead as we conserved resources
to defend ourselves during the bankruptcy litigation. The increase in
interest expense for the nine months ended September 30, 2004 compared to
the similar period in 2003 reflects the interest accrued on the
approximately $26 million IEP note discussed above.

The reduced operating expenses shown for the three months ended September 30,
2004 compared to a similar period in 2003 reflect the sharply curtailed
operations resulting from the bankruptcy litigation. The restart of operations
following the Confirmation of the Plan of Reorganization did not yet have a
material effect on these expenses for the period ended September 30, 2004. The
increase in revenues for the Three month period ended September 30, 2004
compared to the three months ended September 30, 2003 reflects more cases
settling, improved communication with clients that were previously recalcitrant
and strenuous collection activities following the confirmation of the
Reorganization Plan.

OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. To effectuate our business
plan during the next twelve months, we must restart the marketing of our
products and increase our product offerings. Demand for financing continues to
remain strong and we have a backlog of requests for advances that we look
forward to begin satisfying as soon as we have secured new capital or financing.
On August 5, 2004 and September 29, 2004 we received separate non-binding
letters of intent for new financing totaling $5,000,000 and we are aggressively
pursuing other funding opportunities that have been presented to management.
Concurrently, effective October 8, 2004 we moved operations to the State of




                                       16
<PAGE>


Nevada to take advantage of the prevailing tax structure, business climate and
commercial lending laws in that state. Additionally, we still intend to start
marketing of our new full recourse loan product in 2005. That product, which we
anticipate will eventually become approximately 10% of our core business, will
limit our exposure to losses, allow for earlier recognition of revenue and at
the same time answer the demand in the legal community for more traditional
borrowing facilities that carry a lower interest rate compared to the fees we
currently charge for our non recourse advance product. We intend to expand our
geographic market penetration and will explore opportunities to acquire assets
or other companies in this industry.

We have cash of approximately $300,000 as of September 30, 2004. In the opinion
of management, available funds will not satisfy our working capital requirements
for the next twelve months. Nevertheless, our reorganization plan does provide
for sufficient revenue to sustain operations. Our forecast for the period for
which our financial resources will be adequate to support our operations
involves significant risks and uncertainties and actual results could fail as a
result of a number of factors.

We will also need to raise funds to continue to implement our business plan. We
plan to raise these funds through private and institution or other equity
offerings. We may attempt to secure other loans from lending institutions or
other sources. There is no guarantee that we will be able to raise additional
funds through offerings or other sources. If we are unable to raise funds, our
ability to continue with operations will be materially hindered.

We do not anticipate that we will purchase or sell any significant equipment but
we may enter into long or medium term lease in Las Vegas, Nevada. That lease is
currently under the negotiation and will be with a related party. We do not yet
know the terms of that agreement. In the event that we generate significant
revenues and expand our operations, then we may need to hire additional
employees or independent contractors as well as purchase or lease additional
equipment.

OFF-BALANCE SHEET ARRANGEMENTS

There are no off balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.

ITEM 3. CONTROLS AND PROCEDURES


(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed as of September 30,
2004, our chief executive officer and the principal financial officer concluded
that our disclosure controls and procedures were adequate.

(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.

                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On April 2, 2003 certain individuals and entities filed an involuntary
bankruptcy petition against us in the United States Bankruptcy Court, Central
District of California. In the Petition, the Petitioning Creditors alleged that
we were generally not paying our debts as they became due. We disputed this
allegation. For approximately thirteen months we and the Petitioning Creditors
engaged in litigation regarding the merits of the involuntary petition, and the
Petitioning Creditors' rights under disputed contracts.



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After numerous legal proceedings, in November 2003, we stipulated to the entry
of an order for relief, thereby placing us into a Chapter 11 proceeding. In
January 2004, our wholly owned operating subsidiary, California LitFunding,
filed a voluntary Chapter 11 bankruptcy petition. In February of 2004, an order
was entered substantively consolidating our Chapter 11 estate with the Chapter
11 estate of California LitFunding. However, this order did not effectuate a
merger between these two corporate entities. On May 26th, 2004 the bankruptcy
court ruled in favor of our plan of reorganization and it became effective on
June 17th, 2004. We are continuing to operate under that plan of reorganization
as discussed in prior filings.

We are the defendant in several matters in litigation, many of which are in the
normal course of business, including litigation for refunds of funds invested.
Apart from the litigation instituted against recalcitrant clients that felt they
need not live up to their obligations, we believe these suits are without merit
and intend to defend these litigations in courts of law.

The Company is involved in a suit alleging breach of contract, fraud, conspiracy
and defamation. The claimants allege there was a finder's fee agreement between
them and the founding officers/shareholders of the Company. The Company's
position is that there was a negotiated agreement with the claimants that was
honored. The claimants allege damages of $16 million. A hearing on objections to
theses claims was heard on May 24, 2004 and an Order entered on October 28,
2004. Both claimants' claims for money were disallowed. Claims based upon a
claim of debt or payment of money and/or claims for additional common stock were
temporarily disallowed pending further hearings. Claimants have filed adversary
complaints seeking the same relief. Motions to dismiss will be heard in February
2005. State claims for the same relief are pending but stayed. They are subject
to res judicata dismissal upon conclusion of Federal proceedings

The Company believes that all alleged claims must be settled through the
bankruptcy court.

ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS.

In July, 2004, in accordance with the Plan of reorganization, the Company issued
approximately 401,792 common shares to general creditors of the Company. These
shares were issued pursuant to and under the Plan of Reorganization as ordered
by the Federal Bankruptcy Court and as such were issued under an exemption from
registration and were not registered. They are however, freely tradable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

There has not been a default on senior securities

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

On August 6, 2004 we held our annual meeting in Los Angeles,
California. At that meeting, the shareholders present either in person or by
proxy voted on three proposals: (1) the election of directors; (2) ratification
of our 2004 stock option plan; and (3) the appointment of Epstein Weber, &
Conover, PLC as the independent auditors of LitFunding for fiscal year of 2004.
For proposal (1) there were 6,036,606 votes cast FOR the proposal or 64.1%,
180,150 votes AGAINST the proposal and 54,000 votes abstained. For proposal (2)
there were 5,957,406 votes cast FOR the proposal or 63.3%, 269,850 votes AGAINST
the proposal and 43,500 votes abstained. For proposal (3) there were 6,270,606
votes cast FOR the proposal or 66.6%, 150 votes AGAINST the proposal and no
votes abstaining.

ITEM 5.  OTHER INFORMATION

We have moved our corporate headquarters to 3760 Pecos McLeod Dr. Suite 14, NV
89121 as a prelude to a final move to new premises in Las Vegas, Nevada, 89121.
We are currently negotiating a long term lease for these premises with a related
Party, but do not yet know the specific terms of that lease.


ITEM 6.  EXHIBITS

         31.1 Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer

         31.1 Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer

         32. Section 1350 Certification by Chief Executive Officer

         32. Section 1350 Certification by Chief Financial Officer




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                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                          LitFunding Corp.


November 19, 2004                  By:    /s/ Morton Reed
                                          -----------------------------------
                                          Morton Reed, President and
                                          Chief Executive Officer