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, 2006





 ̈ TRANSITION REPORT UNDER SECTION 13 OR


15(d)
      OF
      THE SECURITIES EXCHANGE ACT OF 1934





Commission
      file number 000-49679





LITFUNDING
      CORP.


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
            **93-1221399**(State
                or other jurisdiction of incorporation or organization)
            (IRS
                Employer Identification No.)





**6375
      S. Pecos Road, Suite 217**


**Las
      Vegas, Nevada 89120**


(Address
      of principal executive offices)





**(702)
      898-8388**


(Issuer’s
      telephone number)





Check
      whether the issuer (1) 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  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes  ̈ No x





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 x No  ̈





The
      number of shares of Common Stock, $0.001 par value, outstanding on August 2,
      2006, was 24,483,902 shares.





Transitional
      Small Business Disclosure Format (check one):


Yes  ̈ No x




PART
      I -
      FINANCIAL INFORMATION





Item
      1.
      Financial Statements.





1


**LitFunding
                  Corp****Consolidated
                  Balance Sheets****(unaudited)**
  **(unaudited)**
              
              **(audited)****September
                  30,**
              
              **December
                  31,****2006**
              
              **2005****Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              27,861
              
              $
              7,121Accounts
                  receivable, net
              
              
              30,760
              
              
              27,970Due
                  from employees
              
              
              48,313
              
              
              -Contigent
                  advances less reserves for unsuccessfulresolution
                  of lawsuits
              
              
              398,025
              
              
              1,068,300Note
                  receivable
              
              
              26,000
              
              
              100,181Total
                  current assets
              
              
              974,189
              
              
              1,203,572Fixed
                  assets, net
              
              
              213,635
              
              
              39,402Total
                  fixed assets
              
              
              213,635
              
              
              39,402Other
                  assetsDeposits
              
              
              20,531
              
              
              20,881Total
                  other assets
              
              
              20,531
              
              
              20,881Total
                  assets
              
              $
              1,208,355
              
              $
              1,263,855**Liabilities
                  and Stockholders' Equity**Liabilities
                  not subject to compromiseAccounts
                  payable
              
              $
              835,442
              
              $
              709,545Accrued
                  expenses
              
              
              385,400
              
              
              384,167Deferred
                  revenue
              
              
              29,170
              
              
              141,668Notes
                  payable
              
              
              411,298
              
              
              65,000Investor
                  participation obligations
              
              
              734,900
              
              
              1,175,000Total
                  current liabilities not subject to compromise
              
              
              2,396,210
              
              
              2,475,380Liabilities
                  subject to compromiseTrade
                  and miscellaneous claims
              
              
              -
              
              
              380,210Debentures
              
              
              200,000
              
              
              200,000Total
                  liabilities subject to compromise
              
              
              200,000
              
              
              580,210Total
                  liabilites
              
              
              2,632,483
              
              
              3,055,590Stockholders'
                  equity:Series
                  A Convertible preferred Stock, par value $0.001,2,000,000
                  shares authorized, 800,000 shares issued andand
                  outstanding; 800,000 shares were converted to common
              
              
              
              
              
              800Common
                  stock, $0.001 par value, 50,000,000 sharesauthorized,
                  29,563,902 and 16,217,402 shares issued andoutstanding
                  at September 30, 2006 and December 31, 2005, respectively
              
              
              38,409
              
              
              16,217Shares
                  authorized & unissued
              
              
              64,875Subscription
                  Payable
              
              
              384,789
              
              
              327,139Additional
                  paid-in capital
              
              
              9,272,120
              
              
              8,061,428Preferred
                  stock dividend
              
              
              
              
              
              -Accumulated
                  (deficit)
              
              
              (11,184,321
              )
              
              (6,225,276
              )(1,424,128
              )
              
              2,180,308$
              1,208,355
              
              $
              5,235,898


**See
      notes to consolidated financial statements**


2


**LitFunding
      Corp.**


**Consolidated
      Statement of Operations**


**Unaudited**


Nine
                  months ended
              
              For
                  the nine months endedSeptember
                  30,
              
              September
                  30,2006
              
              2005
              
              2006
              
              2005Net
                  Revenue
              
              $
              -
              
              $
              74,670
              
              $
              656,580
              
              $
              222,545Expenses:Reserve
                  for unsuccessfl resolution of lawsuits
              
              
              -
              
              
              46,700
              
              
              -
              
              
              73,950General
                  and administrative expenses
              
              
              299,389
              
              
              742,364
              
              
              1,446,161
              
              
              2,227,545Financing
                  expense
              
              
              47,880
              
              
              -
              
              
              47,880
              
              
              -Depreciation
                  & Amortization
              
              
              
              
              
              -
              
              
              
              
              
              -Total
                  operating expenses
              
              
              341,818
              
              
              789,064
              
              
              1,494,041
              
              
              2,397,161Net
                  operating (loss)
              
              
              (341,818
              )
              
              (635,387
              )
              
              (837,461
              )
              
              (2,174,616
              )Other
                  income (expenses):Other
                  income (expense)
              
              
              
              
              
              (55,522
              )
              
              -
              
              
              (177,055
              )Interest
                  (expense) net of interest income
              
              
              (11,252
              )
              
              (14,944
              )
              
              (48,240
              )
              
              52,444Rental
                  Income
              
              
              -
              
              
              -
              
              
              -
              
              
              -Amortization
                  of debt discount
              
              
              15,000
              
              
              (444,643
              )
              
              15,000
              
              
              -Total
                  other income (expenses)
              
              
              
              
              
              (515,109
              )
              
              (63,240
              )
              
              (857,844
              )Income
                  (Loss) before Income taxes
              
              
              (368,070
              )
              
              (1,229,503
              )
              
              (900,701
              )
              
              3,032,460Income
                  tax (benefit) provision
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  Income (loss)
              
              $
              (368,070
              )
              $
              (1,229,503
              )
              $
              (900,701
              )
              $
              (3,032,460
              )Weighted
                  average number ofcommon
                  shares outstanding - basic and fully diluted
              
              
              26,854,004
              
              
              15,066,359
              
              
              22,485,619
              
              
              13,962,400Net
                  (loss) per share - basic and fully diluted
              
              $
              (0.01
              )
              $
              (0.08
              )
              $
              (0.04
              )
              $
              (0.22
              )




**See
      notes to consolidated financial statements**




3


**LitFunding
      Corp.**


**Consolidated
      Statement of Cash Flows**


**Unaudited**


**For
                  the nine months ended****September
                  30,****2006**
              
              **2005****Cash
                  flows from operating activities**Net
                  income (loss)
              
              $
              (900,701
              )
              $
              (3,032,460
              )Adjustments
                  to reconcile net income to net cashprovided
                  by (used in operating activities)Depreciation
                  and amortization
              
              
              18,442
              
              
              21,983Reserve
                  for unsuccessful resolution of lawsuits
              
              
              -
              
              
              73,950Share-based
                  compensation
              
              
              568,981
              
              
              826,174Common
                  stock issued in settlement
              
              
              
              
              
              49,794Debt
                  Discount amortization
              
              
              
              
              
              603,558Changes
                  in assets and liabilities:Increase
                  (decrease) in account receivables
              
              
              (2,790
              )
              
              97,605Increase
                    (decrease) in other assets
              
              
              71,843
              
              
              24,353Increase
                    (decrease) in contingent advances
              
              
              670,275
              
              
              (739,500
              )Notes
                  receivable
              
              
              (73,161
              )
              
              -Debt
                  discount
              
              
              -
              
              
              185,890Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              (127,897
              )
              
              296,049Trade
                  and other claims subject to compromise
              
              
              -
              
              
              (127,703
              )Interest
                  payable
              
              
              
              
              
              58,388Increase
                  (decrease) in deferred revenue
              
              
              (112,498
              )
              
              97,917Net
                  cash (used in) operating activities
              
              
              112,490
              
              
              (1,764,892
              )Cash
                  flows from investing activities:Purchase
                  of property and equipment
              
              
              -
              
              
              (3,734
              )Net
                  cash (used in) investing activities
              
              
              -
              
              
              (3,734
              )Cash
                  flows from financing activities:Cash
                  from issuance of common stock and exercised warrants
              
              
              50,000
              
              
              392,050Common
                  stock cancellation
              
              
              (7,000
              )
              
              -Sale
                  of preferred stock
              
              
              
              
              
              200,000Proceeds
                  from notes payable
              
              
              31,000
              
              
              222,500Repayments
                  of notes payable
              
              
              (170,000
              )
              
              -Proceeds
                  from investor participation borrowings
              
              
              -
              
              
              702,500Net
                  cash provided by financing activities
              
              
              (91,750
              )
              
              1,517,050Increase
                  (decrease) in cash
              
              
              20,740
              
              
              (251,575
              )Cash
                  - beginning of period
              
              
              7,121
              
              
              341,522Cash
                  - ending of period
              
              $
              27,861
              
              $
              89,947Supplemental
                  disclosures:Interest
                  paid
              
              $
              14,090
              
              $
              13,275Income
                  taxes paid
              
              $
              -
              
              $
              -Shares
                  issued for services
              
              $
              568,981
              
              
              -


**See
      notes to consolidated financial statements**





4


**LitFunding
      Corp**


**Notes
      To Consolidated Financial Statements**








**Note
      1 - Basis of Presentation**




The
      condensed interim financial statements included herein, presented in accordance
      with United States generally accepted accounting principles and stated in US
      dollars, have been prepared by the Company, without audit, pursuant to the
      rules
      and regulations of the Securities and Exchange Commission. Certain information
      and footnote disclosures normally included in financial statements prepared
      in
      accordance with generally accepted accounting principles have been condensed
      or
      omitted pursuant to such rules and regulations, although the Company believes
      that the disclosures are adequate to make the information presented not
      misleading.




These
      statements reflect all adjustments, consisting of normal recurring adjustments,
      which in the opinion of management are necessary for fair presentation of the
      information contained therein. It is suggested that these condensed interim
      financial statements be read in conjunction with the financial statements of
      the
      Company for the year ended December 31, 2005 and notes thereto included in
      the
      Company's Form 10-KSB annual report. The Company follows the same accounting
      policies in the preparation of interim reports.




Results
      of operation for the interim period are not indicative of annual
      results.




**Note
      2 - 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 LitFunding Corp, a Nevada
      corporation. In the Petition, the Petitioning Creditors alleged that LitFunding
      Corp was generally not paying its debts as they became due. The debtors disputed
      this allegation. For approximately eleven months the debtors and the petitioning
      creditors engaged in litigation regarding the merits of the involuntary
      petition, and the Petitioning Creditors rights under disputed
      contracts.





As
      a
      result of the foregoing litigation, LitFunding Corp was placed into a protective
      Chapter 11 proceeding 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 LitFunding Corp 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, this litigation was settled. The settlement reached by and
      among the Company and the petitioning creditors has been incorporated into
      a
      reorganization plan confirmed by the United States Bankruptcy Courts on June
      17th, 2004.





During
      2004 and 2003, California LitFunding, as the operating entity, held title to
      substantially all of the assets of The Company. The core assets within
      California LitFunding, and those with most of the value, were the Settlement
      Agreements, which were the primary subject of the litigation indicated with
      the
      filing of the involuntary bankruptcy petition on April 2, 2003. A total of
      approximately $18.6 million dollars was invested through those Settlement
      Agreements.





5


Pursuant
      to the plan of reorganization, LitFunding Corp and California LitFunding had
      the
      option to voluntarily transfer the control and the collection of the settlement
      agreements ("the Contract Pool") to an IEP distribution agent (the `Contract
      Agent') for the benefit of the IEP claimants who comprise class 6 under the
      terms of the reorganization plan.





LitFunding
      Corp, California LitFunding and the IEP claimants stipulated and agreed to
      do
      this in December 2004. In that stipulation, the Contract Agent would assume
      full
      control and administration over the `Contract Pool' and have full authority
      over
      the enforcement of the obligations set forth in the settlement agreements that
      comprise the Contract Pool.





Per
      the
      agreement signed on November 30th, 2004, LitFunding Corp and California
      LitFunding transferred all of the original records and files to the Contract
      Agent on December 16th, 2004, and sent written notice to all parties subject
      to
      the settlement agreement notifying them of the transfer of control of the
      Contract Pool and settlement agreements to the Contract Agent including the
      assignment of LitFunding Corp and California LitFunding's legal rights and
      that
      all payments are now payable to the Contract Agent.





As
      a
      result of the transfer, the Company was effectively relieved of the obligation
      due to the IEP claimants of IEP Note of approximately $26,662,000 including
      related accrued interest. The carrying value of receivables and advances at
      the
      time of the transfer was approximately $12,331,000 resulting in a gain on the
      transfer of $14,131,000 for the year ended December 31, 2004. The original
      value
      of the IEP Note was determined based on the stipulations within the bankruptcy
      plan. In the transfer, the Company transferred all of its rights to the
      contingent advances and any potential earnings thereon. Because payments on
      the
      IEP Note were only to come from collections and earnings on the contingent
      advances, the Company is no longer responsible for that obligation.





In
      consideration for the cooperation and support provided by LitFunding Corp.
      and
      California LitFunding making the transition seamless and effective, the IEP
      claimants waived and released LitFunding Corp and California LitFunding from
      all
      liability arising under the "Contingent Recourse Note" of approximately
      $1,560,000, which would have become effective in 2005.





Moreover,
      by effecting this transfer of the Contract Pool, the two other classes of
      creditors (Class 4 and 5) affected by this transition will continue to receive
      the benefit of the unsecured creditors' allocation as defined in the plan of
      reorganization. The contingency administrative charge allowed by the plan of
      reorganization to be paid to LitFunding Corp and California LitFunding has
      ceased as a result of this transfer.





As
      a
      result of the transfer of the contract pool to the IEP claimants effective
      in
      December 2004, the Company recorded an extraordinary gain for the removal the
      associated obligation and assets.





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





6


A.
      Administrative and Priority Claims. The claims within this class total
      approximately $287,000 through December 31, 2005. Most of this amount represents
      the fees and costs payable to the Debtors general insolvency counsel, Winthrop
      Couchot, P.C. who accepted 200,000 shares of common stock from the company
      in
      April 2005 and an additional 100,000 shares in 2005 in part or full payment
      for
      the amount. The balance represents sums owed of approximately $9,300 in priority
      wages owed to two officers of the Debtors. These amounts are not subject to
      compromise and are included in accounts payable and accrued expenses in the
      accompanying balance sheet at March 31 ,2006;





B.
      Gap
      Claims. During the period between the filing of the involuntary petition and
      the
      date on which LitFunding Nevada's 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 LitFunding Nevada against the
      involuntary filing. The Debtors reached an agreement with these claimants to
      pay
      $314,000 over twelve months. During the three months ended March 31, 2006 the
      debtor elected to convert $3,676 to 26,250 shares oh the Company’s $.001 par
      value common stock and $36,881 to a promissory note bearing interest at 8%
      per
      annum with a maturity date of August 1, 2006.





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. Included is a $10,000 debenture payable
      to a related party. These claims are unsecured and they are
      undisputed.





D.
      Unsecured Claims Other Than Debenture Claims and IEP Claims. During the months
      ended March 31, 2006, the debtors elected to convert $244,169 to 1,454,108
      shares of the Company’s $.001 par value common stock and $64,684 to notes
      payable with a maturity date of June 15, 2006. At March 31, 2006 the Company
      had
      issued 281,132 and the remaining 1,172,976 shares were issued on April 18,
      2006
      the Company recorded a subscription payable of $ 190,687 at March 31,
      2006.





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 them Plan. The totality of all claims
      held by the IEP petitioning creditors has been incorporated into the
      non-recourse Plan Note. The Plan Note had an opening balance of $26,111,763.
      This obligation was relieved in connection with the transfer of the Contract
      Pool to the IEP Creditors in December 31, 2004;





F.
      The
      Plan presented for confirmation 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





G.
      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 Company's
      business model by raising and investing additional capital in new
      lawsuits;





7


H.
      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 LitFunding Nevada, 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 LitFunding Nevada.
      These classes are not impaired under the terms of the Plan.





The
      remaining bankruptcy liabilities at December 31, 2005 are summarized as
      follows:





Gap
                Claims
            
            $
            -Unsecured
                Creditors and Other
            
            
            -Subtotal
            
            
            -Debentures
            
            
            200,000$
            200,000




The
      Company intends to repay all obligations in full. Debenture Claims are impaired
      as that termed is used in the Bankruptcy Code because obligations will be paid
      out over a specified longer term. However, for accounting purposes, the Company
      does not believe any of the obligations are compromised at September 30, 2006
      based on the expected amount of allowed claims.





On
      June
      2006 the Company received its discharge from the Bankruptcy Court.





**Note
      3 - Contingent Advances**





Contingent
      advances occur when the Company enters into agreements with lawyers and law
      firms whereby the Company advances funds for litigation costs on selected cases.
      Generally, the Company will be repaid those amounts plus negotiated fees when
      and if a case is settled. 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 the Company has
      historically achieved a success rate of approximately 85% on cases that it
      has
      funded. Post reorganization procedures and policies have been implemented and
      management believes that it will achieve a success rate of no less than 90%
      on
      new fundings. Management monitors all cases and provides an allowance if it
      believes that any advances have been impaired. At September 31, 2006 there
      were
      contingent advances outstanding of $442,250 and a corresponding impairment
      allowance of $44,225.





8


**Note
      4 - Participation Agreements**





Prior
      to
      the filing of the involuntary petition on April 2, 2003, the Company raised
      capital to enable it to engage in the practice of funding the contingent
      advances by entering into so called IEP agreements. These are considered to
      be
      investment/equity participation 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
      non-recourse Plan Note. The non-recourse Plan Note had an opening balance of
      $26,111,763 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. The Contract Pool was transferred on December 16, 2004, to the Contract
      Manager designated by the IEP Claimants. Accordingly, this non-recourse plan
      note was removed from the balance sheet at December 31, 2004, to reflect the
      economic reality of that transaction. As of September 31, 2006, the Company
      had
      participation obligations of $992,000.





**Note
      5 - Debentures**





During
      the years ended December 31, 2002, the Company issued 5-year 9% convertible
      debentures amounting to $200,000, due January 1, 2007. Included is one debenture
      due to a related party for $10,000. 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 have an amended maturity
      to 2008. At September 30, 2006, the Company had accrued interest totaling
      $5,250.




The
      registered holders of the debentures have the right, after one 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 agreements.





**Note
      6- Debt**





In
      2005,
      certain of the note holders elected to convert unsecured notes totaling $700,000
      to 1,091,000 common shares. At December 31, 2005 the Company has issued 600,000
      shares and recorded subscription of $250,606 and were issued at September 30,
      2006.





During
      the three months ended March 31, 2006, certain debtors in (note 2) above elected
      to convert $64,684 to promissory notes with a maturity date of June 15, 2006.
      These notes have been verbally extended.





9


Notes
                payable at September 30, 2006 is comprised of the
                following:Note
                payable to entity, original balance of $19,181.Principal
                and interest due June 15, 2006. The Note is unsecured.
            
            $
            9,591Note
                payable to entity, original balance of $15,000 due in three monthly
                installments of $5,000 beginning April 15, 2006. The Note is
                unsecured
            
            
            10,000Note
                payable to entity, original balance of $30,502 due in two monthly
                installments of $15,251 beginning April 15, 2006. The Note is
                unsecured
            
            
            15,251Notes
                payable with no specified due dates. Face amount of $19,500 and $15,000,
                interest at 10% per annum, the note is unsecured.
            
            
            34,500Notes
                payable with specified due dates. Face amount $6,000, interest at
                6% due
                March 15, 2006
            
            
            6,000Notes
                payable with varying due dates that have been verbally extended.
                Interest
                at 6% and 12%, face amounts totaling $62,500. Notes
                unsecured.
            
            
            62,500Notes
                payable with specified due dates. Face amount $6,000, interest at
                12% due
                April 1, 2006.
            
            
            25,000Note
                payable face amount $100,000, at 2% per month due May 13, 2007. Note
                unsecured.
            
            
            100,000Notes
                payable with no specified due dates. Notes unsecured
            
            
            148,456Total
            
            $
            411,298





**Note
      7 - Stockholders’ Equity**





Common
      Stock


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.





In
      the
      year ended December 31, 2004, the Company declared and issued an 11 for 10
      stock
      dividends. As a result 1,042,501 shares were issued. The trading value of the
      shares on the declaration date of November 1, 2004, was $0.70. The aggregate
      value of the new shares issued of $729,751 was reclassified from the accumulated
      deficit to additional paid-in capital.





During
      the year ended December 31, 2005, the Company accepted a subscription to
      purchase 186,667 shares of its $.001 par value to an accredited investor at
      $0.41 per share. The Company recorded a subscription payable of $76,533 at
      December 31, 2005; the shares were issued at September 30, 2006.





10


On
      March
      21, 2006 the Company issued 250,000 shares of its $.001 par value common stock
      to two accredited investors at $.20 per share for cash totaling
      $50,000.




During
      the three months ended March 31, 2006, certain consultants and debtors exercised
      their warrant rights to purchase 650,000 shares of the Company’s par value
      common stock for cash totaling $4,250.





In
      March
      2006, the Company issued 2,737,318 shares of its $.001 par value common stock
      for services valued at $271,426 the fair value of the underlying
      shares.





During
      the months ended March 31, 2006, certain unsecured creditors elected to convert
      $244,169 to 1,454,108 shares of the Company’s $.001 par value common stock. At
      March 31, 2006 the Company had issued 281,132 and the remaining1,172,976 shares
      were issued on April 18, 2006 the Company recorded a subscription payable of
      $
      190,687 at March 31, 2006





On
      April
      18, 2006, the company issued 831,481 shares of its common stock to Morton Reed,
      CEO of the Company, in exchange for accrued debt valued at $130,000. The shares
      were unrestricted pursuant to the S-8 Registration filed on February 28,
      2006.





On
      April
      18, 2006, the Company issued 50,000 shares of its restricted common stock to
      Anthony Longo as a sign-on bonus.





On
      April
      18, 2006, the Company issued 15,000 shares of its restricted common stock to
      Rochester Capital Partners, LP and 5,000 shares of our common stock to Joseph
      Weaver in exchange for all of the issued and outstanding shares of Easy Money
      Express, Inc. (200,000 shares).





On
      April
      18, 2006, the Company issued 100,000 shares of its common stock to Marc
      Lieberman for services rendered to the Company. The shares were unrestricted
      pursuant to the S-8 Registration filed with the SEC on February 28,
      2006.





On
      April
      18, 2006, the Company issued 10,700 shares of its common stock to Michael
      Marcelli for services rendered to the Company. The shares were unrestricted
      pursuant to the S-8 Registration filed with the SEC on February 28,
      2006.





On
      April
      18, 2006, the Company issued 20,000 shares of its common stock to Kathleen
      Saur
      for services rendered to the Company. The shares were unrestricted pursuant
      to
      the S-8 Registration filed with the SEC on February 28, 2006.





On
      April
      18, 2006, the Company issued 163,295 shares of its common stock to Jon M. Leader
      for services rendered to the Company. The shares were unrestricted pursuant
      to
      the S-8 Registration filed with the SEC on February 28, 2006.





11


On
      April
      20, 2006, the Company issued 25,000 shares of its restricted common stock to
      Baldev Singh Grewal of Navin Enterprises, Inc. pursuant to its consulting
      agreement dated March 1, 2006.





On
      May
      23, 2006, the Company issued 1,000,000 shares of its restricted common stock
      to
      Stoecklein Law Group for services rendered to the Company.





On
      May
      23, 2006, the Company issued 500,000 shares of its restricted common stock
      to
      Opus Pointe for services rendered to the Company.





On
      June
      2, 2006, the Company issued 100,000 shares of its common stock to Marc J.
      Winthrop for legal services provided to the Company. The shares issued were
      unrestricted pursuant to the S-8 Registration filed with SEC on February 28,
      2006.





Apex
      Investment Fund Ltd. converted 400,000 shares of Series A 12% Convertible
      Preferred Stock into 800,000 shares of our restricted common stock. The 800,000
      shares of common stock were issued on June 2, 2006.





On
      June
      23, 2006, the Company issued 1,000,000 shares of its restricted common stock
      to
      CLX & Associates, Inc. pursuant to its consulting agreement dated March 1,
      2006.





On
      August
      7, 2006, the Company issued 125,000 shares of restricted common stock to Howard
      Joffe for $10,000 cash.





On
      August
      7, 2006, the Company issued 125,000 shares of restricted common stock to Robert
      Heitner for $10,000 cash.





On
      August
      7, 2006 the Company issued 1,250,000 shares of restricted common stock to Morton
      Reed, CEO of the Company, in exchange for accrued debt valued at
      $250,000.





On
      August
      14, 2006 the Company voided the 1,000,000 shares of its restricted common stock
      issued on June 23, 2006 to CLX & Associates, Inc pursuant to the
      cancellation agreement dated March 1, 2006.





On
      August
      28, 2006, the Company issued 1,000,000 shares of its restricted common stock
      to
      CLX & Associates, Inc. pursuant to its consulting agreement dated March 1,
      2006 that was reinstated.





On
      August
      28, 2006, the Company issued 1,600,000 shares of restricted common stocks to
      Imperial Capital Holdings LLC as follows; 96,000 shares for preferred shares
      dividend, 200,000 shares for the extension of the $30,000 note executed April
      12, 2006 and 504,000 shares for inducement to execute an equity line of
      $3,000,000.





Imperial
      Capital Holdings LLC converted 400,000 shares of Series A 12% Convertible
      Preferred Stock into 800,000 shares of our restricted common stock. The 800,000
      shares of common stock were issued on August 28, 2006.





12


On
      August
      28, 2006, the Company issued 2,780,000 shares of restricted common stock to
      Davric Corporation as follows; 14.666 shares for interest accrued on $200,000
      note, 765,334 shares for cash and 2,000,000 in settlement of $200,000 note.





Series
      “A” Preferred Stock


On
      July
      20 2005, the Board of Directors authorized the company to amend its Article
      of
      Incorporation to allow the issuance of up to 10,000,000 shares of preferred
      stock, par value $0.001 per share. Further, the Board authorized the initial
      issuance of up to 2,000,000 shares of Series A 12% convertible preferred stock.
      The Series A provides for a conversion rate 2 shares of common for 1 share
      of
      preferred, and such conversion rights shall commence six months from the date
      of
      purchase. As of March 31, 2006, the company has issued 800,000 shares at $0.25
      per share to two individual investors for cash totaling $200,000. During the
      quarter ended September 30, 2006 these shares were converted to common
      stock.




**Note
      8 - 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 courts of law.





The
      Company is involved in suits for breach of contract, fraud, conspiracy and
      defamation with the same claimants in the United States Bankruptcy Court and
      California State Court. The claimants allege that 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, which was complied with. The claimants allege damages of $16 million.
      The suits were lost by the claimants.





In
      May
      2004, the United States Bankruptcy Court upheld the company's objections to
      all
      monetary claims. The claimants appealed this decision. Additionally, they filed
      an adversary proceeding raising most of the issues already raised in the first
      claims. In February 2005, the United States Bankruptcy Court partially dismissed
      the claimant's adversary complaint and told the claimants to amend the complaint
      to give them the opportunity to clarify their claims. The claimants filed that
      amended complaint. In March 2005, the company filed a motion to dismiss with
      prejudice the entire amended complaint on the grounds that the claims therein
      were previously denied by the court in the bankruptcy proceeding.





The
      State
      Court action has been stayed pending resolution of the issues in the United
      States Bankruptcy Court. The Federal Court's decisions in the company's favor
      will preclude proceedings against the company in the state court
      action.





13


**Note
      9 - Warrants and Options**





During
      the three months ended March 31, 2006, the Company granted options to purchase
      300,000 shares of its common stock at an exercise price of $.15 per share with
      a
      one-year term and 20,000 warrants at an exercise price of $.25 with a two-year
      term. The estimated value of the options and warrants, using the Black-Scholes
      pricing model, is $31,260 and $3,497, respectively, which was expensed as
      share-based compensation and financing expense.





Options
      and Warrants Exercised





During
      the three months ended March 31, 2006, 650,000 warrants were exercised for
      cash
      totaling $4,250. There were no options exercised during the period.





During
      the three months ended September 30, 2006 no options or warrants were issued
      or
      exercised.





The
      summary of activity for the Company's stock options/warrants is presented
      below:





Nine
                months ended
                September
                  30, 2006
            
            Weighted
                Average
              Exercise
                PriceOptions/warrants
                outstanding at December 31, 2005
            
            
            6,250,750
            
            
            $0.42Granted
            
            
            320,000
            
            
            $0.21Exercised
            
            
            (650,000
            )
            
            $0.01Terminated/ExpiredOptions/warrants
                outstanding at end of period
            
            
            5,920,750
            
            
            $0.44Options/warrants
                exercisable at end of period
            
            
            5,920,750
            
            
            $0.44Price
                per share of options outstanding
            
            
            $0.01-$7.00Weighted
                average remaining contractual lives
            
            
            4.03
                yearsWeighted
                average fair value of options granted during the period
            
            
            $0.21








14


FORWARD-LOOKING
      STATEMENTS





This
      document contains “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995. All statements other than statements
      of historical fact are “forward-looking statements” for purposes of federal and
      state securities laws, including, but not limited to, any projections of
      earnings, revenue or other financial items; any statements of the plans,
      strategies and objections of management for future operations; any statements
      concerning proposed new services or developments; any statements regarding
      future economic conditions or performance; any statements or belief; and any
      statements of assumptions underlying any of the foregoing.





Forward-looking
      statements may include the words “may,” “could,” “estimate,” “intend,”
“continue,” “believe,” “expect” or “anticipate” or other similar words. These
      forward-looking statements present our estimates and assumptions only as of
      the
      date of this report. Except for our ongoing securities laws, we do not intend,
      and undertake no obligation, to update any forward-looking
      statement.





Although
      we believe that the expectations reflected in any of our forward-looking
      statements are reasonable, actual results could differ materially from those
      projected or assumed in any or our forward-looking statements. Our future
      financial condition and results of operations, as well as any forward-looking
      statements, are subject to change and inherent risks and uncertainties. The
      factors impacting these risks and uncertainties include, but are not limited
      to:





o
            increased
                competitive pressures from existing competitors and new
                entrants;




o
            increases
                in interest rates or our cost of borrowing or a default under any
                material
                debt agreements;




o
            deterioration
                in general or regional economic
                conditions;




o
            adverse
                state or federal legislation or regulation that increases the costs
                of
                compliance, or adverse findings by a regulator with respect to existing
                operations;




o
            loss
                of customers or sales weakness;




o
            inability
                to achieve future sales levels or other operating
                results;




o
            the
                unavailability of funds for capital expenditures and/or general working
                capital; and




o
            operational
                inefficiencies in distribution or other
                systems.




For
      a
      detailed description of these and other factors that could cause actual results
      to differ materially from those expressed in any forward-looking statement,
      please see “Factors That May Affect Our Plan of Operation” in this document and
      in our Annual Report on Form 10-KSB for the year ended December 31,
      2005.








15


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.**





Throughout
      this Quarterly Report references to “we”, “our”, “us”, “LitFunding”, “the
      Company”, and similar terms refer to LitFunding Corp.





**OVERVIEW
      AND OUTLOOK**





We
      are in
      the business of investing in litigation recoveries. Business is conducted
      through our subsidiary, LitFunding USA and its wholly owned limited liability
      companies. LitFunding USA resumed the business of California LitFunding (our
      subsidiary who has been in the business since 2000) subsequent to June 17,
      2004,
      after the United States Bankruptcy Court entered an order confirming our and
      California LitFunding’s joint plans of reorganization. We raise and advance
      capital to various law firms pursuant to “Settlement Agreements”. These
      Settlement Agreements provide that the funds advanced shall be repaid to us,
      plus a fee, when the lawsuits referenced in the agreement ultimately settle.
      The
      amount of the fee payable on the funds advanced depends upon the length of
      the
      time the funds are outstanding, up to a fixed limit. Pursuant to the terms
      of
      the Settlement Agreements, the Company’s contractual right to payment 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.





At
      September 30, 2006, we estimate that the principle and fee expected on the
      open
      and unresolved cases is approximately $1,178,043.





In
      our
      second quarter, one of our largest advances was repaid. The $450,000 advance
      represented approximately 48% of our investment capital at the time of the
      advance. We received a payoff of $890,000, returning $440,000 after a period
      of
      only eight months. This calculates to a return of roughly 98%, almost 60% of
      which is retained by the Company; the remaining balance is returned to the
      investor. We intend to use a portion of the proceeds to launch our new wholly
      owned subsidiary, Easy Money Express Inc.





**Recent
      Developments**





Effective
      March 7, 2006, we completed a reverse tri-party merger by an among the Company,
      Silver Dollar Production, a Nevada corporation and wholly owned subsidiary
      of
      the Company, and Global Universal Film Group Inc., a Nevada corporation, whereby
      we issued 1,500,000 shares of Series B Convertible Preferred Stock to Global
      in
      exchange for 100% of the issued and outstanding securities of Global. Pursuant
      to the terms of the merger, Global merged into Silver Dollar wherein Silver
      Dollar ceased to exist and Global became a wholly owned subsidiary of the
      Company.





On
      March
      31, 2006, we entered into a Share Exchange Agreement with Easy Money Express,
      Inc., a Nevada Corporation, whereby we issued 20,000 shares of our common stock
      to the 2 stockholders of Easy Money in exchange for 100% of the issued and
      outstanding shares of common stock of Easy Money held by the 2 stockholders.
      Pursuant to the terms of the share exchange agreement, Easy Money will continue
      as a wholly-owned subsidiary of the Company.





16


On
      April
      7, 2006, our wholly-owned subsidiary Easy Money entered into a letter of intent
      with Interactive Brand Development, Inc. (“IBD”), a Delaware corporation,
      wherein they wish to engage in a joint venture project for an Internet based
      payday loan operation under the trade name “Easy Money Express”. We are working
      with IBD to perform the necessary due diligence that will allow both parties
      to
      sign a definitive agreement, which will provide the specific details regarding
      the terms and conditions of the joint venture. Upon completion of a definitive
      agreement we will file a Form 8-K.





On
      June
      16, 2006, our wholly owned subsidiary, Easy Money Express, entered into a
      service agreement with M3 Internet Services, Inc. d/b/a CashZip, a South Dakota
      Corporation, wherein M3 agreed to promote and market the Easy Money
      Internet-based loan business through its developed online marketing using
      various online search engines and Pay-per-Click marketing services, including,
      but not limited to www.Google.com, as well as mutually agreed upon promotional
      and advertising material. Compensation shall be paid only on loan transactions
      made and repaid. Easy Money shall pay to M3 50% of the gross revenue generated
      from loan transactions based upon referrals made by M3 and loan transactions
      based upon referrals made by any source outside of M3’s marketing efforts. Easy
      Money shall also pay M3 a $12 client acquisition fee for each new client who
      submits an online loan application. The term of the agreement is for twelve
      (12)
      months commencing on June 16, 2006 and will automatically renew for succeeding
      12-month periods unless either party notifies the other, in writing, at least
      thirty (30) days prior to the end of the term that it does not intend to renew.





In
      October, 2006 Global Universal complet5ed a promissory note to the Company
      for
      $165,000 to be paid up on the spin out of Global Universal from the Company.





**Results
      of Operations for the Three Months Ended September 30, 2006 and
      2005.**





The
      following table summarizes selected items from the statement of operation at
      June 30, 2006 compared to June 30, 2005.





**INCOME:**





**Three
                Months Ended**
              **September
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Net
                Revenue
            
            
            0
            
            $
            74,670
            
            
            (74,670
            )
            
            100%





17


**Revenue**





Revenue
      for the three months ended September 30, 2006 was $0 compared to revenues of
      $74,670 in the three months ended September 30, 2005. This resulted in an
      decrease in revenues of $74,670 or 100%, from the same period one year ago.
      The
      decrease in revenue is due to previously funded cases have not settled during
      this period our collection efforts are proceeding to include legal proceedings
      to collect on cases that have settled. Our operating cycle is typically longer
      than one year for funded cases to generate revenue. We cannot guarantee with
      certainty when we will generate revenue sufficient to fund ongoing operations.
      Our future revenues will be reliant on the ability to fund future cases which
      require shorter periods of funding and strong collection efforts on funded
      cases
      as they are resolved.





**EXPENSES:**





**Three
                Months Ended**
              **September
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Reserve
                forunsuccessful
                resolutionof
                lawsuits
            
            $
            -
            
            $
            46,700
            
            $
            (46,700
            )
            
            (100%
            )General
                andadministrative
                expenses
            
            
            299,398
            
            
            742,364
            
            
            (442,966
            )
            
            (60%
            )Total
                operating expenses
            
            $
            341,818
            
            $
            789,064
            
            $
            (489,666
            )
            
            (62%
            )





**Total
      Operating Expenses**





Total
      operating expenses for the three month period ended September 30, 2006 decreased
      by $489,666 over the three month period ended September 30, 2005 due to a
      reduction in payroll, the companies move to a smaller office space and a
      reduction in professional fees.





**Three
                Months Ended**
              **September
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Other
                income (expense)
            
            $
            0
            
            $
            (55,522
            )
            $
            (55,522
            )
            
            (100%
            )Interest
                (expense) netof
                interest income
            
            
            (11,252
            )
            
            (14,944
            )
            
            (3,692
            )
            
            (25%
            )Amortization
                of debtDiscount
            
            
            (15,000
            )
            
            (444,643
            )
            
            (429,643
            )
            
            (97%
            )Total
                other income(expense)
            
            $
            (26,252
            )
            $
            (515,109
            )
            $
            (488,857
            )
            
            (95%
            )





18


**Interest
      Expense**





Our
      interest expense was $3,692 lower in the three month period ended September
      30,
      2006 than the three month period ended September 30, 2005 because we reduced
      short term interest bearing debt. Our debt amortization discount was $488,857
      lower in the three month period ended September 30, 2006 than the three month
      period ended September 30, 2005 because we reduced short term debt.











**Three
                Months Ended**
              **September
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Net
                income (loss)
            
            $
            (368,070
            )
            $
            (1,229,503
            )
            $
            (861,433
            
            
            (70%
            )





**Net
      Loss**





Our
      net
      loss was $861,433 lower in the three month period ended September 30, 2006
      as
      compared to the three months ended September 30, 2005.





**Results
      of Operations for the Nine Months Ended September 30, 2006 and
      2005.**





The
      following table summarizes selected items from the statement of operation at
      September 30, 2006 compared to September 30, 2005.





**INCOME:**





**Nine
                Months Ended**
              **September,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Net
                Revenue
            
            $
            656,580
            
            $
            222,545
            
            $
            434,035
            
            
            195%





**Revenue**





Revenue
      for the nine months ended September 30, 2006 was $656,580 compared to revenues
      of $222,545 in the nine months ended September 30, 2005. This resulted in an
      increase in revenues of $434,035, or 195%, from the same period one year ago.
      The increase in revenue is due to several previously funded cases which settled
      and our collection efforts were successful. Our operating cycle is typically
      longer than one year for funded cases to generate revenue. We cannot guarantee
      with certainty when we will generate revenue sufficient to fund ongoing
      operations. Our future revenues will be reliant on the ability to fund future
      cases which require shorter periods of funding and strong collection efforts
      on
      funded cases as they are resolved.





19


**EXPENSES:**





**Nine
                Months Ended**
              **September
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Reserve
                forunsuccessful
                resolutionof
                lawsuits
            
            $
            -
            
            $
            73,950
            
            $
            (73,950
            )
            
            (100%
            )General
                andadministrative
                expenses
            
            
            1,446,161
            
            
            2,227,361
            
            
            (781,200
            )
            
            (35%
            )Financing
                expense
            
            
            47,800
            
            
            -
            
            
            47,800
            
            
            100%Total
                operating expenses
            
            $
            (1,494,041
            )
            $
            (2,397,161
            )
            $
            (903,120
            )
            
            (38%
            )





**Total
      Operating Expenses**





Total
      operating expenses for the nine month period ended September 30, 2006 decreased
      by $903,120 over the nine month period ended September 30, 2005 because of
      our
      efforts to reduce payroll costs, professional fees and general operating
      expenses in the General and Administrative expenses.





**Nine
                Months Ended**
              **September
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Other
                income
            
            $
            -
            
            $
            (177,055
            )
            $
            (177,055
            )
            
            (100%
            )Interest
                (expense) netof
                interest income
            
            
            (48,240
            )
            
            (52,444
            )
            
            (4,204
            )
            
            (8%
            )Amortization
                of debt discount
            
            
            (15,000
            )
            
            (628,345
            )
            
            (613,345
            )
            
            (98%
            )Total
                other income(expense)
            
            $
            (63,240
            )
            $
            (857,844
            )
            $
            (794,604
            )
            
            (93%
            )





**Interest
      Expense**





Our
      interest expense was $4,204 lower in the nine month period ended September
      30,
      2006 than the nine month period ended September 30, 2005 due to decreased
      financing activity.





**Nine
                Months Ended**
              **September
                30,**
            
            **Increase
                (Decrease)****2006**
            
            **2005**
            
            $
            
            %Net
                income (loss)
            
            $
            (900,701
            )
            $
            (3,032,460
            )
            $
            (2,131,759
            )
            
            (70%
            )




20


**Net
      Loss**





Our
      net
      loss was $2,131,759 lower in the nine month period ended September 30, 2006
      as
      compared to the nine months ended September 30, 2005 because we increased
      revenue with more cases settling and our cost cutting efforts reflected by
      General and Administrative expenses being substantially reduced.  Until we
      can increase sales we will continue to have net losses.





**Operation
      Plan**





During
      the next twelve months we plan to effectuate our business plan and have
      restarted the marketing of our products and increased 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. Additionally, we still intend to start
      marketing of a new full recourse loan product during 2006. We believe that
      full
      recourse loans, 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 $19,271 as of September 30, 2006. 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.





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
      including interest bearing debentures. We may attempt to secure other loans
      from
      lending institutions or other sources. We will also consider establishing
      relationships with selected business partners whose contributions include
      necessary cash. 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.





**Liquidity
      and Capital Resources**





Liquidity
      is a measure of a company’s ability to meet potential cash requirements. We have
      historically met our capital requirements through the issuance of stock and
      by
      borrowings. In the future we believe we will be able to provide the necessary
      liquidity we need by the revenues generated from our operations.





21


Promissory
      Notes





On
      December 21, 2005, we entered into a Promissory Note with Global Universal
      Film
      Group Ent., Inc. for the principal amount of $50,000. Pursuant to the note
      Global promised to pay us the sum of $50,000 together with interest at the
      rate
      of 6% per annum on any unpaid balance. The $50,000 is to pay for the costs
      and
      expenses incurred in connection with the merger and was due upon completion
      of
      the merger. On June 30, 2006, the note was verbally extended to October 1,
      2006.





On
      December 31, 2005, we entered into a Promissory Note with Herbert Stein for
      the
      principal amount of $25,000. Pursuant to the note we promised to pay to the
      order of Herbert Stein $25,000 together with accrued interest thereon at 10%
      in
      sixty (60) days. The note was verbally extended and on May 5, 2006, we paid
      the
      principal amount plus interest to Herbert Stein.





On
      February 1, 2006, we entered into a Promissory Note with Davric Corp. for the
      principal amount of $25,000. Pursuant to the note we promised to pay to the
      order of Davric Corp. the sum of $25,000 together with accrued interest thereon
      at 12% in sixty (60) days. The note was verbally extended and on May 9, 2006,
      we
      paid the principal amount plus interest to Davric Corp.





Pursuant
      to our outstanding indebtedness to the law firm of Callahan & Blaine for
      legal services in connection with our Bankruptcy proceedings, our subsidiary
      California LitFunding and Michael A. Marcelli entered into a Promissory Note
      with Daniel J. Callahan for the principal amount of $36,881 on March 1, 2006.
      Pursuant to the note California LitFunding and Michael A. Marcelli, jointly
      promised to pay to the order of Daniel J. Callahan the sum of $36,881 with
      interest thereon at the rate of 8% per annum. Monthly installments commenced
      on
      April 1, 2006, in the amount of $7,524 and will continue thereafter on the
      first
      day of each month until September 1, 2006, at which time all unpaid principal
      and accrued interest shall be due and payable. Each monthly payment shall be
      credited first on the interest then due, and the remainder, if any, on the
      principal sum; interest shall thereupon cease to accrue on the amount so
      credited on the principal sum. Should default be made in the payment of any
      installment due under the note, Mr. Callahan will be entitled to payment of
      all
      amounts due plus $8,305 previously waived in consideration for the note and
      the
      whole sum of principal and interest shall become immediately due and payable
      at
      the option of Mr. Callahan.





On
      April
      26, 2006, we entered into a Promissory Note with Global Universal Film Group,
      Inc. for the principal amount of $10,000. Pursuant to the note we promised
      to
      pay to the order of Global the sum of $10,000 together with interest at the
      rate
      of 6% per on June 30, 2006. On June 30, 2006, the note was verbally extended
      to
      October 1, 2006.





On
      May
      10, 2006, Easy Money, our wholly owned subsidiary, entered into a Promissory
      Note with Davric Corp. for the principal amount of $100,000. Pursuant to the
      note Easy Money promised to pay to the order of Davric Corp. the sum of $100,000
      together with accrued interest thereon at 24% per annum. The principal amount
      of
      the note or any part thereof, along with all interest accrued and unpaid
      thereon, shall be payable to Davric Corp. on or before one year from the date
      of
      May 10, 2006.





22


Investment
      Agreement with Imperial Capital Holdings





On
      July
      28, 2006, we entered into an Investment Agreement with Imperial Capital Holdings
      (“Imperial”). Under the terms of the agreement, we agreed to issue and sell to
      Imperial, and Imperial agreed to purchase from the Company up to that number
      of
      shares of common stock having an aggregate purchase price of $3,000,000. The
      Company will be able to require Imperial to purchase up to the $3,000,000 of
      our
      common stock over a two-year period commencing on the date a registration
      statement is declared effective by the SEC covering shares of the Registrant’s
      common stock underlying the Investment Agreement. These funds will be able
      to be
      drawn at the Company’s discretion by delivering a written notice (“Put Notice”)
      stating the amount of funds the Company wishes to draw (“Put Amount”). The Put
      Amount shall be equal to 93% of the market price of the Company’s common stock,
      as calculated in accordance with the terms of the Investment Agreement, provided
      that in no event will the Put Amount be greater than $250,000. The Company
      shall
      not be entitled to submit a Put Notice until after the previous closing has
      been
      completed. If any closing best bid price during the applicable Pricing Period
      (the period beginning on the Put Notice date and ending on and including the
      date that is 5 trading days after such Put Notice date) with respect to any
      particular Put Notice is less than 75% of any closing best bid price of the
      common stock for the 10 trading days prior to the Put Notice date, the Put
      Notice will terminate at the Company’s request.





***Registration
      Rights.*** Pursuant
      to the terms of the Registration Rights Agreement dated July 28, 2006 between
      Imperial and the Company, the Company is obligated to file a registration
      statement registering 15,000,000 shares of our common stock issuable on the
      date
      proceeding the filing of the Registration Statement based on the closing bid
      price of our common stock on such date and the amount reasonably calculated
      that
      represents common stock issuable to other parties as set forth in the Investment
      Agreement except to the extent that the SEC requires the share amount to be
      reduced as a condition of effectiveness. The Company shall use commercially
      reasonable efforts to have the Registration Statement declared effective by
      the
      SEC within 180 calendar days after the filing of the Registration
      Statement.





***Placement
      Agent.*** In
      connection with the Investment Agreement, on July 28, 2006 we entered into
      a
      Placement Agent Agreement with Brewer Financial Services, LLC., a NASD
      registered broker-dealer. The Placement Agent will render consulting services
      to
      the Company with respect to the Investment Agreement and will be available
      for
      consultation in connection with the advances to be requested by the Company
      pursuant to the Investment Agreement. We agreed to pay to the Placement Agent
      1%
      of the gross proceeds from each draw for all services in connection with the
      Placement Agent Agreement.





***Satisfaction
      of our cash obligations for the next 12 months.***





As
      of
      September 30, 2006, our cash balance was $19,271. Over the next twelve months
      we
      believe that existing capital and anticipated funds from operations will not
      be
      sufficient to sustain operations and planned expansion. Our plan for satisfying
      our cash requirements for the next twelve months is through additional equity,
      third party financing, and/or traditional bank financing. We intend to make
      appropriate plans to insure sources of additional capital in the future to
      fund
      growth and expansion through additional equity or debt financing or credit
      facilities. No assurance can be made that such financing would be available,
      and
      if available it may take either the form of debt or equity. In either case,
      the
      financing could have a negative impact on our financial condition and our
      Stockholders.





23


We
      anticipate incurring operating losses over the next twelve months. Our lack
      of
      operating history makes predictions of future operating results difficult to
      ascertain. Our prospects must be considered in light of the risks, expenses
      and
      difficulties frequently encountered by companies in their early stage of
      development, particularly companies in new and rapidly evolving technology
      markets. Such risks include, but are not limited to, an evolving and
      unpredictable business model and the management of growth. To address these
      risks we must, among other things, implement and successfully execute our
      business and marketing strategy, continue to develop and upgrade technology
      and
      products, respond to competitive developments, and continue to attract, retain
      and motivate qualified personnel. There can be no assurance that we will be
      successful in addressing such risks, and the failure to do so can have a
      material adverse effect on our business prospects, financial condition and
      results of operations.





***Going
      Concern***





The
      ability of the Company to continue as a going concern remains 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.





***Summary
      of product and research and development that we will perform for the term of
      our
      plan.***





We
      do not
      anticipate performing any significant product research and development under
      our
      plan of operation until such time as we complete a merger or
      acquisition.





***Expected
      Purchase or sale of plant and significant equipment.*** ****





We
      do not
      anticipate the purchase or sale of any plant or significant equipment, as such
      items are not required by us at this time or anticipated to be needed in the
      next twelve months.




24


***Significant
      changes in the number of employees.***





We
      currently employ 4 full time employees. Because of the legal proceedings
      previously discussed in prior filings, we experienced a deleterious and damaging
      loss of key personnel that will have to be replaced. In the event that we
      generate significant revenues and expand our operations, then we may need to
      hire additional employees or independent contractors.





***Consultants***





*IR
      Partners, LLC.* On
      January 10, 2006, we entered into an agreement with IR Partners, LLC, wherein
      IR
      Partners agreed to provide us with investor relations services during the period
      February 1, 2006 through May 31, 2006. As consideration for the performance
      of
      the services we agreed to pay IR Partners $5,000 and issue 250,000 shares of
      our
      restricted common stock (issued on February 1, 2006).





*CLX
      & Associates, Inc.* On March
      1, 2006, we entered into a consulting agreement with CLX & Associates, Inc.,
      wherein CLX agreed to provide us with consulting services in connection with
      (i)
      short and long term strategic planning; (ii) short term crisis management;
      (iii)
      short and long term marketing; (iv) meeting with/selecting qualified companies
      for joint business ventures; (v) contracting and interviewing qualified
      accounting firms and legal counsel; (vi) recruitment selection of key executives
      and staff; (vii) internet and website design; and (viii) recommending and
      identifying of board members. We agreed to compensate CLX for the services
      a
      total of $100,000 in cash, or 1,000,000 shares of our common stock. CLX will
      commence providing services for the Company on such date as it has received
      the
      agreed compensation (“effective date”). The term of the agreement is for three
      months from the effective date. On June 23, 2006, the 1,000,000 shares were
      issued to CLX. On August 14, 2006 the 1,000,000 shares were cancelled due to
      a
      suspension of the contract. On August 28, 2006 the contract was reinstated
      with
      an addendum and 1,000,000 shares were issued to CLX & Associates, Inc.





*Navin
      Enterprises, Inc.* On March
      1, 2006, we entered into a consulting agreement with Navin Enterprises, Inc.,
      wherein we agreed to retain the services of Navin to advise and consult with
      us
      regarding the Company’s establishment of a branch office in Canada to advance
      nonrecourse funds to Canadian attorneys in Canada. The term of the agreement
      is
      for 6 months from March 1, 2006. We agreed to issue 150,000 shares of our freely
      traded common stock to Navin as full and complete compensation. The said shares
      shall be issued 25,000 shares per month over the term of the agreement. On
      March
      6, 2006, we issued 25,000 shares of our common stock to Navin. The shares were
      unrestricted pursuant to the S-8 Registration filed with the SEC on February
      28,
      2006. On April 20, 2006, we issued 25,000 shares of our restricted common stock
      to Navin.





*Alliance
      Marketing.* On March
      1, 2006, we entered into a sales consultant agreement with Alliance Marketing,
      wherein we agreed to retain the services of Alliance Marketing to act as an
      outside, independent marketing consultant and sales representative for sales
      to
      new clients, acquiring new investor money to the LLC program and conducting
      all
      marketing and sales programs. We agreed to issue 50,000 shares of our common
      stock to Alliance Marketing as a sign-on bonus (issued on April 18, 2006 to
      Anthony Longo, principal of Alliance Marketing). We also agreed to issue to
      Alliance Marketing 50,000 options to purchase shares of our common stock at
      $0.15 per share for one year. This agreement has been amended and replaced
      with
      the consulting agreement with Anthony Longo dated July 1, 2006 (described
      below).





25


*Anthony
      Longo.* On July
      1, 2006, we entered into a consulting agreement with Anthony Longo, wherein
      he
      agreed to act as an outside, independent marketing consultant for the
      establishment of our wholly-owned subsidiary Easy Money Express, Inc. (“EME”),
      acquiring new investor money that program and conducting all other marketing
      programs. This agreement serves as an amendment and supercedes the agreement
      with Alliance dated March 1, 2006. We agreed to provide Mr. Longo with marketing
      expenses such as show or event travel expenses and advertising material as
      well
      as a fee of $5,000 per month for six months from the date of July 1, 2006. In
      addition to a signing bonus of 50,000 shares of our restricted common stock
      (issued on April 18, 2006), Mr. Longo will receive the following stock bonuses
      related to specific performance:





When
                EME commences funding:
            
            200,000
                shares of common stockWhen
                EME’s revenue totals $100,000:
            
            200,000
                shares of common stockWhen
                EME’s revenue totals $300,000:
            
            200,000
                shares of common stockWhen
                EME’s revenue totals $500,000:
            
            400,000
                shares of common stock





*Julian
      Goldberg.* On
      August 2, 2006, our wholly-owned subsidiary Global Universal Film Group entered
      into a consulting agreement with Julian Goldberg, wherein Mr. Goldberg agreed
      to
      assist Global in connection with Global’s efforts to raise capital through the
      sale and offering of Global’s interest bearing, ten-year corporate notes in the
      principal amount of $50,000,000, with principal secured or guaranteed by a
      package of Insurance Instruments (the “Corporate Notes”). The term of the
      agreement is for three (3) months from the date of August 2, 2006. Global agreed
      to compensate Mr. Goldberg with an initial retainer in the amount of $4,000.
      In
      the event that Global is successful in realizing financing from the sale of
      Global’s Corporate Notes, then Mr. Goldberg shall be entitled to receive an
      incentive fee in an amount equal to 6.5% of the cash proceeds actually received
      by Global. In the event Global is successful in obtaining financing from the
      sale of the Corporate Notes from any source located or introduced to Global
      by
      Mr. Goldberg, Global shall pay Mr. Goldberg a one-time performance fee in an
      amount equal to 3% of the gross proceeds from the Corporate Notes. Mr. Goldberg
      will also be entitled to a stock performance fee in the event of the sale of
      the
      Corporate Notes and paid in the form of a common stock warrant entitling Mr.
      Goldberg to purchase up to 500,000 shares of Global’s common stock. The warrant
      shall effective for one year from the date of August 2, 2006 and the stock
      price
      shall be equal to 50% of the average closing prices for the initial 20 trading
      days after trading, immediately after the “spin off” from the
      Company.





***Off-Balance
      Sheet Arrangements***





We
      do not
      have any 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 or operations, liquidity, capital
      expenditures or capital resources that is material to investors.





26


**Critical
      Accounting Policies and Estimates**





Our
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations section discusses our 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, primarily allowance for doubtful accounts
      receivables, accruals for other costs, and the classification of net operating
      loss and tax credit carry forwards between current and long-term assets. These
      accounting policies are described at relevant sections in this discussion and
      analysis and in the notes to the financial statements included in this
      report.





**FACTORS
      THAT MAY AFFECT OUR RESULTS OF OPERATION**





***Our
      cash flow depends on a lengthy collection cycle and factors beyond our control
      that may require us to obtain interim financing.***





Our
      procedures and underwriting process have been changed to try and lessen our
      risk
      and to shorten our collection cycle. Nevertheless, our collection cycle on
      advances made will remain lengthy compared to other similar industries. We
      believe that cases we advance funds to attorneys on may take between 18 months
      and 36 months to reach resolution. Larger cases may take longer to reach
      resolution. Once we advance the money, the collection cycle is out of our
      control and this may force us to seek other sources of capital to fund our
      overhead expenses. There can be no assurance that in such an event we could
      find
      such financing or that, if we could, the financing would be available on
      satisfactory terms.





***We
      have a limited operating history and lack of
      profitability.***





We
      still
      have limited operating history having begun business in 2000 and spent almost
      a
      full year in litigation defending ourselves from a petition for involuntary
      bankruptcy. During that time, we have incurred losses in every quarter since
      inception except for the extraordinary gain realized in December 2004 and we
      remain subject to the risks and uncertainties usually encountered by early
      stage
      companies.





27


In
      the
      past, we attracted large well known firms of attorneys as clients. We believe
      that it will be possible to once again attract large firms of this caliber
      even
      after the enormously negative and unwarranted reputation achieved during the
      bankruptcy litigation. We have met with some successes in this regard. We have
      not yet experienced an intolerable inability to attract the talent that we
      need.
      However risks remain that we will not attract, train or integrate into the
      business organization qualified personnel. Additionally, it is fair to expect
      that fluctuations in operating results may be significant as we develop and
      test
      new business practices. There is also the risk that we will fail to properly
      manage growth and expansion, if and when it occurs.





***Our
      business of funding plaintiffs and plaintiff attorneys may be in potential
      conflict with champerty laws.***





Champerty,
      as defined by Black’s Law Dictionary, “is a bargain to divide the proceeds of
      litigation between the owner of the liquidated claim and a party supporting
      or
      enforcing the litigation.”  Different states impose rules on the champerty
      process.  We research state champerty laws prior to advancing capital to
      plaintiffs and plaintiff attorneys, however, if we were to be found in violation
      of states champerty laws it could have a material adverse effect on us and
      our
      results of operations.





***We
      have historically had losses from operations and losses may continue in the
      future, which may cause us to curtail operations.***





Since
      our
      inception we have not been profitable and have lost money on both a cash and
      non-cash basis. For the three months ended September 30, 2006, we incurred
      net
      losses of $561,574. Our accumulated deficit at the end of September 30, 2006
      was
      $11,159,389. Future losses are likely to occur, as we are dependent on spending
      money to pay for our operations. No assurances can be given that we will be
      successful in reaching or maintaining profitable operations. Accordingly, we
      may
      experience liquidity and cash flow problems. If our losses continue, our ability
      to operate may be severely impacted or alternatively we may be forced to
      terminate our operations.





***We
      are subject to a working capital deficit, which means that our current assets
      on
      September 30, 2006 were not sufficient to satisfy our current liabilities and,
      therefore, our ability to continue operations is at
      risk.***





We
      had a
      working capital deficit for the three months ended September 30, 2006 which
      means that our current liabilities exceeded our current assets on September
      30,
      2006 by $1,577,581. Current assets are assets that are expected to be converted
      to cash within one year and, therefore, may be used to pay current liabilities
      as they become due. Our working capital deficit means that our current assets
      on
      September 30, 2006 were not sufficient to satisfy all of our current liabilities
      on September 30, 2006. If our ongoing operations do not begin to provide
      sufficient profitability to offset the working capital deficit, we may have
      to
      raise capital or debt to fund the deficit or curtail future
      operations.





28


***Our
      common stock is listed on the Over-the-Counter (OTC) Bulletin Board which may
      make it more difficult for stockholders to sell their shares and may cause
      the
      market price of our common stock to decrease.***





Our
      common stock is listed on the OTC Bulletin Board. Factors that may affect
      potential liquidity include limited coverage by security analysts and the news
      media. This may negatively affect the prices for our shares of common stock.
      The
      filings of the involuntary bankruptcy petition against us on April 2, 2003
      and
      subsequent litigation and filings of voluntary chapter 11’s for both ourselves
      and our then operating subsidiary, California LitFunding did have a materially
      negative effect on the price of our stock and for all intents and purposes
      that
      stock had no value for all of 2003 and most of 2004. We believe that the
      successful resolution of the litigation has given us an opportunity to rebuild
      value in the stock.





***Our
      stock price may be volatile and an investment in such common stock could suffer
      a decline in value.***





The
      market price of our common stock may fluctuate significantly and violently
      in
      response to a number of factors, some of which are beyond our control. These
      factors include:





·
            Government
                regulatory action affecting our services or competitor’s
                services;


·
            Actual
                or anticipated fluctuations in operating
                results;


·
            The
                loss of key management or other
                personnel;


·
            The
                loss of major customers;


·
            The
                outcome of any future litigation;


·
            Broad
                market fluctuations; and economic conditions in the United States
                or
                abroad.





***We
      could fail to attract or retain key personnel, which could be detrimental to
      our
      operations.***





Our
      success largely depends on the efforts and abilities of our Officers and
      Directors. The loss of their services could materially harm our business because
      of the cost and time necessary to find successors. Such a loss would also divert
      management attention away from operational issues. We do not have other key
      employees who manage our operations. To the extent that we are smaller than
      our
      competitors and have fewer resources, we may not be able to attract a sufficient
      number and quality of staff, when required.





29


***Because
      our common stock is deemed a low-priced “Penny” stock, an investment in our
      common stock should be considered high risk and subject to marketability
      restrictions.***





Since
      our
      common stock is a penny stock, as defined in Rule 3a51-1 under the Securities
      Exchange Act, it will be more difficult for investors to liquidate their
      investment even if and when a market develops for the common stock. Until the
      trading price of the common stock rises above $5.00 per share, if ever, trading
      in the common stock is subject to the penny stock rules of the Securities
      Exchange Act specified in rules 15g-1 through 15g-10. Those rules require
      broker-dealers, before effecting transactions in any penny stock,
      to:





·
            Deliver
                to the customer, and obtain a written receipt for, a disclosure
                document;


·
            Disclose
                certain price information about the
                stock;


·
            Disclose
                the amount of compensation received by the broker-dealer or any associated
                person of the broker-dealer;


·
            Send
                monthly statements to customers with market and price information
                about
                the penny stock; and ·
            In some circumstances, approve the purchaser’s account
              under certain standards and deliver written statements to the customer
              with information specified in the rules.





Consequently,
      the penny stock rules may restrict the ability or willingness of broker-dealers
      to sell the common stock and may affect the ability of holders to sell their
      common stock in the secondary market and the price at which such holders can
      sell any such securities. These
      additional procedures could also limit our ability to raise additional capital
      in the future.





**Item
      3. Controls and Procedures.**





We
      conducted an evaluation, with the participation of Morton Reed, our Chief
      Executive Officer, and Terry Gabby, our Chief Financial Officer, of the
      effectiveness of the design and operation of our disclosure controls and
      procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934, as amended, as of June 30, 2006, to ensure that
      information required to be disclosed by us in the reports filed or submitted
      by
      us under the Exchange Act is recorded, processed, summarized and reported,
      within the time periods specified in the Securities Exchange Commission’s rules
      and forms, to ensure that information required to be disclosed by us in the
      reports filed or submitted by us under the Exchange Act is accumulated and
      communicated to our management, including our principal executive and principal
      financial officers, or persons performing similar functions, as appropriate
      to
      allow timely decisions regarding required disclosure. Based on that evaluation,
      Messrs. Reed and Gabby have concluded that as of September, 2006, our disclosure
      controls and procedures were not effective at the reasonable assurance level,
      primarily due to our inability to efficiently obtain information from our wholly
      owned subsidiary, Global Universal Film Group.





30


Although
      we encountered difficulty in obtaining information from Global Universal Film
      Group, we performed additional analysis and other post-closing procedures to
      ensure our consolidated financial statements were prepared in accordance with
      generally accepted accounting principles. Accordingly, we believe that the
      consolidated financial statements included in this report fairly present, in
      all
      material respects, our financial condition, results of operations and cash
      flows
      for the periods presented.





Other
      than the deficiency and weakness described above, Mr. Reed, our Chief Executive
      Officer and Mr. Gabby, our Chief Financial Officer concluded that our disclosure
      controls and procedures are otherwise effective.





In
      an
      attempt to prevent further breakdowns in our internal control over financial
      and
      disclosure reporting, we have instituted enhanced reporting requirements for
      the
      management of our wholly owned subsidiaries and engaged the services of an
      independent financial consultant to assist us in the preparation of our
      financial statements in accordance with GAAP and assist in the evaluation of
      our
      financial statement disclosures. This was our only change in our internal
      control over financial reporting for the most recent quarter ended September
      30,
      2006.





**PART
      II - OTHER INFORMATION**





**Item
      1.**  **Legal Proceedings.**





We
      are a
      defendant in several matters in litigation, many of which are in the normal
      course of business, including litigation for refunds of funds invested. We
      believe these suits are without merit and intends to defend these litigations
      in
      courts of law.





We
      are
      involved in suits for breach of contract, fraud, conspiracy and defamation
      with
      the same claimants in the United States Bankruptcy Court and California State
      Court. The claimants allege that 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, which was complied
      with. The claimants allege damages of $16 million.





In
      May
      2004, the United States Bankruptcy Court upheld the Company's objections to
      all
      monetary claims. The claimants appealed this decision. Additionally, they filed
      an adversary proceeding raising most of the issues already raised in the first
      claims. In February 2005, the United States Bankruptcy Court partially dismissed
      the claimant's adversary complaint and told the claimants to amend the complaint
      to give them the opportunity to clarify their claims. The claimants filed that
      amended complaint. In March 2005, we filed a motion to dismiss with prejudice
      the entire amended complaint on the grounds that the claims therein were
      previously denied by the court in the bankruptcy proceeding.





The
      State
      Court action has been stayed pending resolution of the issues in the United
      States Bankruptcy Court. The Federal Court's decisions in the Company's favor
      will preclude proceedings against the Company in the state court
      action.





31


**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





On
      April
      18, 2006, we issued 831,481 shares of our common stock to Morton Reed, CEO
      of
      the Company, in exchange for accrued debt valued at $130,000. The shares were
      unrestricted pursuant to the S-8 Registration filed on February 28,
      2006.





On
      April
      18, 2006, we issued 50,000 shares of our restricted common stock to Anthony
      Longo as a sign-on bonus.





On
      April
      18, 2006, we issued 15,000 shares of our restricted common stock to Rochester
      Capital Partners, LP and 5,000 shares of our common stock to Joseph Weaver
      in
      exchange for all of the issued and outstanding shares of Easy Money Express,
      Inc. (200,000 shares).





On
      April
      18, 2006, we issued 100,000 shares of our common stock to Marc Lieberman for
      services rendered to the Company. The shares were unrestricted pursuant to
      the
      S-8 Registration filed with the SEC on February 28, 2006.





On
      April
      18, 2006, we issued 10,700 shares of our common stock to Michael Marcelli for
      services rendered to the Company. The shares were unrestricted pursuant to
      the
      S-8 Registration filed with the SEC on February 28, 2006.





On
      April
      18, 2006, we issued 20,000 shares of our common stock to Kathleen Saur for
      services rendered to the Company. The shares were unrestricted pursuant to
      the
      S-8 Registration filed with the SEC on February 28, 2006.





On
      April
      18, 2006, we issued 163,295 shares of our common stock to Jon M. Leader for
      services rendered to the Company. The shares were unrestricted pursuant to
      the
      S-8 Registration filed with the SEC on February 28, 2006.





On
      April
      20, 2006, we issued 25,000 shares of our restricted common stock to Baldev
      Singh
      Grewal of Navin Enterprises, Inc. pursuant to its consulting agreement dated
      March 1, 2006.





On
      May
      23, 2006, we issued 1,000,000 shares of our restricted common stock to
      Stoecklein Law Group for services rendered to the Company.





On
      May
      23, 2006, we issued 500,000 shares of our restricted common stock to Opus Pointe
      for services rendered to the Company.





32


On
      June
      2, 2006, we issued 100,000 shares of our common stock to Marc J. Winthrop for
      legal services provided to the Company. The shares issued were unrestricted
      pursuant to the S-8 Registration filed with SEC on February 28,
      2006.





Apex
      Investment Fund Ltd. converted 400,000 shares of Series A 12% Convertible
      Preferred Stock into 800,000 shares of our restricted common stock. The 800,000
      shares of common stock were issued on June 2, 2006.





On
      June
      23, 2006, we issued 1,000,000 shares of our restricted common stock to CLX
&
Associates, Inc. pursuant to its consulting agreement dated March 1,
      2006.





We
      believe that the issuance and sale of the restricted shares was exempt from
      the
      registration and prospectus delivery requirements of the Securities Act of
      1933
      by virtue of Section 4(2) and Regulation D Rule 506. The shares issued were
      directly from us and did not involve a public offering or general solicitation.
      The recipients of the shares were afforded an opportunity for effective access
      to files and records of the Company that contained the relevant information
      needed to make their investment decision, including the financial statements
      and
      34 Act reports. We reasonably believed that the recipients, immediately prior
      to
      issuing the shares, had such knowledge and experience in our financial and
      business matters that they were capable of evaluating the merits and risks
      of
      their investment. The recipients had the opportunity to speak with our
      management on several occasions prior to their investment decision.





**Item
      3.**  **Defaults Upon Senior Securities.**





None.





**Item
      4.**  **Submission of Matters to a Vote of Security Holders.**





None.





**Item
      5.**  **Other Information.**




None.





33


**Item
      6.**  **Exhibits and Reports on Form 8-K.**





Exhibits




**Exhibit**
              **Number**
            **Description**2.1
            Plan
                and agreement of merger between RP Entertainment Inc., RP Acquisition
                Corp. and LitFunding Corp. dated February 21, 2003*(Incorporated
                by reference to the exhibits to Form 8-K filed on March 11,
                2003)*2.2
            U.S.
                Bankruptcy Court Stipulation between LitFunding Corporation and
                Petitioning Creditors dated November 14, 2003*(Incorporated
                by reference to the exhibits to Form 8-K filed on December 4,
                2003)*2.3
            U.
                S. Bankruptcy Court Notice of Entry of Judgement*(Incorporated
                by reference to the exhibits to Form 8-K filed on December 4,
                2003)*2.4
            U.S.
                Bankruptcy Court Chapter 11 Plan of Reorganization dated April 7,
                2004*(Incorporated
                by reference to the exhibits to Form 8-K filed on July 6,
                2004)*2.5
            Agreement
                and Plan of Merger between LitFunding Inc., LFDG Subsidiary Corp.
                and Easy
                Money Express Inc. dated February 7th,
                2006*(Incorporated
                by reference to the exhibits to Form 8-K filed on February 13,
                2006)*3(i).1
            Articles
                of Incorporation dated July 2, 1996*(Incorporated
                by reference to the exhibits to Form SB-2 filed on June 19,
                2001)*3(i).2
            Certificate
                of Amendment to Articles of Incorporation dated September 4, 1996*(Incorporated
                by reference to the exhibits to Form SB-2 filed on June 19,
                2001)*3(ii).1
            By-Laws
                dated September 2, 1996*(Incorporated
                by reference to the exhibits to Form SB-2 filed on June 19,
                2001)*3(ii).2
            Amendment
                of By-laws dated March 5, 1997*(Incorporated
                by reference to the exhibits to Form SB-2 filed on June 19,
                2001)*4.1
            Common
                Stock Certificate Form*(Incorporated
                by reference to the exhibits to Form SB-2 filed on June 19,
                2001)*10.1
            Agreement
                between RP Entertainment Inc. and Brutus Productions dated May 1,
                1999*(Incorporated
                by reference to the exhibits to Form SB-2A filed on August 3,
                2001)*10.2
            Amended
                2002 Employee Stock Compensation Plan Prospectus dated September
                2, 2003*(Incorporated
                by reference to the exhibits to Form S-8 filed on September 10,
                2003)*10.3
            Amended
                2002 Employee Stock Compensation Plan Certification of Plan Adoption
                dated
                September 2, 2003*(Incorporated
                by reference to the exhibits to Form S-8 filed on September 10,
                2003)*10.4
            2004
                Stock Option Plan dated March 9, 2004*(Incorporated
                by reference to the exhibits to Form DEF 14A filed on July 13,
                2004)*10.5
            Employment
                Agreement between LitFunding USA and Stephen D. King dated October
                2004*(Incorporated
                by reference to the exhibits to Form S-8 filed on October 28,
                2004)*10.6
            Investment
                Agreement between LitFunding Corp. and Dutchess Private Equities
                Fund,
                L.P. dated January 14, 2005*(Incorporated
                by reference to the exhibits to Form 8-K filed on January 21,
                2005)*10.7
            Registration
                Rights Agreement between LitFunding Corp. and Dutchess Private Equities
                Fund, L.P. dated January 14, 2005*(Incorporated
                by reference to the exhibits to Form 8-K filed on January 21,
                2005)*10.8
            Option
                Agreement between Silver Dollar Productions Inc. and Morton Reed
                dated
                January 31, 2005*(Incorporated
                by reference to the exhibits to Form PRE 14C filed on March 21,
                2005)*10.9
            Certificate
                of Designation dated July 25, 2005*(Incorporated
                by reference to the exhibits to Form S-8 filed on July 28,
                2005)*10.10
            Binding
                letter of intent of merger between LitFunding Corp. and Cashwize
                Inc.
                dated September 15, 2005*(Incorporated
                by reference to the exhibits to Form 8-K filed on September 19,
                2005)*10.11
            Letter
                of intent of merger between LitFunding Corp. and Easy Money Express
                Inc.
                dated December 14, 2005*(Incorporated
                by reference to the exhibits to Form 8-K filed on January 3,
                2006)*10.12
            Binding
                Letter of Intent between Silver Dollar Productions, Inc. and Global
                Universal Film, Group Ent. Inc. dated December 21, 2005*(Incorporated
                by reference to the exhibits to Form 8-K filed on January 12,
                2006)*10.13
            Investment
                Agreement with Imperial Capital Holdings, dated January 16, 2006*(Incorporated
                by reference to the exhibits to Form 8-K filed on February 1,
                2006)*10.14
            Registration
                Rights Agreement with Imperial Capital Holdings, dated January 19,
                2006*(Incorporated
                by reference to the exhibits to Form 8-K filed on February 1,
                2006)*10.15
            Placement
                Agent Agreement with Brewer Financial Services, LLC., dated January
                16,
                2006*(Incorporated
                by reference to the exhibits to Form 8-K filed on February 1,
                2006)*10.16
            2006
                Non-Qualified****Stock
                Compensation Plan*(Incorporated
                by reference to the exhibits to Form S-8 filed on February 28,
                2006)*10.19
            Share
                Exchange Agreement with Easy Money Express, Inc., dated March 31,
                2006*(Incorporated
                by reference to the exhibits to Form 10-KSB file on May 19,
                2006)*20
            Letter
                to Shareholders dated March 11, 2003*(Incorporated
                by reference to the exhibits to Form 8-K filed on March 11,
                2003)*21
            List
                of Subsidiaries : California LitFunding, E.Evolution Expeditions
                and
                LitFunding USA*(Incorporated
                by reference to the exhibits to Form 10-KSB filed on March 21,
                2005)*




34


31.1*
            Certification
                of Morton Reed pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2*
            Certification
                of Terry Gabby pursuant to Section 302 of the Sarbanes-Oxley
                Act32.1*
            Certification
                of Morton Reed pursuant to Section 906 of the Sarbanes-Oxley
                Act32.2*
            Certification
                of Terry Gabby pursuant to Section 906 of the Sarbanes-Oxley
                Act




*
      Filed
      herewith.








Reports
      on Form 8-K





Form
      8-K
      filed on September 1, 2006.


Form
      8-K
      filed on August 4, 2006; Investment Agreement with Imperial, dated
      7/28/06.


Form
      8-K
      filed on July 20, 2006; Press Release.


Form
      8-K
      filed on June 21, 2006; Press Releases.


Form
      8-K/A filed on May 26, 2006; Change of auditor.


Form
      8-K/A filed on May 15, 2006; Change of auditor.


Form
      8-K/A filed May 5, 2006; Change of auditor.


Form
      8-K
      filed May 4, 2006; Change of auditor.




35


**SIGNATURES**








Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.





**LITFUNDING
      CORP.**


(Registrant)








By: 
      /s/
      Terry Gabby


Terry
      Gabby, Chief Financial Officer


(On
      behalf of the registrant and as principal


accounting
      officer)





Date:
      November 20, 2006






36