| Delaware                                                                                                                                                                                                                                                                                                                    | 20-5456087                           |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
| (State of jurisdiction of Incorporation)                                                                                                                                                                                                                                                                                         | (I.R.S. Employer Identification No.) |
|  10801 Johnston Road. Suite 210                    Charlotte, NC                     (Address of Principal Executive Offices) |                                 |  28226(Zip Code) |   |

| Large accelerated filer [  ] |   |   |   | Accelerated filer [  ] |
|----------------------------------------|--------|--------|--------|----------------------------------|

|  Non-accelerated filer [  ] |   | (Do not check if a smaller reporting company) |   | Smaller reporting company [X] |
|--------------------------------------------|--------|-----------------------------------------------|--------|-------------------------------|

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|                                                    | Page                                                                                                                     |
|---------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|
|                                                    |                                                                                                                     |
| PART I.  FINANCIAL INFORMATION                |                                                                                                                     |
|                                                    |                                                                                                                     |
| Item 1.                                                 | Financial Statements                                                                                                     | 4 |
|                                                    |                                                                                                                     |   |
|                                                    | Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009                                        | 4 |
|                                                    |                                                                                                                     |   |
|                                                    | Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2010 and 2009 (unaudited)  | 5 |
|                                                    |                                                                                                                     |   |
|                                                    | Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2010 (unaudited) | 6 |
|                                                    |                                                                                                                     |   |
|                                                    | Consolidated Statements of Cash Flows for Six Months Ended June 30, 2010 and 2009(unaudited)                             | 7 |
|                                                    |                                                                                                                     |   |
|                                                    | Notes to Consolidated Financial Statements                                                                               | 8 - 21 |
|                                                    |                                                                                                                     |   |
| Item 2.                                                 | Management's Discussion and Analysis of Financial Condition and Results of Operations                                    | 22 |
|                                                    |                                                                                                                     |   |
| Item 3.                                                 | Quantitative and Quantitative Disclosures about Market Risk                                                              | 29 |
|                                                    |                                                                                                                     |   |
| Item 4.                                                 | Controls and Procedures                                                                                                  | 29 |
|                                                    |                                                                                                                     |
| PART II.     OTHER INFORMATION |                                                                                                                     |
|                                                    |                                                                                                                     |
| Item 1.                                                 | Legal Proceedings                                                                                                        | 30  |
|                                                    |                                                                                                                     |   |
| Item 2.                                                 | Changes in Securities                                                                                                    | 30 |
|                                                    |                                                                                                                     |   |
| Item 3.                                                 | Defaults Upon Senior Securities                                                                                          | 31 |
|                                                    |                                                                                                                     |   |
| Item 4.                                                 | Submissions of Matters to a Vote of Security Holders                                                                     | 31 |
|                                                    |                                                                                                                     |   |
| Item 5                                                  | Other Information                                                                                                        | 31 |
|                                                    |                                                                                                                     |   |
| Item 6.                                                 | Exhibits and Reports on Form 8-K                                                                                         | 31 |
|                                                    |                                                                                                                     |
| Signatures                                              | 33                                                                                                                       |

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| ANCHOR FUNDING SERVICES, INC.                                                                                                                                                                                                                                                                                                                    |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEETS                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                             |   | (Unaudited) |   |   | (Audited) |   |
|                                                                                                                                                                                                                                                                                                                                             |   | June 30, |   |   | December 31, |   |
|                                                                                                                                                                                                                                                                                                                                             |   | 2010 |   |   | 2009 |   |
| CURRENT ASSETS:                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |
|   Cash                                                                                                                                                                                                                                                                                                                                 |   | $ | 92,951 |   |   | $ | 491,486 |   |
|   Retained interest in purchased accounts receivable, net                                                                                                                                                                                                                                                                              |   |   | 10,196,575 |   |   |   | 6,775,364 |   |
|   Earned but uncollected fee income                                                                                                                                                                                                                                                                                                    |   |   | 214,474 |   |   |   | 163,116 |   |
|   Due from lender                                                                                                                                                                                                                                                                                                                      |   |   | - |   |   |   | 164,899 |   |
|   Prepaid expenses and other                                                                                                                                                                                                                                                                                                           |   |   | 79,916 |   |   |   | 82,680 |   |
|     Total current assets                                                                                                                                                                                                                                                                                                     |   |   | 10,583,916 |   |   |   | 7,677,545 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| PROPERTY AND EQUIPMENT, net                                                                                                                                                                                                                                                                                                                      |   |   | 16,091 |   |   |   | 31,189 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| GOODWILL                                                                                                                                                                                                                                                                                                                                         |   |   | 410,000 |   |   |   | 410,000 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| INTANGIBLE ASSET - customer list                                                                                                                                                                                                                                                                                                                 |   |   | 56,000 |   |   |   | 70,000 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| SECURITY DEPOSITS                                                                                                                                                                                                                                                                                                                                |   |   | 5,486 |   |   |   | 5,486 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                             |   | $ | 11,071,493 |   |   | $ | 8,194,220 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                  LIABILITIES AND STOCKHOLDERS’ EQUITY |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|   Due to financial institution                                                                                                                                                                                                                                                                                                         |   | $ | 6,083,520 |   |   | $ | 4,296,601 |   |
|   Due to participant                                                                                                                                                                                                                                                                                                                   |   |   | 325,388 |   |   |   | 126,909 |   |
|   Accounts payable                                                                                                                                                                                                                                                                                                                     |   |   | 103,928 |   |   |   | 45,551 |   |
|   Due to Lender                                                                                                                                                                                                                                                                                                                        |   |   | 1,773,204 |   |   |   | - |   |
|   Accrued payroll and related taxes                                                                                                                                                                                                                                                                                                    |   |   | 90,546 |   |   |   | 45,780 |   |
|   Accrued expenses                                                                                                                                                                                                                                                                                                                     |   |   | 251,268 |   |   |   | 316,204 |   |
|   Collected but unearned fee income                                                                                                                                                                                                                                                                                                    |   |   | 50,215 |   |   |   | 52,430 |   |
|   Contingent note payable                                                                                                                                                                                                                                                                                                              |   |   | 480,000 |   |   |   | 480,000 |   |
|   Due to client                                                                                                                                                                                                                                                                                                                        |   |   | - |   |   |   | 146,831 |   |
|     Total current liabilities                                                                                                                                                                                                                                                                                                |   |   | 9,158,069 |   |   |   | 5,510,306 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
| PREFERRED STOCK, net of issuance costs of                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
|      $1,209,383                                                                                                                                                                                                                                                                                                         |   |   | 698,984 |   |   |   | 5,212,719 |   |
| COMMON STOCK                                                                                                                                                                                                                                                                                                                                     |   |   | 1,860 |   |   |   | 1,409 |   |
| ADDITIONAL PAID IN CAPITAL                                                                                                                                                                                                                                                                                                                       |   |   | 7,443,852 |   |   |   | 2,916,552 |   |
| ACCUMULATED DEFICIT                                                                                                                                                                                                                                                                                                                              |   |   | (6,402,774 | ) |   |   | (5,747,917 | ) |
| NONCONTROLLING INTEREST                                                                                                                                                                                                                                                                                                                          |   |   | 171,502 |   |   |   | 301,151 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   | 1,913,424 |   |   |   | 2,683,914 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                             |   | $ | 11,071,493 |   |   | $ | 8,194,220 |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |

----

|                                                    |   |   | (Unaudited)                        |   |   |   | (Unaudited)                        |   |
|---------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|--------|-----------------------------------------|--------|
|                                                    |   |   | For the quarters ending  June 30,  |   |   |   | For the six months ending June 30, |   |
|                                                    |   |   | 2010                                         |   |   |   | 2009                                    |   |   |   | 2010 |   |   |   | 2009 |   |
| FINANCE REVENUES                                        |   | $      | 844,801                                      |   |   | $      | 393,202                                 |   |   | $ | 1,646,820 |   |   | $ | 797,480 |   |
| INTEREST AND COMMISSION EXPENSE - financial institution |   |   | (288,511                                     | )      |   |   | (20,718                                 | )      |   |   | (535,259 | ) |   |   | (33,617 | ) |
| INTEREST INCOME                                         |   |   | 1,006                                        |   |   |   | -                                       |   |   |   | 1,006 |   |   |   | - |   |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| NET FINANCE REVENUES                                    |   |   | 557,296                                      |   |   |   | 372,484                                 |   |   |   | 1,112,567 |   |   |   | 763,863 |   |
| PROVISION FOR CREDIT LOSSES                             |   |   | (650,485                                     | )      |   |   | (21,646                                 | )      |   |   | (649,187 | ) |   |   | (27,709 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| FINANCE REVENUES, NET OF INTEREST AND                   |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
|  COMMISSION EXPENSE AND CREDIT LOSSES              |   |   | (93,189                                      | )      |   |   | 350,838                                 |   |   |   | 463,380 |   |   |   | 736,154 |   |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES                                      |   |   | 605,793                                      |   |   |   | 698,610                                 |   |   |   | 1,237,886 |   |   |   | 1,409,807 |   |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| LOSS BEFORE INCOME TAXES                                |   |   | (698,982                                     | )      |   |   | (347,772                                | )      |   |   | (774,506 | ) |   |   | (673,653 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| INCOME TAXES                                            |   |   | -                                            |   |   |   | -                                       |   |   |   | - |   |   |   | - |   |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| NET LOSS                                                |   |   | (698,982                                     | )      |   |   | (347,772                                | )      |   |   | (774,506 | ) |   |   | (673,653 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| LESS: NONCONTROLLING INTEREST SHARE                     |   |   | (135,736                                     | )      |   |   | -                                       |   |   |   | (119,649 | ) |   |   | - |   |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| CONTROLLING INTEREST SHARE                              |   |   | (563,246                                     | )      |   |   | (347,772                                | )      |   |   | (654,857 | ) |   |   | (673,653 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| DEEMED DIVIDEND ON CONVERTIBLE PREFERRED STOCK          |   |   | -                                            |   |   |   | (131,076                                | )      |   |   | - |   |   |   | (260,711 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDER             |   | $      | (563,246                                     | )      |   | $      | (478,848                                | )      |   | $ | (654,857 | ) |   | $ | (934,364 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| NET LOSS ATTRIBUTABLE TO COMMON                         |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
|   SHAREHOLDER, per share                      |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
|   Basic                                       |   | $      | (0.03                                        | )      |   | $      | (0.04                                   | )      |   | $ | (0.04 | ) |   | $ | (0.07 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
|   Dilutive                                    |   | $      | (0.03                                        | )      |   | $      | (0.04                                   | )      |   | $ | (0.04 | ) |   | $ | (0.07 | ) |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING           |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |
|   Basic and dilutive                          |   |   | 18,580,271                                   |   |   |   | 12,940,378                              |   |   |   | 16,887,718 |   |   |   | 12,940,378 |   |
|                                                    |   |   |                                         |   |   |   |                                    |   |   |   |   |   |   |   |   |   |

----

|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |
|----------------------------------------------------------------------|--------|-----------|------------|--------|--------|--------|--------|-----------------|--------|--------|-------------|--------|--------|----------------|------------|--------|--------|--------|
|                                                                 |   | Preferred |       |   | Common |   |   | Additional      |   |   | Accumulated |   |   | Noncontrolling |       |   |   |   |
|                                                                 |   | Stock     |       |   | Stock  |   |   | Paid in Capital |   |   | Deficit     |   |   | Interest       |       |   | Total  |   |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |
| Beginning  Balance, December 31, 2009  (audited) |   | $         | 5,212,719  |   |   | $      | 1,409  |            |   | $      | 2,916,552   |   |   | $              | (5,747,917 | )      |   | $      | 301,151 |   |   | $ | 2,683,914 |   |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   |   |   |
| Compensation expense related to issued stock options                 |   |      | -          |   |   |   | -      |            |   |   | 14,016      |   |   |           | -          |   |   |   | - |   |   |   | 14,016 |   |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   |   |   |
| Net loss                                                             |   |      | -          |   |   |   | -      |            |   |   | -           |   |   |           | (654,857   | )      |   |   | (119,649 | ) |   |   | (774,506 | ) |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   |   |   |
| Conversion of  902,747 preferred shares to                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   | - |   |
|  4,513,735 common shares                                        |   |      | (4,513,735 | )      |   |   | 451    |            |   |   | 4,513,284   |   |   |           | -          |   |   |   | - |   |   |   | - |   |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   |   |   |
|  Distributions                                                  |   |      | -          |   |   |   | -      |            |   |   | -           |   |   |           | -          |   |   |   | (10,000 | ) |   |   | (10,000 | ) |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2010                                               |   | $         | 698,984    |   |   | $      | 1,860  |            |   | $      | 7,443,852   |   |   | $              | (6,402,774 | )      |   | $      | 171,502 |   |   | $ | 1,913,424 |   |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   |   |   |
|                                                                 |   |      |       |   |   |   |   |            |   |   |        |   |   |           |       |   |   |   |   |   |   |   |   |   |

----

|                                                                              |   |        |       |    |        |   |
|-----------------------------------------------------------------------------------|--------|-------------|------------|---------|-------------|--------|
|                                                                              |   | (Unaudited) |       |    | (Unaudited) |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                             |   | 2010        |       |    | 2009        |   |
|   Net loss:                                                             |   |        | (654,857   | )       |        | $      | (673,653 | ) |
|   Adjustments to reconcile net loss to net cash                         |   |        |       |    |        |   |   |   |
|     used in operating activities:                             |   |        |       |    |        |   |   |   |
|     Noncontrolling interest share                             |   |        | (119,649   | )       |        |   |   |   |
|     Depreciation and amortization                             |   |        | 37,260     |    |        |   | 24,945 |   |
|     Compensation expense related to issuance of stock options |   |        | 14,016     |    |        |   | (4,823 | ) |
|     Allowance for uncollectible accounts                      |   |        | 650,485    |    |        |   | 21,646 |   |
|     Amortization of loan fees                                 |   |        | -          |    |        |   | 50,115 |   |
|     Increase in retained interest in purchased                |   |        |       |    |        |   |   |   |
|        accounts receivable                     |   |        | (4,071,697 | )       |        |   | (16,708 | ) |
|     Increase in earned but uncollected                        |   |        | (51,358    | )       |        |   | (14,235 | ) |
|     (Increase) decrease  in due from customer       |   |        | 164,899    |    |        |   | (215,152 | ) |
|     Decrease in prepaid expenses and other                    |   |        | 2,763      |    |        |   | 38,988 |   |
|     Decrease (increase) in accounts payable                   |   |        | 58,377     |    |        |   | (1,518 | ) |
|     Increase in accrued payroll and related taxes             |   |        | 44,766     |    |        |   | 29,529 |   |
|     Decrease in collected but not earned                      |   |        | (2,215     | )       |        |   | (6,368 | ) |
|     Increase in due to participant                            |   |        | 198,479    |    |        |   |   |   |
|     Decrease in accrued expenses                              |   |        | (64,936    | )       |        |   | (25,433 | ) |
|     Decrease in due to client                                 |   |        | (146,831   | )       |        |   |   |   |
|       Net cash used in operating activities         |   |        | (3,940,498 | )       |        |   | (792,667 | ) |
|                                                                              |   |        |       |    |        |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                             |   |        |       |    |        |   |   |   |
|   Purchases of property and equipment                                   |   |        | (8,160     | )  |        |   | (11,029 | ) |
|      Net cash used in investing activities               |   |        | (8,160     | )  |        |   | (11,029 | ) |
|                                                                              |   |        |       |    |        |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                             |   |        |       |    |        |   |   |   |
|   Distributions                                                         |   |        | (10,000    | )       |        |   |   |   |
|   Proceeds from financial institution, net                              |   |        | 1,786,919  |    |        |   | 785,240 |   |
|   Proceeds from lender                                                  |   |        | 1,773,204  |    |        |   |   |   |
|      Net cash provided by financing activities           |   |        | 3,550,123  |    |        |   | 785,240 |   |
|                                                                              |   |        |       |    |        |   |   |   |
| DECREASE IN CASH                                                                  |   |        | (398,535   | )       |        |   | (18,456 | ) |
|                                                                              |   |        |       |    |        |   |   |   |
| CASH, beginning of period                                                         |   |        | 491,486    |    |        |   | 401,104 |   |
|                                                                              |   |        |       |    |        |   |   |   |
| CASH, end of period                                                               |   | $           | 92,951     |    |        | $      | 382,648 |   |
|                                                                              |   |        |       |    |        |   |   |   |

----

|   | Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Anchor Funding Services, Inc., its wholly owned subsidiary, Anchor Funding Services, LLC and its 80% owned subsidiary Brookridge Funding Services, LLC as of June 30, 2010. The consolidated statement of operations for the three months and six months ended June 30, 2010 includes the results of Brookridge Funding Services, LLC, and Anchor Funding Services, LLC.  The consolidated statement of operations for the three months and six months ended June 30, 2009 does not include the results of Brookridge Funding Services, LLC. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Revenue Recognition – The Company charges fees to its customers in one of two ways as follows: |
|--------|------------------------------------------------------------------------------------------------------|

| 1)   | Fixed Transaction Fee. Fixed transaction fees are a fixed percentage of the purchased invoice and purchase order advance.  This percentage does not change from the date the purchased invoice is funded until the date the purchased invoice is collected. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2)   | Variable Transaction Fee.  Variable transaction fees are variable based on the length of time the purchased invoice and purchase order advance is outstanding.   As specified in its contract with the client, the Company charges variable increasing percentages of the purchased invoice or purchase order advance as time elapses from the purchase date to the collection date. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For both Fixed and Variable Transaction fees, the Company recognizes revenue by using one of two methods depending on the type of customer.  For new customers the Company recognizes revenue using the cost recovery method.  For established customers the Company recognizes revenue using the accrual method. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under the cost recovery method, all revenue is recognized upon collection of the entire amount of purchased accounts receivable. |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | The Company considers new customers to be accounts whose initial funding has been within the last three months or less.  Management believes it needs three months of history to reasonably estimate a customer’s collection period and accrued revenues.  If three months of history has a limited number of transactions, the cost recovery method will continue to be used until a reasonable revenue estimate can be made based on additional history.  Once the Company obtains sufficient historical experience, it will begin using the accrual method to recognize revenue. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For established customers the Company uses the accrual method of accounting.  The Company applies this method by multiplying the historical yield, for each customer, times the amount advanced on each purchased invoice outstanding for that customer, times the portion of a year that the advance is outstanding.  The customers’ historical yield is based on the Company’s last six months of experience with the customer along with the Company’s experience in the customer’s industry, if applicable. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The amounts recorded as revenue under the accrual method described above are estimates.  As purchased invoices and purchase order advances are collected, the Company records the appropriate adjustments to record the actual revenue earned on each purchased invoice and purchase order advance. Adjustments from the estimated revenue to the actual revenue have not been material. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Retained Interest in Purchased Accounts Receivable – Retained interest in purchased accounts receivable represents the gross amount of invoices purchased and advances on purchase orders from clients less amounts maintained in a reserve account.  For factoring transactions, the Company purchases a customer’s accounts receivable and advances them a percentage of the invoice total.  The difference between the purchase price and amount advanced is maintained in a reserve account.  The reserve account is used to offset any potential losses the Company may have related to the purchased accounts receivable.  For purchase order transactions, the company advances and pays for 100% of the product’s cost. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company’s factoring and security agreements with their customers include various recourse provisions requiring the customers to repurchase accounts receivable if certain conditions, as defined in the factoring and security agreement, are met. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Senior management reviews the status of uncollected purchased accounts receivable and purchase order advances monthly to determine if any are uncollectible.  The Company has a security interest in the accounts receivable and inventory purchased and, on a case-by-case basis, may have additional collateral.  The Company files security interests in the property securing their advances.  Access to this collateral is dependent upon the laws and regulations in each state where the security interest is filed.  Additionally, the Company has varying types of personal guarantees from their customers relating to the purchased accounts receivable and purchase order advances. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Management considered approximately $706,000 of their June 30, 2010 and $57,000 of their December 31, 2009 retained interest in purchased accounts receivable to be uncollectible. In April 2010, the Company’s 80% owned subsidiary, Brookridge, incurred a credit loss of approximately $650,000 due to what appears to be a fraud committed by a Brookridge client (See Note 16 , below). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Management believes the fair value of the retained interest in purchased accounts receivable approximates its recorded value because of the relatively short term nature of the purchased receivable and the fact that the majority of these invoices have been subsequently collected. As of June 30, 2010, accounts receivable purchased over 90 days old and still accruing fees totaled approximately $392,878. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  Property and Equipment – Property and equipment, consisting of furniture and fixtures and computers and software, are stated at cost.  Depreciation is provided over the estimated useful lives of the depreciable assets using the straight-line method.  Estimated useful lives range from 2 to 7 years. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The Company tests the goodwill balance for impairment annually and between annual tests if circumstances would require it.  The Company’s goodwill testing is a two-step process with the first step being a test for potential impairment by comparing the fair value of the reporting unit with its carrying amount (including goodwill).  If the fair value of the reporting unit exceeds the carrying amount, then no impairment exists.  If the carrying amount of the reporting unit exceeds the fair value, the Company completes the second step to measure the amount of the impairment, if any.  The Company will complete the annual test for impairment during its fourth quarter in future years. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Identifiable intangible assets are carried at amortized cost.  Intangible assets with definite lives are amortized over their useful lives and amortization is computed using the straight line method over their expected useful lives.  Long-lived assets are tested for recoverability whenever events of changes in circumstances indicate that their carrying amounts may not be recoverable.  Impairment losses are recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Advertising Costs – The Company charges advertising costs to expense as incurred.  Total advertising costs were approximately $75,000 and $86,000 for the quarters ended June 30, 2010 and 2009, respectively, and $142,000 and $173,000 for the six months ended June 30, 2010 and June 30, 2009, respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Earnings per Share – Basic net income per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period.  Dilutive earnings per share include the potential impact of dilutive securities, such as convertible preferred stock, stock options and stock warrants.  The dilutive effect of stock options and warrants is computed using the treasury stock method, which assumes the repurchase of common shares at the average market price. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Also when there is a year-to-date loss from continuing operations, potential common shares should not be included in the computation of diluted earnings per share, since they would have an anti-dilutive effect.  For the quarters and six months ending June 30, 2010 and 2009, there was a year-to-date loss from continuing operations.   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Stock Based Compensation - The fair value of transactions in which the Company exchanges its equity instruments for employee services (share-based payment transactions) must be recognized as an expense in the financial statements as services are performed. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | See Note 10 for the impact on the operating results for the quarters and six months ended June 30, 2010 and 2009. |
|--------|-------------------------------------------------------------------------------------------------------------------|

|   | Fair Value of Financial Instruments – The carrying value of cash equivalents, retained interest in purchased accounts receivable, due to financial institution, accounts payable and accrued liabilities approximates their fair value. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Cash and cash equivalents – Cash and cash equivalents consist primarily of highly liquid cash investment funds with original maturities of three months or less when acquired. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income Taxes –The Company is a “C” corporation for income tax purposes.  In a “C” corporation income taxes are provided for the tax effects of transactions reported in the financial statements plus deferred income taxes related to the differences between financial statement and taxable income. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The primary differences between financial statement and taxable income for the Company are as follows: |
|--------|--------------------------------------------------------------------------------------------------------|

| ·   | Compensation costs related to the issuance of stock options |
|--------------------|-------------------------------------------------------------|

| ·   | Use of the reserve method of accounting for bad debts |
|--------------------|-------------------------------------------------------|

| ·   | Differences in basis of property and equipment between financial and income tax reporting |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Net operating loss carryforwards. |
|--------------------|-----------------------------------|

|   | Recent Accounting Pronouncements – |
|--------|------------------------------------------|

----

----

|   | Retained interest in purchased accounts receivable consists of the following: |
|--------|-------------------------------------------------------------------------------|

|                                 |   | June 30, 2010 December 31, 2009 |       |
|--------------------------------------|--------|--------------------------------------|------------|
| Purchased invoices                   |   | $                                    | 11,481,884 |   |   | $ | 7,260,539 |   |
| Purchase order advances              |   |                                 | 1,384,723  |   |   |   | 737,813 |   |
| Reserve account                      |   |                                 | (1,964,032 | ) |   |   | (1,165,886 | ) |
| Allowance for uncollectible invoices |   |                                 | (706,000   | ) |   |   | (57,102 | ) |
|                                 |   | $                                    | 10,196,575 |   |   | $ | 6,775,364 |   |

|   |   |
|--------|--------|

|             |   | June 30, 2010 |       |   | December 31, 2009 |   |
|------------------|--------|---------------|------------|--------|-------------------|--------|
| Staffing         |   | $             | 651,474    |   |              | $      | 734,415 |   |
| Transportation   |   |          | 1,979,189  |   |              |   | 1,737,153 |   |
| Construction     |   |          | 5,218      |   |              |   | 5,218 |   |
| Service          |   |          | 3,723,609  |   |              |   | 3,107,145 |   |
| Metal Processing |   |          | 650,102    |   |              |   | 625,501 |   |
| Publishing       |   |          | 3,048,549  |   |              |   | - |   |
| Other            |   |          | 844,434    |   |              |   | 623,034 |   |
|             |   | $             | 10,902,575 |   |              | $      | 6,832,466 |   |

|                                            |   | For the quarters ended June 30, |                  |   |  For the six months ended  June 30, |   |
|-------------------------------------------------|--------|--------------------------------------|-----------------------|--------|-----------------------------------------------|--------|
|                                            |   | 2010                                 |                  |   | 2009                                          |   |   | 2010 |   |   | 2009 |   |
|  Purchased invoices         |   | $                                    | 28,065,913            |   |                                          | $      | 13,098,952 |   |   | $ | 51,615,444 |   |   | $ | 24,496,162 |   |
|  Purchase order advances    |   |                                 |  2,496,508  |   |                                          |   |   |   |   |   | 11,159,267 |   |   |   |   |   |
|                                            |   | $                                    | 30,562,421            |   |                                          | $      | 13,098,952 |   |   | $ | 62,774,711 |   |   | $ | 24,496,162 |   |

----

|   | Property and equipment consist of the following: |
|--------|--------------------------------------------------|

|                           | Estimated    |   |          |     |   |              |   |
|--------------------------------|--------------|--------|---------------|----------|--------|-------------------|--------|
|                           | Useful Lives |   | June 30, 2010 |     |   | December 31, 2009 |   |
| Furniture and fixtures         | 2-5 years    |   | $             | 44,731   |   |              | $      | 44,731 |   |
| Computers and software         | 3-7 years    |   |          | 144,053  |   |              |   | 135,891 |   |
|                           |         |   |          | 188,784  |   |              |   | 180,622 |   |
| Less: accumulated depreciation |         |   |          | (172,692 | )      |              |   | (149,433 | ) |
|                           |         |   |          |     |   |              |   |   |   |
|                           |         |   | $             | 16,092   |   |              | $      | 31,189 |   |

|   | Depreciation expense was $9,932 and $11,898 for the quarters ended June 30, 2010 and 2009, respectively, and $23,260 and $24,945 for the six months ended June 30, 2010 and 2009, respectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                         |   | June 30, 2010 |   |
|----------------------------------------------|--------|---------------|--------|
|                                         |   | Cost          |   |   | Accumulated Amortization |   |   | Net |   |
|                                         |   |          |   |
| Brookridge customer  relationships |   | $             | 70,000 |   |   | $ | 14,000 |   |   | $ | 56,000 |   |

| Year   |   | Amount |   |
|--------|--------|--------|--------|
| 2010   |   | $      | 20,000 |   |
| 2011   |   |   | 20,000 |   |
| 2012   |   |   | 10,000 |   |
|   |   |   |   |   |

|   | On, November 30, 2009, Anchor Funding Services, LLC, entered into a $7 million senior Accounts Receivable (A/R) Credit Facility with a maximum amount of up to $9 million with lender approval.  This funding facility is based upon Anchor's submission and approval of eligible accounts receivable. This facility replaced Anchor’s revolving credit facility from another financial institution.  Anchor pays .5% for the first 30 days of the face value for each invoice funded and .016% for each day thereafter until collected. In addition, interest on advances is paid monthly at the Prime Rate plus 2.0%.  Anchor pays the financial institution various other monthly fees as defined in the agreement. The agreement requires that Anchor use $1,000,000 of its own funds first to finance its clients.  The agreement contains customary representations and warranties, events of default and limitations, among other provisions. The agreement is collateralized by a first lien on all Anchors’ assets.  Borrowings on this agreement are partially guaranteed by each of the Company’s President and Chief Executive Officer up to $250,000 per officer. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The agreement, among other things requires the Company to maintain certain financial ratios.  As of June 30, 2010, the Company was in compliance with, or obtained waivers for, all provisions of this agreement. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The Company’s capital structure consists of preferred and common stock as described below: |
|--------|--------------------------------------------------------------------------------------------------|

|   | Preferred Stock – The Company is authorized to issue 10,000,000 shares of $.001 par value preferred stock.  The Company’s Board of Directors determines the rights and preferences of its preferred stock. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On January 31, 2007, the Company filed a Certificate of Designation with the Secretary of State of Delaware.  Effective with this filing, 2,000,000 preferred shares became Series 1 Convertible Preferred Stock.  Series 1 Convertible Preferred Stock will rank senior to Common Stock. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Series 1 Convertible Preferred Stock is convertible into 5 shares of the Company’s Common Stock.  The holder of the Series 1 Convertible Preferred Stock has the option to convert the shares to Common Stock at any time.  Upon conversion all accumulated and unpaid dividends will be paid as additional shares of Common Stock. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Common Stock – The Company is authorized to issue 65,000,000 shares of $.0001 par value Common Stock.  Each share of Common Stock entitles the holder to one vote at all stockholder meetings.  Dividends on Common Stock will be determined annually by the Company’s Board of Directors. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                               |   | Series 1 Convertible |           |   | Common |   |
|------------------------------------|--------|----------------------|----------------|--------|--------|--------|
|                               |   | Preferred Stock      |           |   | Stock  |   |
| Balance, December 31, 2009         |   |                 | 1,284,633      |   |   |   | 14,092,967 |   |
| Preferred Stock Conversions        |   |                 | ( 436,829 | )      |   |   |   |   |
| Common Stock Issuances             |   |                 |           |   |   |   | 2,184,235 |   |
| Balance, March  31, 2010 |   |                 | 847,804        |   |   |   | 16,277,202 |   |

| Preferred Stock Conversions       |   |   | (465,918 | )      |   |   |       |
|-----------------------------------|--------|--------|----------|--------|--------|--------|------------|
| Common Stock Issuances            |   |   |     |   |   |   | 2,329,592  |   |
| Balance, June  30, 2010 |   |   | 381,886  |   |   |   | 18,606,794 |   |

|   | 8.  RELATED PARTY TRANSACTION: |
|--------|------------------------------------------|

----

|   | The following summarizes M. Rubin’s employment agreement and stock options: |
|--------|-----------------------------------------------------------------------------------|

| ·   | The employment agreement with M. Rubin currently retains his services as Co-chairman and Chief Executive Officer through January 31, 2011. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | An annual salary of $1 until, the first day of the first month following such time as the Company, shall have, within any period beginning on January 1 and ending not more than 12 months thereafter, earned pre-tax net income exceeding $1,000,000, M. Rubin’s base salary shall be adjusted to an amount, to be mutually agreed upon between M. Rubin and the Company, reflecting the fair value of the services provided, and to be provided, by M. Rubin taking into account (i) his position, responsibilities and performance, (ii) the Company’s  industry, size and performance, and (iii) other relevant factors. M. Rubin is eligible to receive annual bonuses as determined by the Company’s compensation committee.  M. Rubin shall be entitled to a monthly automobile allowance of $1,500. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 10-year options to purchase 650,000 shares exercisable at $1.25 per share, pursuant to the Company’s 2007 Omnibus Equity Compensation Plan. Vesting of the fair value of the options was one-third immediately, one-third on February 29, 2008 and one-third on February 28, 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The following summarizes B. Bernstein’s employment agreement and stock options: |
|--------|---------------------------------------------------------------------------------------|

| ·   | The employment agreement with B. Bernstein currently retains his services as President for a three-year period through January 31, 2011. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | An annual salary of $205,000 during the first year, $220,000 during the second year and $240,000 during the third year and any additional year of employment.  The Board may periodically review B. Bernstein’s base salary and may determine to increase (but not decrease) the base salary in accordance with such policies as the Company may hereafter adopt from time to time.  B. Bernstein is eligible to receive annual bonuses as determined by the Company’s compensation committee.  B. Bernstein shall be entitled to a monthly automobile allowance of $1,000. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 10-year options to purchase 950,000 shares exercisable at $1.25 per share, pursuant to the Company’s 2007 Omnibus Equity Compensation Plan. Vesting of the fair value of the options was one-third immediately, one-third on February 29, 2008 and one-third on February 28, 2009, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   The following summarizes Mr. Hilton’s and Mr. McNiff’s employment agreements and stock options: |
|--------|-------------------------------------------------------------------------------------------------------------------------|

| ·   | The employment agreement retains their services as Co-Presidents of Brookridge for a five-year period. |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | A salary of $120,000 per year. |
|--------------------|--------------------------------|

| ·   | Each is to receive 10-year options to purchase 112,500 shares exercisable at $1.00 per share, pursuant to the Company’s 2007 Omnibus Equity Compensation Plan. Vesting of the fair value of the options is equally over 5 years in arrears. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following summarizes the stock option agreements entered into with three directors: |
|--------|-----------------------------------------------------------------------------------------|

| ·   | 10-year options to purchase 280,000 shares exercisable at $1.25 per share, pursuant to the Company’s 2007 Omnibus Equity Compensation Plan. Vesting of the fair value of the options is one-third immediately, one-third one year from the grant date and the remainder 2 years from grant date.  If any director ceases serving the Company for any reason, all unvested options shall terminate immediately and all vested options must be exercised within 90 days after the director ceases serving as a director. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following summarizes employee stock option agreements entered into with five employees: |
|--------|---------------------------------------------------------------------------------------------|

| ·   | 10-year options to purchase 86,500 shares exercisable at prices of $1.00 and $1.25 per share, pursuant to the Company’s 2007 Omnibus Equity Compensation Plan. The grant dates range from September 28, 2007 to November 30, 2009.  Vesting periods range from one to four years. If any employee ceases being employed by the Company for any reason, all vested and unvested options shall terminate immediately. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The following table summarizes information about stock options as of June 30, 2010: |
|--------|-------------------------------------------------------------------------------------|

|     |   |   |        |   |             |   |        |   |
|----------|--------|--------|-------------|--------|------------------|--------|-------------|--------|
| Exercise |   |   | Number      |   | Remaining        |   | Number      |   |
| Price    |   |   | Outstanding |   | Contractual Life |   | Exercisable |   |
|     |   |   |        |   |             |   |        |   |
| $        | 1.25   |   |        |   | 1,886,500        |   | 7 years     |   |   | 1,885,250 |   |
| $        | 1.00   |   |        |   | 305,000          |   | 9-10 years  |   |   | 20,000 |   |
| $        | 0.62   |   |        |   | 500,000          |   | 9 years     |   |   | 500,000 |   |
|     |   |   |        |   | 2,691,500        |   |        |   |   | 2,405,250 |   |

|   | The Company recorded the issuance of these options in accordance with ASC 718.  The following information was input into a Black Scholes option pricing model. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           |   |           |          |
|----------------|--------|----------------|---------------|
| Exercise price |   | $              | 0.62 to $1.00 |   |
| Term           |   | 10 years       |          |
| Volatility     |   | .85 to 2.50    |          |
| Dividends      |   |           | 0             | % |
| Discount rate  |   | 2.82% to 4.75% |          |

|   | The pre-tax fair value effect recorded for these options in the statement of operations for the quarters ending June 30, 2010 and 2009 was as follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              |   | 2010   |   |   | 2009   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
|                              |   |   |   |   |   |   |
| Fully vested stock options        |   | $      | -      |   |   | $      | 1,982 |   |
| Unvested portion of stock options |   |   | 14,016 |   |   |   | 625 |   |
|                              |   |   | 14,016 |   |   |   | 2,607 |   |
| Benefit for expired stock options |   |   |   |   |   |   | (8,424 | ) |
| (Benefit) provision, net          |   | $      | 14,016 |   |   | $      | (5,817 | ) |

|   | The placement agent was issued warrants to purchase 1,342,500 shares of the Company’s common stock.  The following information was input into a Black Scholes option pricing model to compute a per warrant price of $.0462: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Exercise price |   | $       | 1.10   |   |
|----------------|--------|---------|--------|--------|
| Term           |   | 5 years |   |
| Volatility     |   |    | 2.5    |   |
| Dividends      |   |    | 0      | %      |
| Discount rate  |   |    | 4.70   | %      |

----

|     |   |   |        |   | Weighted Average |   |        |   |
|----------|--------|--------|-------------|--------|------------------|--------|-------------|--------|
| Exercise |   |   | Number      |   | Remaining        |   | Number      |   |
| Price    |   |   | Outstanding |   | Contractual Life |   | Exercisable |   |
|     |   |   |        |   |             |   |        |   |
| $        | 1.10   |   |        |   | 1,342,500        |   | 5 years     |   |   | 1,342,500 |   |
| $        | 1.00   |   |        |   | 2,000,004        |   | 10 years    |   |   | 2,000,004 |   |

|   | Revenues – The Company recorded revenues from United States companies in the following industries as follows: |
|--------|---------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| Industry        |   | For the three months endingJune 30, |    |   | For the six months Ended June 30, |   |
|-----------------|--------|-------------------------------------|---------|--------|----------------------------------------|--------|
|            |   | 2010                                |    |   | 2009                                   |   |   | 2010 |   |   | 2009 |   |
| Staffing        |   | $                                   | 53,983  |   |                                   | $      | 60,840 |   |   | $ | 123,079 |   |   | $ | 143,164 |   |
| Transportation  |   |                                | 183,484 |   |                                   |   | 143,454 |   |   |   | 352,671 |   |   |   | 300,022 |   |
| Service         |   |                                | 426,719 |   |                                   |   | 170,008 |   |   |   | 823,604 |   |   |   | 321,748 |   |
| Metal Processor |   |                                | (40,213 | )      |                                   |   |   |   |   |   | 61,752 |   |   |   | 0 |   |
| Other           |   |                                | 70,418  |   |                                   |   | 18,900 |   |   |   | 135,303 |   |   |   | 32,546 |   |
| Publishing      |   |                                | 150,410 |   |                                   |   |   |   |   |   | 150,411 |   |   |   |   |   |
|            |   | $                                   | 844,801 |   |                                   | $      | 393,202 |   |   | $ | 1,646,820 |   |   | $ | 797,480 |   |

|   | Major Customers – The Company had one customer for the quarter ending quarter June 30, 2010 and one customer for the quarter ending June 30, 2009 which represented 10% or more of its revenues as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | Client #1 |      |
|-------------------------------------------|--------|-----------|-----------|
| Three Months Ended June 30, 2010          |   |      |      |
| Revenues                                  |   | $         | 150,410   |   |
| As of  June 30, 2010            |   |      |      |   |
| Purchased accounts receivable outstanding |   | $         | 3,048,549 |   |

|                                      |   | Client #1 |    |
|-------------------------------------------|--------|-----------|---------|
| Three Months Ended June 30, 2009          |   |      |    |
| Revenues                                  |   | $         | 40,190  |   |
| As of  June 30, 2009            |   |      |    |   |
| Purchased accounts receivable outstanding |   | $         | 545,300 |   |

|   | The Company had no customers for the six months ending June 30, 2010 and one customer for the six months ending June 30, 2009 which represented 10% or more of its revenues as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

|                                      |   | Client #1 |    |
|-------------------------------------------|--------|-----------|---------|
| Six  Months Ended June 30, 2009 |   |      |    |
| Revenues                                  |   | $         | 80,689  |   |
| As of  June 30, 2009            |   |      |    |   |
| Purchased accounts receivable outstanding |   | $         | 545,300 |   |

|   | Cash – The Company places its cash and cash equivalents on deposit with financial institutions in the United States. In 2008, the Federal Deposit Insurance Corporation (FDIC) temporarily increased coverage to $250,000 for substantially all depository accounts and temporarily provides unlimited coverage for certain qualifying and participating non-interest bearing transaction accounts.  The unlimited coverage for participating accounts expires on June 30, 2010 and the $250,000 increased coverage for other accounts is scheduled to expire on December 31, 2013, at which time it is anticipated amounts insured by the FDIC will return to $100,000.  During the quarter and six months ended June 30, 2010, the Company from time to time may have had amounts on deposit in excess of the insured limits. As of June 30, 2010, the Company had no amounts on deposit which exceed these insured amounts. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Cash paid for interest was as follows: |
|--------|----------------------------------------|

| For the six months ending June 30, |    |
|-----------------------------------------|---------|
|                                    |    |   |   |   |
| 2010                                    |    |   | 2009 |   |
|                                    |    |   |   |   |
| $                                       | 356,581 |   |   | $ | 33,617 |   |

|   |   | Non-cash financing and investing activities consisted of the following: |
|--------|--------|-------------------------------------------------------------------------|

| For the six months ending June 30, 2010 |
|-----------------------------------------|

| For the six months ending June 30, 2009 |
|-----------------------------------------|

|   | None. |
|--------|-------|

----

----

| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------|

|   | Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Anchor Funding Services, Inc., its wholly owned subsidiary, Anchor Funding Services, LLC and its 80% owned subsidiary Brookridge Funding Services, LLC as of June 30, 2010. The consolidated statement of operations for the three months and six months ended June 30, 2010 includes the results of Brookridge Funding Services, LLC, and Anchor Funding Services, LLC.  The consolidated statement of operations for the three months and six months ended June 30, 2009 does not include the results of Brookridge Funding Services, LLC. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Revenue Recognition – The Company charges fees to its customers in one of two ways as follows: |
|--------|------------------------------------------------------------------------------------------------------|

| 3)   | Fixed Transaction Fee. Fixed transaction fees are a fixed percentage of the purchased invoice and purchase order advance.  This percentage does not change from the date the purchased invoice is funded until the date the purchased invoice is collected. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4)   | Variable Transaction Fee.  Variable transaction fees are variable based on the length of time the purchased invoice and purchase order advance is outstanding.   As specified in its contract with the client, the Company charges variable increasing percentages of the purchased invoice or purchase order advance as time elapses from the purchase date to the collection date. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | For both Fixed and Variable Transaction fees, the Company recognizes revenue by using one of two methods depending on the type of customer.  For new customers the Company recognizes revenue using the cost recovery method.  For established customers the Company recognizes revenue using the accrual method. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under the cost recovery method, all revenue is recognized upon collection of the entire amount of purchased accounts receivable. |
|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | The Company considers new customers to be accounts whose initial funding has been within the last three months or less.  Management believes it needs three months of history to reasonably estimate a customer’s collection period and accrued revenues.  If three months of history has a limited number of transactions, the cost recovery method will continue to be used until a reasonable revenue estimate can be made based on additional history.  Once the Company obtains sufficient historical experience, it will begin using the accrual method to recognize revenue. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For established customers the Company uses the accrual method of accounting.  The Company applies this method by multiplying the historical yield, for each customer, times the amount advanced on each purchased invoice outstanding for that customer, times the portion of a year that the advance is outstanding.  The customers’ historical yield is based on the Company’s last six months of experience with the customer along with the Company’s experience in the customer’s industry, if applicable. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The amounts recorded as revenue under the accrual method described above are estimates.  As purchased invoices and purchase order advances are collected, the Company records the appropriate adjustments to record the actual revenue earned on each purchased invoice and purchase order advance. Adjustments from the estimated revenue to the actual revenue have not been material. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Retained Interest in Purchased Accounts Receivable – Retained interest in purchased accounts receivable represents the gross amount of invoices purchased and advances on purchase orders from clients less amounts maintained in a reserve account.  For factoring transactions, the Company purchases a customer’s accounts receivable and advances them a percentage of the invoice total.  The difference between the purchase price and amount advanced is maintained in a reserve account.  The reserve account is used to offset any potential losses the Company may have related to the purchased accounts receivable.  For purchase order transactions the company advances and pays for 100% of the product’s cost. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company’s factoring and security agreements with their customers include various recourse provisions requiring the customers to repurchase accounts receivable if certain conditions, as defined in the factoring and security agreement, are met. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Senior management reviews the status of uncollected purchased accounts receivable and purchase order advances monthly to determine if any are uncollectible.  The Company has a security interest in the accounts receivable and inventory purchased and, on a case-by-case basis, may have additional collateral.  The Company files security interests in the property securing their advances.  Access to this collateral is dependent upon the laws and regulations in each state where the security interest is filed.  Additionally, the Company has varying types of personal guarantees from their customers relating to the purchased accounts receivable and purchase order advances. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Management considered approximately $706,000 of their June 30, 2010 and $57,000 of their December 31, 2009 retained interest in purchased accounts receivable to be uncollectible (See Note 16 , above). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Management believes the fair value of the retained interest in purchased accounts receivable approximates its recorded value because of the relatively short term nature of the purchased receivable and the fact that the majority of these invoices have been subsequently collected. As of June 30, 2010, accounts receivable purchased over 90 days old and still accruing fees totaled approximately $392,878. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Property and Equipment – Property and equipment, consisting of furniture and fixtures and computers and software, are stated at cost.  Depreciation is provided over the estimated useful lives of the depreciable assets using the straight-line method.  Estimated useful lives range from 2 to 7 years. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |   Goodwill and Intangible Assets – Goodwill represents the excess of the cost of purchased businesses over the  fair value of the net assets acquired. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company tests the goodwill balance for impairment annually and between annual tests if circumstances would require it.  The Company’s goodwill testing is a two-step process with the first step being a test for potential impairment by comparing the fair value of the reporting unit with its carrying amount (including goodwill).  If the fair value of the reporting unit exceeds the carrying amount, then no impairment exists.  If the carrying amount of the reporting unit exceeds the fair value, the Company completes the second step to measure the amount of the impairment, if any.  The Company will complete the annual test for impairment during its fourth quarter in future years |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Identifiable intangible assets are carried at amortized cost.  Intangible assets with definite lives are amortized over their useful lives and amortization is computed using the straight line method over their expected useful lives.  Long-lived assets are tested for recoverability whenever events of changes in circumstances indicate that their carrying amounts may not be recoverable.  Impairment losses are recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Advertising Costs – The Company charges advertising costs to expense as incurred.  Total advertising costs were approximately $75,000 and $86,000 for the quarters ended June 30, 2010 and 2009, respectively. The Company charges advertising costs to expense as incurred.  Total advertising costs were approximately $142,000 and $173,000 for the six months ended June 30, 2010 and 2009, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Earnings per Share – Basic net income per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period.  Dilutive earnings per share include the potential impact of dilutive securities, such as convertible preferred stock, stock options and stock warrants.  The dilutive effect of stock options and warrants is computed using the treasury stock method, which assumes the repurchase of common shares at the average market price. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Also when there is a year-to-date loss from continuing operations, potential common shares should not be included in the computation of diluted earnings per share, since they would have an anti-dilutive effect.  For the quarters ending June 30, 2010 and 2009, there was a year-to-date loss from continuing operations.  For the six months ending June 30, 2010 and 2009, there was a year-to-date loss from continuing operations.   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Stock Based Compensation - The fair value of transactions in which the Company exchanges its equity instruments for employee services (share-based payment transactions) must be recognized as an expense in the financial statements as services are performed. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | See Note 10 for the impact on the operating results for the quarters and six months ended June 30, 2010 and 2009. |
|--------|-------------------------------------------------------------------------------------------------------------------|

|   | Fair Value of Financial Instruments – The carrying value of cash equivalents, retained interest in purchased accounts receivable, due to financial institution, accounts payable and accrued liabilities approximates their fair value. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash and cash equivalents – Cash and cash equivalents consist primarily of highly liquid cash investment funds with original maturities of three months or less when acquired. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income Taxes –The Company is a “C” corporation for income tax purposes.  In a “C” corporation income taxes are provided for the tax effects of transactions reported in the financial statements plus deferred income taxes related to the differences between financial statement and taxable income. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The primary differences between financial statement and taxable income for the Company are as follows: |
|--------|--------------------------------------------------------------------------------------------------------|

| ·   | Compensation costs related to the issuance of stock options |
|--------------------|-------------------------------------------------------------|

| ·   | Use of the reserve method of accounting for bad debts |
|--------------------|-------------------------------------------------------|

| ·   | Differences in bases of property and equipment between financial and income tax reporting |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Net operating loss carryforwards. |
|--------------------|-----------------------------------|

----

|                                                          |   |   |     |
|---------------------------------------------------------------|--------|--------|----------|
| Anchor Funding Services, Inc and Anchor Funding Services, LLC |   | $      | (20,303  | ) |
| Brookridge Funding Services, LLC (Controlling Interest)       |   |   | (542,943 | ) |
| Consolidated net loss                                         |   | $      | (563,246 | ) |

----

|                                                        |   | Three Months Ended |     |   |   |   |     |     |   |
|-------------------------------------------------------------|--------|--------------------|----------|--------|--------|--------|----------|----------|--------|
|                                                        |   | June 30,           |     |   |   |   |     |     |   |
|                                                        |   | 2010               |     |   | 2009   |   |     | $ Change |   |   | % Change |   |
| Finance revenues                                            |   | $                  | 844,801  |   |   | $      | 393,202  |     |   | $ | 451,599 |   |   |   | 114.9 |   |
| Interest income (expense), net  and commissions   |   |               | (287,505 | )      |   |   | (20,718  | )        |   |   | (266,787 | ) |   |   | - |   |
| Net finance revenues                                        |   |               | 557,296  |   |   |   | 372,484  |     |   |   | 184,812 |   |   |   | 49.6 |   |
| (Provision) Benefit for  credit losses            |   |               | (650,485 | )      |   |   | (21,646  | )        |   |   | (628,839 | )  |   |   | - |   |
| Finance revenues, net of interest expense and credit losses |   |               | (93,189  | )      |   |   | 350,838  |     |   |   | (444,027 | ) |   |   | (126.6 | ) |
| Operating expenses                                          |   |               | 605,793  |   |   |   | 698,610  |     |   |   | (92,817 | ) |   |   | (13.3 | ) |
| Net income (loss) before income taxes                       |   |               | (698,982 | )      |   |   | (347,772 | )        |   |   | (351,210 | ) |   |   | - |   |
| Income tax (provision) benefit:                             |   |               | -        |   |   |   | -        |     |   |   | - |   |   |   | - |   |
| Net loss                                                    |   |               | (698,982 | )      |   |   | (347,772 | )        |   |   | (351,210 | ) |   |   | - |   |
| Less: Noncontrolling interest share                         |   | $                  | (135,736 | )      |   | $      | -        |     |   |   | (135,736 | ) |   |   | - |   |
| Controlling interest share                                  |   | $                  | (563,246 | )      |   | $      | (347,772 | )        |   |   | (215,474 | ) |   |   | - |   |

| Anchor Funding Services, Inc and Anchor Funding Services, LLC |   | $      | (176,265 | ) |
|---------------------------------------------------------------|--------|--------|----------|---|
| Brookridge Funding Services, LLC (Controlling Interest)       |   |   | (478,592 | ) |
| Consolidated net loss                                         |   | $      | (654,857 | ) |

----

|                                                        |   | Six Months Ended |      |   |   |   |      |     |   |
|-------------------------------------------------------------|--------|------------------|-----------|--------|--------|--------|-----------|----------|--------|
|                                                        |   | June 30,         |      |   |   |   |      |     |   |
|                                                        |   | 2010             |      |   | 2009   |   |      | $ Change |   |   | % Change |   |
| Finance revenues                                            |   | $                | 1,646,820 |   |   | $      | 797,480   |     |   | $ | 849,340 |   |   |   | 106.5 |   |
| Interest income (expense), net  and commissions   |   |             | (534,253  | )      |   |   | (33,617   | )        |   |   | (500,636 | ) |   |   | - |   |
| Net finance revenues                                        |   |             | 1,112,567 |   |   |   | 763,863   |     |   |   | 348,704 |   |   |   | 45.7 |   |
| (Provision) Benefit for  credit losses            |   |             | (649,187  | )      |   |   | (27,709   | )        |   |   | (621,478 | )  |   |   | - |   |
| Finance revenues, net of interest expense and credit losses |   |             | 463,380   |   |   |   | 736,154   |     |   |   | (272,774 | ) |   |   | (37.1 | ) |
| Operating expenses                                          |   |             | 1,237,886 |   |   |   | 1,409,807 |     |   |   | (171,921 | ) |   |   | (12.2 | ) |
| Net income (loss) before income taxes                       |   |             | (774,506  | )      |   |   | (673,653  | )        |   |   | (100,853 | ) |   |   | - |   |
| Income tax (provision) benefit:                             |   |             | -         |   |   |   | -         |     |   |   | - |   |   |   | - |   |
| Net loss                                                    |   |             | (774,506  | )      |   |   | (673,653  | )        |   |   | (100,853 | ) |   |   | - |   |
| Less: Noncontrolling interest share                         |   | $                | (119,649  | )      |   | $      | -         |     |   |   | (119,649 | ) |   |   | - |   |
| Controlling interest share                                  |   | $                | (654,857  | )      |   | $      | (673,653  | )        |   |   | 18,796 |   |   |   | - |   |

----

| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|---------|------------------------------------------------------------|

| ITEM 4. | CONTROLS AND PROCEDURES |
|---------|-------------------------|

----

| ITEM 1. | LEGAL PROCEEDINGS: |
|---------|--------------------|

| Item 1A. | Risk Factors |
|----------|--------------|

| ITEM 2. | CHANGES IN SECURITIES. |
|---------|------------------------|

| Date of Sale                |    | Title of Security    |    | NumberSold                             |    | ConsiderationReceived,Commissions                                                   |    | Purchasers                     |    | Exemption fromRegistrationClaimed                                                 |    |
|----------------------------------|--------------|---------------------------|--------------|----------------------------------------|--------------|------------------------------------------------------------------------------------------|--------------|-------------------------------------|--------------|----------------------------------------------------------------------------------------|--------------|
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |
| March 2009andDecember 2009  |         | Common StockOptions (1)   |         |   356,500                    |         | Securities granted under Equity Compensation Plan;no cash received;no commissions paid   |         | Employees, Directors and/orOfficers |         | Section 4(2) of the Securities Act of 1933 and/or Rule 506 promulgatedthereunder       |         |
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |
| March 2009andDecember2009   |         | Common StockOptions (2)   |         |   805,000                    |         | Securities granted outside Equity Compensation Plan;no cash received;no commissions paid |         | Employees, Directors and/orOfficers |         | Section 4(2) of the Securities Act of 1933 and/or Rule 506 promulgatedthereunder  |         |
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |
| December 2009               |         | Common Stock and Warrants |         | 500,004 shares; 2,000,016 Warrants (1) |         | $500,004 received;no commissions paid                                                    |         | Accredited Investors                |         | Section 4(2) of the Securities Act of 1933 and/or Rule 506 promulgatedthereunder       |         |
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |
| Dec. 31, 2009                    |         | Preferred StockDividend   |         | 95,189Shares                           |         | Dividend with an assumed value of $475,782; no commissionsPaid                           |         | ExistingStockholders                |         | Section 2(3)                                                                      |         |
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |
| 2009                        |         | Common Shares        |         | 652,587shares (3)                      |         | Conversion of 124,915Preferred Shares; no commissions paid                               |         | ExistingStockholders                |         | Section 3(a)(9)                                                                   |         |
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |
| Jan. - March2010                 |         | Common Stock (1)          |         | 2,184,145shares (3)                    |         | Conversion of 436,829 Preferred Shares;no commission paid                      |         | Existingsecurity holders            |         | Rule 3(a(9)                                                                            |         |
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |
| April - June2010                 |         | Common Stock (1)          |         | 2,329,592shares (3)                    |         | Conversion of 465,902 Preferred Shares; no commission paid                     |         | Existingsecurity holders            |         | Rule 3(a(9)                                                                            |         |
|                             |         |                      |         |                                   |         |                                                                                     |         |                                |         |                                                                                   |         |

----

| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES: |
|---------|----------------------------------|

| ITEM 4. | SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS: |
|---------|-------------------------------------------------------|

| ITEM 5. | OTHER INFORMATION: |
|---------|--------------------|

|  2.1  | Exchange Agreement                                                            |
|------------|-------------------------------------------------------------------------------|
|  3.1  | Certificate of Incorporation-BTHC,INC.                                   |
|  3.2  | Certificate of Merger of BTHC XI, LLC into BTHC XI, Inc.                      |
|  3.3  | Certificate of Amendment                                                      |
|  3.4  | Designation of Rights and Preferences-Series 1 Convertible Preferred Stock    |
|  3.5  | Amended and Restated By-laws                                                  |
|  4.1  | Form of Placement Agent Warrant issued to Fordham Financial Management        |
|  10.1 | Directors’ Compensation Agreement-George Rubin                          |
|  10.2 | Employment Contract-Morry F. Rubin                                            |
|  10.3 | Employment Contract-Brad Bernstein                                            |
|  10.4 | Agreement-Line of Credit                                                      |
|  10.5 | Fordham Financial Management-Consulting Agreement                             |
|  10.6 | Facilities Lease – Florida                                              |
|  10.7 | Facilities Lease – North Carolina                                       |
| 10.8       | Loan and Security Agreement (1)                                               |
| 10.9       | Revolving Note (1)                                                            |
| 10.10      | Debt Subordination Agreement (1)                                              |
| 10.11      | Guaranty Agreement (Morry Rubin) (1)                                          |
| 10.12      | Guaranty Agreement (Brad Bernstein)(1)                                        |
| 10.13      | Continuing Guaranty Agreement (1)                                             |
| 10.14      | Pledge Agreement (1)                                                          |
| 10.16      | Asset Purchase Agreement between the Company and Brookridge Funding LLC (2)   |
| 10.17      | Senior Credit Facility between the Company and MGM Funding LLC  (2) |

----

| 10.18 | Senior Credit Facility Guarantee - Michael P. Hilton and John A. McNiff III  (4)              |
|-------|---------------------------------------------------------------------------------------------------------|
| 10.19 | Employment Agreement - Michael P. Hilton  (4)                                                 |
| 10.20 | Employment Agreement - John A. McNiff  (4)                                                    |
| 10.21 | Accounts Receivable Credit Facility with Greystone Commercial Services LP  (3)                |
| 10.22 | [File Agreement to sell Brookridge.]                                                                    |
| 21.1  | Subsidiaries of Registrant listing state of incorporation (4)                                           |
| 31.1  | Rule 13a-14(a) Certification – Chief Executive Officer *                                          |
| 31.2  | Rule 13a-14(a) Certification – Chief Financial Officer *                                          |
| 32.1  | Section 1350 Certification – Chief Executive Officer *                                            |
| 32.2  | Section 1350 Certification – Chief Financial Officer *                                            |
| 99.1  | 2007 Omnibus Equity Compensation Plan                                                                   |
| 99.2  | Form of Non-Qualified Option under 2007 Omnibus Equity Compensation Plan                                |
| 99.3  | Amendment to 2007 Omnibus Equity Compensation Plan increasing the Plan to 4,200,000 shares  * |
| 99.4  | Press Release - Results of Operations - Second Quarter 2010  *                                |

|   |  _____________ |
|--------|---------------------|

|   | *  Filed herewith. |
|--------|------------------------------|

| (1)   | Incorporated by reference to the Registrant’s Form 8-K filed November 24, 2008 (date of earliest event |
|-----------------|--------------------------------------------------------------------------------------------------------------|

| (2)   | Incorporated by reference to the Registrant's Form 8-K filed December 8, 2009 (date of earliest event - |
|-----------------|---------------------------------------------------------------------------------------------------------|

| (3)   | Incorporated by reference to the Registrant's Form 8-K filed December 2, 2009 (date of earliest event - |
|-----------------|---------------------------------------------------------------------------------------------------------|

| (4) | Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 2009. |
|-----|------------------------------------------------------------------------------------------------------|

----

|                                   | ANCHOR FUNDING SERVICES, INC. |                                      |
|----------------------------------------|-------------------------------|-------------------------------------------|
|                                   |                          |                                      |   |
| Date:  August 16, 2010  | By:                           | /s/ Morry F. Rubin    |   |
|                                   |                          | Morry F. Rubin                            |   |
|                                   |                          | Chief Executive Officer                   |   |
|                                   |                          |                                      |   |

|                  |   |                                  |   |
|-----------------------|--------|---------------------------------------|--------|
| Date: August 16, 2010 | By:    | /s/ Brad Bernstein          |   |
|                  |   | Brad Bernstein                        |   |
|                  |   | President and Chief Financial Officer |   |
|                  |   |                                  |   |