SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q







Quarterly
Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act Of
1934





For
The Quarterly Period Ended September 30, 2008





Commission
File Number: 0-52589





ANCHOR FUNDING SERVICES,
INC.


(Exact
name of registrant as specified in its charter)




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)




(866)
789-3863


(Registrant's
telephone number)





Not
Applicable


(Former
name, address and fiscal year, if changed since last report)












Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing
requirements for the past 90 days. Yes  э   No 
o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer o
            
            
            
            Accelerated
      filer o




Non-accelerated
      filer o
            
            (Do
      not check if a smaller reporting company)
            
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes  o   No 
x




As of
September 30, 2008, the Company had a total of 12,940,378 shares of Common Stock
outstanding, excluding 1,216,999 outstanding shares of Series 1 Preferred Stock
convertible into 6,084,995 shares of Common Stock.





1




CAUTIONARY
STATEMENT ABOUT FORWARD-LOOKING STATEMENTS






This
report contains certain "forward-looking statements," within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform Act of 1995, and are
including this statement for purposes of these safe harbor provisions.
"Forward-looking statements," which are based on certain assumption and describe
our future plans, strategies and expectations, may be identified by the use of
such words as "believe," "expect," "anticipate," "should," "planned,"
"estimated" and "potential." Examples of forward-looking statements, include,
but are not limited to, estimates with respect to our financial condition,
results of operations and business that are subject to various factors that
could cause actual results to differ materially from these estimates and most
other statements that are not historical in nature. These factors include, but
are not limited to, general and local economic conditions, changes in interest
rates, deposit flows, demand for commercial, mortgage, consumer and other loans,
real estate values, competition, changes in accounting principles, policies or
guidelines, changes in legislation or regulation, and other economic,
competitive, governmental, regulatory and technological factors affecting our
operations, pricing, products and services. These risks and uncertainties should
be considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect our
financial results, is included in our other filings with the Securities and
Exchange Commission.



















2




ANCHOR
FUNDING SERVICES, INC.





Form
10-Q Quarterly Report


Table
of Contents







PagePART
      I.  FINANCIAL INFORMATIONItem
      1.
                  Financial
      Statements (Unaudited)Consolidated
      Balance Sheet as of September 30, 2008 and December 31,
    2007
                  4Consolidated
      Statements of Operations for the Three and Nine months
      Ended  September 30, 2008 and September 30, 2007
                  5Consolidated
      Statements of Stockholders’ Equity
                  6Consolidated
      Statements of Cash Flows for Nine Months Ended September 30, 2008 and
      September 30, 2007
                  7Notes
      to Consolidated Financial Statements
                  8Item
      2.
                  Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  22Item
      3.
                  Quantitative
      and Quantitative Disclosures about Market Risk
                  27Item
      4.
                  Controls
      and Procedures
                  28PART
      II  OTHER INFORMATIONItem
      1.
                  Legal
      Proceedings
                  28Item
      2.
                  Changes
      in Securities
                  28Item
      3.
                  Defaults
      Upon Senior Securities
                  29Item
      4.
                  Submissions
      of Matters to a Vote of Security Holders
                  29Item
      5
                  Other
      Information
                  29Item
      6.
                  Exhibits
      and Reports on Form 8-K
                  29Signatures
                  30




3




PART I.
FINANCIAL INFORMATION


ANCHOR
FUNDING SERVICES, INC.
  CONSOLIDATED
BALANCE SHEETS


ASSETS(Unaudited)
                                  
                                  
                                  (Audited)September
                                  
                                  
                                  December30,
      2008
                                  
                                  
                                  
                                  31,
      2007CURRENT
      ASSETS:Cash
                                  
                                  $
                                  648,973
                                  
                                  
                                  $
                                  3,499,044Retained
      interest in purchased accounts receivable
                                  
                                  
                                  3,297,184
                                  
                                  
                                  
                                  1,502,215Earned
      but uncollected fee income
                                  
                                  
                                  64,269
                                  
                                  
                                  
                                  25,742Prepaid
      expenses and other
                                  
                                  
                                  114,527
                                  
                                  
                                  
                                  65,016Total
      current assets
                                  
                                  
                                  4,124,953
                                  
                                  
                                  
                                  5,092,017PROPERTY
      AND EQUIPMENT, net
                                  
                                  
                                  82,393
                                  
                                  
                                  
                                  89,044SECURITY
      DEPOSITS
                                  
                                  
                                  19,763
                                  
                                  
                                  
                                  20,216$
                                  4,227,109
                                  
                                  
                                  $
                                  5,201,277LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                  
                                  
                                  81,957
                                  
                                  
                                  
                                  68,728Accrued
      payroll and related taxes
                                  
                                  
                                  86,638
                                  
                                  
                                  
                                  101,248Accrued
      expenses
                                  
                                  
                                  14,986
                                  
                                  
                                  
                                  73,201Collected
      but unearned fee income
                                  
                                  
                                  47,595
                                  
                                  
                                  
                                  30,748Preferred
      dividends payable
                                  
                                  
                                  380,306
                                  
                                  
                                  
                                  405,995Total
      current liabilities
                                  
                                  
                                  611,482
                                  
                                  
                                  
                                  679,920COMMITMENTS
      AND CONTINGENCIESPREFERRED
      STOCK, net of issuance costs
                                  
                                  
                                  4,874,712
                                  
                                  
                                  
                                  5,503,117of
      $1,209,383COMMON
      STOCK
                                  
                                  
                                  12,941
                                  
                                  
                                  
                                  11,821ADDITIONAL
      PAID IN CAPITAL
                                  
                                  
                                  1,656,727
                                  
                                  
                                  
                                  536,199ACCUMULATED
      DEFICIT
                                  
                                  
                                  (2,928,753
                                  )
                                  
                                  
                                  (1,529,780
                                  )3,615,627
                                  
                                  
                                  
                                  4,521,357$
                                  4,227,109
                                  
                                  
                                  $
                                  5,201,277




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







4


ANCHOR
FUNDING SERVICES, INC.
  CONSOLIDATED
STATEMENTS OF OPERATIONS
  (Unaudited)
                                                    
                                                    
                                                    (Unaudited)For
      the quarters ending September
    30,
                                                    
                                                    
                                                    For
      the nine months ending September 30,2008
                                                    
                                                    
                                                    2007
                                                    
                                                    
                                                    2008
                                                    
                                                    
                                                    2007FINANCE
      REVENUES
                                                    
                                                    $
                                                    338,356
                                                    
                                                    
                                                    $
                                                    121,996
                                                    
                                                    
                                                    $
                                                    823,533
                                                    
                                                    
                                                    $
                                                    297,740INTEREST
      EXPENSE
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (5,866
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (27,231
                                                    )INTEREST
      INCOME
                                                    
                                                    
                                                    5,087
                                                    
                                                    
                                                    
                                                    56,823
                                                    
                                                    
                                                    
                                                    39,606
                                                    
                                                    
                                                    
                                                    154,352NET
      FINANCE REVENUES
                                                    
                                                    
                                                    343,443
                                                    
                                                    
                                                    
                                                    172,953
                                                    
                                                    
                                                    
                                                    863,139
                                                    
                                                    
                                                    
                                                    424,861PROVISION
      FOR CREDIT LOSSES
                                                    
                                                    
                                                    226
                                                    
                                                    
                                                    
                                                    22,000
                                                    
                                                    
                                                    
                                                    5,270
                                                    
                                                    
                                                    
                                                    22,000FINANCE
      REVENUES, NET OF INTEREST EXPENSEAND
      CREDIT LOSSES
                                                    
                                                    
                                                    343,217
                                                    
                                                    
                                                    
                                                    150,953
                                                    
                                                    
                                                    
                                                    857,869
                                                    
                                                    
                                                    
                                                    402,861OPERATING
      EXPENSES
                                                    
                                                    
                                                    583,644
                                                    
                                                    
                                                    
                                                    380,074
                                                    
                                                    
                                                    
                                                    1,805,549
                                                    
                                                    
                                                    
                                                    939,530NET
      LOSS BEFORE INCOME TAXES
                                                    
                                                    
                                                    (240,427
                                                    )
                                                    
                                                    
                                                    (229,121
                                                    )
                                                    
                                                    
                                                    (947,680
                                                    )
                                                    
                                                    
                                                    (536,669
                                                    )INCOME
      TAX (PROVISION) BENEFIT:Current
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Deferred
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    4,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    21,000Total
                                                    
                                                    
                                                    0
                                                    
                                                    
                                                    
                                                    4,000
                                                    
                                                    
                                                    
                                                    0
                                                    
                                                    
                                                    
                                                    21,000NET
      LOSS
                                                    
                                                    
                                                    (240,427
                                                    )
                                                    
                                                    
                                                    (225,121
                                                    )
                                                    
                                                    
                                                    (947,680
                                                    )
                                                    
                                                    
                                                    (515,669
                                                    )DEEMED
      DIVIDEND ON CONVERTIBLE PREFERRED STOCK
                                                    
                                                    
                                                    (122,682
                                                    )
                                                    
                                                    
                                                    (134,849
                                                    )
                                                    
                                                    
                                                    (383,863
                                                    )
                                                    
                                                    
                                                    (269,169
                                                    )NET
      LOSS ATTRIBUTABLE TO COMMONSTOCKHOLDER
                                                    
                                                    $
                                                    (363,109
                                                    )
                                                    
                                                    $
                                                    (359,970
                                                    )
                                                    
                                                    $
                                                    (1,331,543
                                                    )
                                                    
                                                    $
                                                    (784,838
                                                    )NET
      LOSS ATTRIBUTABLE TO COMMONSTOCKHOLDER,
      per shareBasic
                                                    
                                                    $
                                                    (0.03
                                                    )
                                                    
                                                    $
                                                    (0.03
                                                    )
                                                    
                                                    $
                                                    (0.11
                                                    )
                                                    
                                                    $
                                                    (0.07
                                                    )Dilutive
                                                    
                                                    $
                                                    (0.03
                                                    )
                                                    
                                                    $
                                                    (0.03
                                                    )
                                                    
                                                    $
                                                    (0.11
                                                    )
                                                    
                                                    $
                                                    (0.07
                                                    )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDINGBasic
      and dilutive
                                                    
                                                    
                                                    12,940,168
                                                    
                                                    
                                                    
                                                    11,820,555
                                                    
                                                    
                                                    
                                                    12,649,494
                                                    
                                                    
                                                    
                                                    10,912,130
  The
accompanying notes to financial statements are an integral part of these
statements.





5




ANCHOR
FUNDING SERVICES, INC.


UNAUDITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


For
the nine months ended September 30, 2008





Preferred
                                                  
                                                  
                                                  Common
                                                  
                                                  
                                                  Additional
                                                  
                                                  
                                                  AccumulatedStock
                                                  
                                                  
                                                  Stock
                                                  
                                                  
                                                  Paid
      in Capital
                                                  
                                                  
                                                  DeficitBalance,
      December 31, 2007 (audited)
                                                  
                                                  $
                                                  5,503,117
                                                  
                                                  
                                                  $
                                                  11,821
                                                  
                                                  
                                                  $
                                                  536,199
                                                  
                                                  
                                                  $
                                                  (1,529,780
                                                  )To
      record the issuance of 94,865 preferred shares in connection with
      thepayment
      of the accrued preferred dividend liability as of December 31,
      2007
                                                  
                                                  
                                                  473,425
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -To
      record conversion of 220,366 preferred shares, plus accrued
      anddeclared
      dividends, to 1,119,823 common shares
                                                  
                                                  
                                                  (1,101,830
                                                  )
                                                  
                                                  
                                                  1,120
                                                  
                                                  
                                                  
                                                  1,104,267
                                                  
                                                  
                                                  
                                                  (3,558
                                                  )Provision
      for compensation expense related to issued stock options
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  16,261
                                                  
                                                  
                                                  
                                                  -Preferred
      stock dividends
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (447,735
                                                  )Net
      loss for the nine months ended September 30, 2008
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (947,680
                                                  )Balance,
      September 30, 2008 (unaudited)
                                                  
                                                  $
                                                  4,874,712
                                                  
                                                  
                                                  $
                                                  12,941
                                                  
                                                  
                                                  $
                                                  1,656,727
                                                  
                                                  
                                                  $
                                                  (2,928,753
                                                  )
  The
accompanying notes to financial statements are an integral part of these
statements.




6




ANCHOR
FUNDING SERVICES, INC.




CONSOLIDATED
STATEMENTS OF CASH FLOWS
  For
the nine months ended September 30,
  (Unaudited)
                                      
                                      
                                      (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:
                                      
                                      2008
                                      
                                      
                                      2007Net
      loss:
                                      
                                      $
                                      (947,680
                                      )
                                      
                                      $
                                      (515,669
                                      )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
      and amortization
                                      
                                      
                                      33,798
                                      
                                      
                                      
                                      10,562Compensation
      expense related to issuance of stock options
                                      
                                      
                                      16,261
                                      
                                      
                                      
                                      61,152Allowance
      for uncollectible accounts
                                      
                                      
                                      5,270
                                      
                                      
                                      
                                      22,000Benefit
      for deferred income taxes
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (21,000
                                      )Increase
      in retained interest in purchasedaccounts
      receivable
                                      
                                      
                                      (1,800,239
                                      )
                                      
                                      
                                      (774,814
                                      )Increase
      in earned but uncollected fee income
                                      
                                      
                                      (38,527
                                      )
                                      
                                      
                                      (27,538
                                      )Increase
      in prepaid expenses and other
                                      
                                      
                                      (49,511
                                      )
                                      
                                      
                                      (9,408
                                      )Decrease
      (increase) in security deposits
                                      
                                      
                                      453
                                      
                                      
                                      
                                      (19,203
                                      )Increase
      in accounts payable
                                      
                                      
                                      13,229
                                      
                                      
                                      
                                      38,819Increase
      in collected but not earned fee income
                                      
                                      
                                      16,847
                                      
                                      
                                      
                                      18,252Decrease
      in due to related company
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (21,472
                                      )(Decrease)
      increase in accrued payroll and related taxes
                                      
                                      
                                      (14,610
                                      )
                                      
                                      
                                      59,586(Decrease)
      increase in accrued expenses
                                      
                                      
                                      (58,215
                                      )
                                      
                                      
                                      12,278Net
      cash used in operating activities
                                      
                                      
                                      (2,822,924
                                      )
                                      
                                      
                                      (1,166,455
                                      )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of property and equipment
                                      
                                      
                                      (27,147
                                      )
                                      
                                      
                                      (85,367
                                      )CASH
      FLOWS FROM FINANCING ACTIVITIES:Payments
      to financial institution, net
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (47,153
                                      )Proceeds
      from sale of preferred stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      6,712,500Payments
      made related to sale of preferred stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,209,383
                                      )Net
      cash provided by financing activities
                                      
                                      
                                      0
                                      
                                      
                                      
                                      5,455,964(DECREASE)
      INCREASE IN CASH
                                      
                                      
                                      (2,850,071
                                      )
                                      
                                      
                                      4,204,142CASH,
      beginning of period
                                      
                                      
                                      3,499,044
                                      
                                      
                                      
                                      55,771CASH,
      end of period
                                      
                                      $
                                      648,973
                                      
                                      
                                      $
                                      4,259,913
  The
accompanying notes to financial statements are an integral part of these
statements.




7


ANCHOR
FUNDING SERVICES, INC
 
 Notes
To Consolidated Financial Statements
 
 Three
and Nine Months Ended September 30, 2008 and 2007
 (Unaudited)
 
 The
Consolidated Balance Sheet as of September 30, 2008, the Consolidated Statements
of Operations for the three and nine months ended September 30, 2008 and 2007
and the Consolidated Statements of Cash Flows for the nine months ended
September 30, 2008 and 2007 have been prepared by us without
audit.  In the opinion of Management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly in all material
respects our financial position as of September 30, 2008, results of operations
for the three and nine months ended September 30, 2008 and 2007 and cash flows
for the nine months ended September 30, 2008 and 2007 are not necessarily
indicative of the results to be expected for the full year.
 
 Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such rules and
regulations.
 
 The
results of operations for the three and nine months ended September 30, 2008 are
not necessarily indicative of the results expected or the full
year.
 
 This
report should be read in conjunction with our Form 10-KSB for our fiscal year
ended December 31, 2007.
 
 1.  BACKGROUND AND DESCRIPTION OF
BUSINESS:
 The
      consolidated financial statements include the accounts of Anchor Funding
      Services, Inc. (formerly BTHC XI, Inc.) and its wholly owned subsidiary,
      Anchor Funding Services, LLC (“the Company”).  In April of 2007,
      BTHC XI, Inc. changed its name to Anchor Funding Services,
      Inc.  All significant intercompany balances and transactions
      have been eliminated in
consolidation.
 
 Anchor
      Funding Services, Inc. is a Delaware corporation.  Anchor
      Funding Services, Inc. has no operations; substantially all operations of
      the Company are the responsibility of Anchor Funding Services,
      LLC.
 
 Anchor
      Funding Services, LLC is a North Carolina limited liability
      company.    Anchor Funding Services, LLC was formed
      for the purpose of providing factoring and back office services to
      businesses located throughout the United States of
  America.
 
 On
      January 31, 2007, BTHC XI, Inc acquired Anchor Funding Services, LLC by
      exchanging shares in BTHC XI, Inc. for all the outstanding membership
      units of Anchor Funding Services, LLC (See Note
      7).   Anchor Funding Services, LLC is considered the
      surviving entity therefore these financial statements include the accounts
      of BTHC XI, Inc. and Anchor Funding Services, LLC since January 1,
      2007.
 
 8
 
 2.  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
 Estimates – The
      preparation of 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 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.  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 is
      outstanding.   As specified in its contract with the
      client, the Company charges variable increasing percentages of the
      purchased invoice 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 are collected, the Company
      records the appropriate adjustments to record the actual revenue earned on
      each purchased invoice. These adjustments from the estimated revenue to
      the actual revenue have not been
material.
  9
  Retained Interest in Purchased
      Accounts Receivable –Retained interest in purchased accounts
      receivable represents the gross amount of invoices purchased from
      factoring customers less amounts maintained in a reserve account and
      collected but unearned fee income, plus earned but uncollected fee
      income.  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.
 
 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
monthly to determine if any are uncollectible.  The Company has a
security interest in the accounts receivable 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 factoring customers relating to the
purchased accounts receivable.
 
 Management
considered approximately $36,000 and $31,000 of their September 30, 2008 and
December 31, 2007 retained interest in purchased accounts receivable to be
uncollectible.
 
 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.
 
 Property and Equipment –
      Property and equipment, consisting primarily of furniture and fixtures,
      computers and software, are stated at cost.  Depreciation is
      provided over the estimated useful lives of the depreciable assets using
      the straight-line method.
 
 Advertising Costs – The
      Company charges advertising costs to expense as incurred.  Total
      advertising costs were as follows:
 
  For
      the nine months ending September 30,2008
              
              
              2007$
              309,000
              
              
              $
              151,700For
      the quarters ending September 30,2008
              
              
              2007$
              78,000
              
              
              $
              64,800
 10
  Earnings per Share – The
      Company computes earnings per share in accordance with SFAS No. 128
      “Earnings Per Share.”  Basic earnings per share is computed by
      dividing the earnings for the period by the weighted average number of
      common shares outstanding during the period.  Dilutive earnings
      per share includes 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.
 
 In
accordance with SFAS No. 128, options and warrants will have a dilutive effect,
under the treasury method, only when the average price of common stock during
the period exceeds the exercise price of the options or warrants. During the
period under review, the average price of common stock was less than the
exercise price of the options and warrants.
 
 Also in
accordance with SFAS No. 128, if 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. During the period under review, there was a
year-to-date loss.
 
 Stock Based Compensation
      -In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 123(R),
      “Accounting for Stock-Based Compensation.” SFAS No. 123(R) establishes
      standards for the accounting for transactions in which an entity exchanges
      its equity instruments for goods or services. This statement focuses
      primarily on accounting for transactions in which an entity obtains
      employee services in share-based payment transactions. SFAS No. 123(R)
      requires that the fair value of such equity instruments be recognized as
      an expense in the historical financial statements as services are
      performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of
      fair value were required. The provisions of this statement were effective
      for the first interim reporting period that began after December 15, 2005.
      The Company adopted the provisions of SFAS No.123(R) in the first quarter
      of fiscal 2006.
 
 See
      Note 8 for the SFAS No. 123(R) impact on the operating results for the
      nine months ended September 30, 2008 and
2007.
 
 Fair Value of Financial
      Instruments – The carrying value of cash equivalents, retained
      interest in purchased accounts receivable, 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 – Effective
      January 31, 2007, the Company became 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.
  11
  The
deferred tax asset represents the future tax return consequences of utilizing
these items.   Deferred tax assets are reduced by a valuation
reserve, when management is uncertain if the net deferred tax assets will ever
be realized.
 
 Prior to
January 31, 2007,Anchor Funding Services,
LLC was treated as a partnership for Federal and state income tax
purposes.  Its earnings and losses were included in the personal tax
returns of its members; therefore, no provision or benefit from income taxes has
been included in those financial statements.
 
 In July
2006, FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes—an interpretation of SFAS No. 109” (“FIN 48”), which clarifies the
accounting for uncertainty in tax positions.  This Interpretation
requires that the Company recognize in its consolidated financial statements,
the impact of a tax position, if that position is more likely than not of being
sustained on audit, based on the technical merits of the
position.  The provisions of FIN 48 became effective for the Company
on January 1, 2007.
 
 The
Company applied FIN 48 to all its tax positions, including tax positions taken
and those expected to be taken, under the transition provision of the
interpretation.  As a result of the implementation of FIN 48, the
Company recognized no increases or decreases in its recorded tax liabilities or
2006 retained earnings.
 
 For the
nine months and quarters ending September 30, 2008 and 2007, the Company
recognized no liability for uncertain tax positions.
 
 The
Company classifies interest accrued on unrecognized tax benefits with interest
expense.  Penalties accrued on unrecognized tax benefits are
classified with operating expenses.
 
 Recent Accounting Pronouncements –In September 2006, the Financial Accounting Standards Board (“FASB”)
issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements.”
SFAS 157 provides enhanced guidance for using fair value to measure assets and
liabilities.  It clarifies the principle that fair value should be
based on the assumptions market participants would use when pricing the asset or
liability and establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions.  SFAS 157 is effective
for fiscal years beginning after November 15, 2007.  The adoption of
SFAS 157 does not currently have a material impact on the Company’s financial
condition and results of operations.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115.”  SFAS 159 provides companies with an option to report
selected financial assets and liabilities at estimated fair
value.  Most of the provisions of SFAS No. 159 are elective; however,
the amendment to SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities, applies to all entities that own trading
and available-for-sale securities.  The fair value option created by
SFAS No. 159 permits an entity to measure eligible items at fair value as of
specified election dates.  The fair value option (a) may generally be
applied instrument by instrument, (b) is irrevocable unless a new election date
occurs, and must be applied to the entire instrument and not to only a portion
of the instrument.
 
 SFAS No.
159 is effective as of the beginning of an entity’s first fiscal year beginning
after November 15, 2007.  Early adoption is permitted as of the
beginning of the previous fiscal year provided that the entity makes that choice
in the first 120 days of the fiscal year, has not yet issued financial
statements for any interim period of such year, and also elects to apply the
provisions of SFAS No. 159.  The adoption of SFAS 159 does not
currently have a material impact on the Company’s financial condition and
results of operations.
 
 On
December 4, 2007, the FASB issued SFAS 141(R) “Business
Combinations”.  SFAS 141R modifies the accounting for business
combinations and requires, with limited exceptions, the acquiring entity in a
business combination to recognize 100 percent of the assets acquired,
liabilities assumed, and any non-controlling interest in the acquiree at the
acquisition date fair value.  In addition, SFAS 141R limits the
recognition of acquisition-related restructuring liabilities and requires the
following: the expense of acquisition-related and restructuring costs and the
acquirer to record contingent consideration measured at the acquisition date at
fair value.  SFAS 141R is effective for new acquisitions consummated
on or after January 1, 2009.  Early adoption is not
permitted.  The Company is currently evaluating the effect of this
standard.
 
 On
December 4, 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements” (SFAS 160).  SFAS 160 requires all
entities to report noncontrolling (i.e. minority interests) in subsidiaries as
equity in the Consolidated Financial Statements and to account for transactions
between an entity and noncontrolling owners as equity transactions if the parent
retains its controlling financial interest in the subsidiary.  SFAS
160 also requires expanded disclosure that distinguishes between the interests
of a parent’s owners and the interests of a noncontrolling owners of a
subsidiary.  SFAS 160 is effective for the Company’s financial
statements for the year beginning January 1, 2009 and early adoption is not
permitted.  The adoption of SFAS 160 is not expected to have a
material impact on the Company’s financial condition and results of
operations.
 
 12
 
 
 3.  RETAINED INTEREST IN PURCHASED
ACCOUNTS RECEIVABLE:
 Retained
      interest in purchased accounts receivable consists of the
      following:
  September
      30, 2008
                            
                            
                            December
      31, 2007Purchased
      accounts receivable outstanding
                            
                            $
                            3,921,214
                            
                            
                            $
                            1,841,539Reserve
      account
                            
                            
                            (588,052
                            )
                            
                            
                            (308,616
                            )Allowance
      for uncollectible accounts
                            
                            
                            (35,978
                            )
                            
                            
                            (30,708
                            )$
                            3,297,184
                            
                            
                            $
                            1,502,215
  Retained
      interest in purchased accounts receivable consists of United States
      companies in the following
industries:
  September
      30, 2008
                        
                        
                        December
      31, 2007Staffing
                        
                        $
                        577,719
                        
                        
                        $
                        656,020Transportation
                        
                        
                        1,394,522
                        
                        
                        
                        218,264Publishing
                        
                        
                        2,664
                        
                        
                        
                        6,000Construction
                        
                        
                        11,552
                        
                        
                        
                        8,291Service
                        
                        
                        1,133,774
                        
                        
                        
                        498,614Other
                        
                        
                        212,931
                        
                        
                        
                        145,734$
                        3,333,162
                        
                        
                        $
                        1,532,923
  Total
      accounts receivable purchased were as
follows:
 
  For
      the nine months ending September 30,2008
                            
                            
                            2007$
                            23,851,600
                            
                            
                            $
                            7,561,800For
      the quarters ending September 30,2008
                            
                            
                            2007$
                            10,255,500
                            
                            
                            $
                            3,192,000
  13
  4.  PROPERTY AND
EQUIPMENT:
 Property
      and equipment consist of the
following:
  Estimated
                          
                          September
      30,
                          
                          
                          December
      31,Useful
      Lives
                          
                          2008
                          
                          
                          2007Furniture
      and fixtures
                          2-5
      years
                          
                          $
                          35,825
                          
                          
                          $
                          33,960Computers
      and software
                          3-7
      years
                          
                          
                          119,148
                          
                          
                          
                          93,866154,973
                          
                          
                          
                          127,826Less
      accumulated depreciation
                          
                          
                          
                          (72,580
                          )
                          
                          
                          (38,782
                          )$
                          82,393
                          
                          
                          $
                          89,044
  5.  CAPITAL
STRUCTURE:
 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.
 
 Each
      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.
 
 The
      dividend rate on Series 1 Convertible Preferred Stock is
      8%.  Dividends are paid annually on December 31st in the form of
      additional Series 1 Convertible Preferred Stock unless the Board of
      Directors approves a cash dividend.  Dividends on Series 1
      Convertible Preferred Stock shall cease to accrue on the earlier of
      December 31, 2009, or on the date they are converted to Common
      Shares.  Thereafter, the holders of Series 1 Convertible
      Preferred Stock have the same dividend rights as holders of Common Stock,
      as if the Series 1 Convertible Preferred Stock had been converted to
      Common Stock.  Accrued dividends at September 30, 2008 and
      December 31, 2007 were $380,306 and
$405,995.
 
 Common Stock – The
      Company is authorized to issue 40,000,000 shares of $.001 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.
  14
  The
      changes in Series 1 Convertible Preferred Stock and Common Stock shares
      for the nine months ended September 30, 2008 is summarized as
      follows:
 
  Series
      1 Convertible
                          
                          
                          CommonPreferred
      Stock
                          
                          
                          StockBalance,
      December 31, 2007
                          
                          
                          1,342,500
                          
                          
                          
                          11,820,555Shares
      issued in exchange withdividend
      on preferred shares
                          
                          
                          94,865
                          
                          
                          
                          -Shares
      issued (redeemed) in connectionconversion
      of preferred shares tocommon
      shares
                          
                          
                          (220,366
                          )
                          
                          
                          1,119,823Balance,
      September 30, 2008
                          
                          
                          1,216,999
                          
                          
                          
                          12,940,378
 6.  RELATED
PARTY TRANSACTIONS:
 
 The
      Company used the administrative staff and facilities of a limited
      liability company (LLC) related through common ownership.  The
      services provided by the LLC consist primarily of rent, credit,
      collection, invoicing, payroll and bookkeeping.  The Company
      paid the LLC a fee for these services.  The fee is computed as a
      percentage of accounts receivable purchased by the Company.  The
      administrative fee charged by the LLC was as
  follows:
  For
      the nine months ending September 30,2008
                
                
                2007$
                -
                
                
                $
                14,000For
      the quarters ending September 30,2008
                
                
                2007$
                -
                
                
                $
                7,100
 7.  EXCHANGE
TRANSACTION:
 On
      January 31, 2007, Anchor Funding Services, LLC and its members entered
      into a Securities Exchange Agreement with BTHC XI, Inc.  The
      members namely, George Rubin, Morry Rubin (“M. Rubin”) and Ilissa
      Bernstein exchanged their units in Anchor Funding Services, LLC for an
      aggregate of 8,000,000 common shares of BTHC XI, Inc. issued to George
      Rubin (2,400,000 shares), M. Rubin (3,600,000 shares) and Ilissa Bernstein
      (2,000,000 shares).  Upon the closing of this transaction Anchor
      Funding Services, LLC became a wholly-owned subsidiary of BTHC XI,
      Inc.  In April of 2007, BTHC XI, Inc. changed its name to Anchor
      Funding Services, Inc.
 
 At
      the time of this transaction, BTHC XI, Inc. had no operations and no
      assets or liabilities. After this transaction the former members of Anchor
      Funding Services, LLC owned approximately 67.7% of the outstanding common
      stock of BTHC XI, Inc.
 
 This
      transaction was accounted for as a purchase.  There was no
      market value for the common shares of BTHC XI, Inc. or the membership
      units of Anchor Funding Services, LLC at the transaction
      date.  Accordingly, BTHC XI, Inc. recorded the membership units
      received in Anchor Funding Services, LLC at Anchor Funding Service LLC’s
      net asset value as of the transaction
date.
  15
  8.
EMPLOYMENT AND STOCK OPTION AGREEMENTS:
 At
      closing of the exchange transaction described above, M. Rubin and Brad
      Bernstein (“B. Bernstein”), the husband of Ilissa Bernstein and President
      of the Company, entered into employment contracts and stock option
      agreements with BTHC XI, Inc.  Additionally, at closing two
      non-employee directors entered into stock option agreements with BTHC XI,
      Inc.
 .
 The
      following summarizes M. Rubin’s employment agreement and stock
      options:
 
 ·
              The
      employment agreement with M. Rubin retains his services as Co-chairman and
      Chief Executive Officer for a three-year
period.
 
 ·
              An
      annual salary of $1 until, the first day of the first month following such
      time as BTHC XI, Inc. 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 BTHC XI, Inc.,
      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) BTHC XI, Inc.’s  industry, size and
      performance, and (iii) other relevant factors. M. Rubin is eligible to
      receive annual bonuses as determined by BTHC XI, Inc.’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 BTHC XI, Inc.’s 2007 Omnibus Equity Compensation Plan. Vesting
      of the options is one-third immediately, one-third on February 29, 2008
      and one-third on February 28, 2009, provided that in the event of a change
      in control or M. Rubin is terminated without cause or M. Rubin terminates
      for good reason, all unvested options shall accelerate and immediately
      vest and become exercisable in full on the earliest of the date of change
      in control or date of M. Rubin’s voluntary termination or by BTHC XI, Inc.
      without cause.
 
 The
      following summarizes B. Bernstein’s employment agreement and stock
      options:
 
 ·
              The
      employment agreement with B. Bernstein retains his services as President
      for a three-year period.
 
 ·
              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 BTHC XI, Inc. may hereafter
      adopt from time to time.  B. Bernstein is eligible to receive
      annual bonuses as determined by BTHC XI, Inc.’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 BTHC XI, Inc.’s 2007 Omnibus Equity Compensation Plan. Vesting
      of the options is one-third immediately, one-third on February 29, 2008
      and one-third on February 28, 2009, provided that in the event of a change
      in control or B. Bernstein is terminated without cause or B. Bernstein
      terminates for good reason, all unvested options shall accelerate and
      immediately vest and become exercisable in full on the earliest of the
      date of change in control or date of B. Bernstein’s voluntary termination
      or by BTHC XI, Inc. without cause.
  16
  The
      following summarizes the non-employee stock option agreements entered into
      with three directors:
 
 ·
              10-year
      options to purchase 460,000 shares exercisable at $1.25 per share,
      pursuant to BTHC XI, Inc.’s 2007 Omnibus Equity Compensation Plan. Vesting
      of the options is one-third immediately, one-third on 1 year from grant
      date and the remainder 2 years from grant date.  If any director
      ceases serving BTHC XI, Inc. 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 stock option agreements entered into with three
      managerial employees:
 
 ·
              10-year
      options to purchase 12,000 shares exercisable at $1.25 per share, pursuant
      to the Anchor Funding Services Inc.’s 2007 Omnibus Equity Compensation
      Plan. The grant dates range from September 28, 2007 to February 21,
      2008.  The vesting periods range from one year to four
      years.  If the employee ceases being employed by Anchor Funding
      Services, Inc. for any reason, all vested and unvested options shall
      terminate immediately.
 
 The
      following summarizes a stock subscription agreement entered into with an
      unrelated individual:
 
 ·
              Pursuant
      to a subscription agreement entered into on December 11, 2007, Anchor
      Funding Services, Inc. awarded 25,000 shares of common stock, at $1 per
      share, in exchange for a full recourse note receivable of
      $25,000.  This transaction was accounted for in accordance with
      SFAS 123(R).
 
 The
      following table summarizes information about stock options as of September
      30, 2008:
  Weighted
      AverageExercise
                          
                          
                          Number
                          
                          Remaining
                          
                          NumberPrice
                          
                          
                          Outstanding
                          
                          Contractual
      Life
                          
                          Exercisable$
                          1.25
                          
                          
                          
                          1,972,000
                          
                          10
      years
                          
                          
                          1,307,668
  
 Anchor
      Funding Services Inc. will record the issuance of these options as of
      September 30, 2008 in accordance with SFAS No. 123(R).  The
      following information was input into a Black Scholes option pricing model
      to compute a per option price of
$.0468:
  Exercise
      price
                        
                        $
                        1.25Term
                        
                        10
      yearsVolatility
                        
                        
                        2.5Dividends
                        
                        
                        0
                        %Discount
      rate
                        
                        
                        4.75
                        %
 
  17
  The
      financial effect of these options to record over their life is as
      follows:
  Options
      to value
                        
                        
                        1,972,000Option
      price
                        
                        $
                        0.0468Total
      expense to recognize overlife of options
                        
                        $
                        92,290
  
 The
      pre-tax fair value recorded for these options in the statement of
      operations for the nine months ended September 30, 2008 and 2007 was as
      follows:
 
  For
      the nine
                          
                          
                          For
      the ninemonths
      ended
                          
                          
                          months
      endedSeptember
      30, 2008
                          
                          
                          September
      30, 2007Fully
      vested stock options
                          
                          $
                          2,548
                          
                          
                          $
                          30,576Unvested
      portion of stock options
                          
                          
                          13,713
                          
                          
                          
                          30,576$
                          16,261
                          
                          
                          $
                          61,152
 
 9.
SALE OF CONVERTIBLE PREFERRED STOCK:
 From
February 1, 2007 to April 5, 2007 the Company sold 1,342,500 shares of
convertible preferred stock to accredited investors.  The gross
proceeds, transaction expenses and net proceeds of these transactions were as
follows:
 Gross
      proceeds
                          
                          $
                          6,712,500Cash
      fees:Placement
      agent
                          
                          
                          (949,050
                          )Legal
      and accounting
                          
                          
                          (218,552
                          )Blue
      sky
                          
                          
                          (39,348
                          )Net
      cash proceeds
                          
                          $
                          5,505,550Non-cash
      fees:Placement
      agents fees - warrants
                          
                          
                          (62,695
                          )Net
      proceeds
                          
                          $
                          5,442,855
  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 option price of
      $.0462:
 
  18
  Exercise
      price
              
              $
              1.10Term
              
              5
      yearsVolatility
              
              
              2.5Dividends
              
              
              0
              %Discount
      rate
              
              
              4.70
              %
  The
following table summarizes information about stock warrants as of September 30,
2008:
 Weighted
      AverageExercise
                        
                        
                        Number
                        
                        Remaining
                        
                        NumberPrice
                        
                        
                        Outstanding
                        
                        Contractual
      Life
                        
                        Exercisable$
                        1.10
                        
                        
                        
                        1,342,500
                        
                        5
      years
                        
                        
                        1,342,500
  10.  CONCENTRATIONS:
 Revenues – The Company
      recorded revenues from United States companies in the following industries
      as follows:
 
  Industry
                              
                              For
      the nine months ending September 30,2008
                              
                              
                              2007Staffing
                              
                              $
                              202,746
                              
                              
                              $
                              214,831Transportation
                              
                              
                              343,382
                              
                              
                              
                              7,209Publishing
                              
                              
                              0
                              
                              
                              
                              2,997Construction
                              
                              
                              4,850
                              
                              
                              
                              8,559Service
                              
                              
                              239,177
                              
                              
                              
                              55,298Other
                              
                              
                              33,378
                              
                              
                              
                              8,846$
                              823,533
                              
                              
                              $
                              297,740
  Industry
                                
                                For
      the quarter ending September 30,2008
                                
                                
                                2007Staffing
                                
                                $
                                52,348
                                
                                
                                $
                                79,632Transportation
                                
                                
                                174,705
                                
                                
                                
                                1,132Publishing
                                
                                
                                0
                                
                                
                                
                                1,592Construction
                                
                                
                                1,945
                                
                                
                                
                                3,540Service
                                
                                
                                99,721
                                
                                
                                
                                31,786Other
                                
                                
                                9,637
                                
                                
                                
                                4,314$
                                338,356
                                
                                
                                $
                                121,996
 Major Customers – The
      Company defines a major customer as one which represents 10 percent or
      more of its revenues.  For the nine months ending September 30,
      2008, the Company had no major customers as defined above.  The
      Company had the following transactions and balances with 4 unrelated
      customers for the nine months ending September 30, 2007 as
      follows:
  19
  For
      the nine months ended September 30, 2007Revenues
                              
                              $
                              25,300
                              
                              
                              $
                              24,200
                              
                              
                              $
                              28,900
                              
                              
                              $
                              15,900As
      of September 30, 2007Purchased
      accountsreceivable
      outstanding
                              
                              $
                              159,300
                              
                              
                              $
                              204,500
                              
                              
                              $
                              155,400
                              
                              
                              $
                              86,200
 
 Cash – The Company
      maintains cash deposits with a bank.  At various times
      throughout the year, these balances exceeded the federally insured limit
      of $100,000.
  11.  SUPPLEMENTAL DISCLOSURES OF CASH
FLOW:
 Cash
      paid for interest for the nine months ended September 30, 2008 and 2007
      was $0 and $27,000 respectively.
 
 Non-cash
      financing and investing activities consisted of the
    following:
  For the nine months
      ending September 30, 2008 -
  94,685
      preferred shares issued in satisfaction of the accrued dividend obligation
      as of December 31, 2007.
  Exchange
      of 220,366 preferred shares for 1,119,613 of common
  shares.
 
 2,000
      stock options were issued to an
employee.
  For the nine months
      ending September 30, 2007 -
  8,000,000
      shares of common stock were issued in exchange for 100,000 membership
      units of Anchor Funding Services, LLC.  In connection with this
      exchange, the Company acquired cash of
$6,270.
 
 1,970,000
      stock options were issued to the Company’s President, CEO and two
      non-employee directors.
 
 1,342,500
      stock warrants were issued to the placement agent handling the sale of the
      Company’s convertible preferred
stock.
 
 20
 
 12.  INCOME TAXES:
 The
      income tax benefit for the nine months ending September 30, 2008 and 2007
      consists of the following:
  September
                              
                              
                              September30,
      2008
                              
                              
                              30,
      2007Current
      provision
                              
                              $
                              0
                              
                              
                              $
                              0Deferred
      benefit
                              
                              
                              313,000
                              
                              
                              
                              182,000313,000
                              
                              
                              
                              182,000Valuation
      reserve
                              
                              
                              (313,000
                              )
                              
                              
                              (161,000
                              )$
                              0
                              
                              
                              $
                              21,000
 Thenet operating loss
      carryforward generated in the nine months ending September 30, 2008 and
      2007 was approximately $921,000 and $474,000, respectively.  The
      deferred tax assets related to these net operating loss carryforwards was
      approximately $313,000 and $161,000 at September 30, 2008 and 2007,
      respectively.  These deferred tax assets have been reduced by
      valuation allowances.  Management is uncertain if these net
      operating losses will ever be utilized, therefore they have been fully
      reserved at September 30, 2008 and reserved at 88% for the period ending
      September 30, 2007.
  13.
FACILITIY LEASES:
 In
      May 2007, the Company executed lease agreements for office space in
      Charlotte, NC and Boca Raton, FL.  Both lease agreements are
      with unrelated parties.
 
 The
      Charlotte lease is effective on August 15, 2007, is for a twenty-four
      month term and includes an option to renew for an additional three year
      term at substantially the same terms.  On November 1, 2007, the
      Company entered into a lease for additional space adjoining its Charlotte
      office.  The lease is for 19 months and includes a two year
      renewal option at substantially the same terms.  The monthly
      rent for the combined space is approximately
  $2,250.
 
 The
      Boca Raton lease was effective on August 20, 2007 and is for a sixty-one
      month term.  The monthly rental is approximately
      $8,300.
 
 Total
      rent expense for the nine months ending September 30, 2008 and 2007 was
      approximately $103,000 and $9,800
respectively.
 
 14.
SUBSEQUENT EVENT:
 On
      October 22 2008, the Company entered into two identical $750,000 line of
      credit agreements.  These agreements are with George Rubin and
      Morry Rubin.  George and Morry Rubin are both shareholders in
      the Company.
 
 These
      agreements authorize the Company to borrow up to
      $1,500,000.  All borrowings under these agreements are charged
      interest at 12% and is payable as described below.  These
      agreements are secured by substantially all assets of the
      Company.  Amounts borrowed, and accrued but unpaid interest, are
      due at the early of demand or upon the Company obtaining replacement
      financing with an institutional
lender.


21




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





You
should read the following discussion and analysis of our financial condition and
plan of operation together with our consolidated financial statements and the
related notes appearing at the end of our Form 10-KSB for the fiscal year ended
December 31, 2007. Some of the information contained in this discussion and
analysis or set forth elsewhere in this form 10-Q, including information with
respect to our plans and strategy for our business and related financing,
includes forward-looking statements that involve risks and uncertainties. You
should review the “Risk Factors” section of our Form 10-KSB for the fiscal year
ended December 31, 2007 for a discussion of important factors that could cause
actual results to differ materially from the results described in or implied by
the forward-looking statements contained in the following discussion and
analysis.




This Form
10-Q contains forward-looking statements.  These statements relate to our
expectations for future events and future financial performance. 
Generally, the words “anticipate,” “expect,” “intend” and similar expressions
identify forward-looking statements.  Forward-looking statements involve
risks and uncertainties, and future events and circumstances could differ
significantly from those anticipated in the forward-looking statements. 
These statements are only predictions.  Actual events or results may differ
materially.  Factors which could affect our financial results are described
in the “Risk Factors” included herein. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.  Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements.  Moreover, neither we nor
any other person assumes responsibility for the accuracy and completeness of the
forward-looking statements.  We undertake no duty to update any of the
forward-looking statements after the date of this report to conform such
statements to actual results or to changes in our expectations.




Executive
Overview





Our
business objective is to create a well-recognized, national financial services
firm for small businesses providing accounts receivable funding (factoring),
outsourcing of accounts receivable management including collections and the risk
of customer default. For certain service businesses, Anchor also provides back
office support including payroll, payroll tax compliance and invoice processing
services. We provide our services to clients nationwide and may expand our
services internationally in the future. We plan to achieve our growth objectives
as described below through a combination of strategic and add-on acquisitions of
other factoring and related specialty finance firms that serve small businesses
in the United States and Canada and internal growth through mass media marketing
initiatives. Our principal operations are located in Charlotte, North Carolina
and we maintain an executive office in Boca Raton, Florida which includes
its sales and marketing functions.





Summary
of Critical Accounting Policies





Management’s
Discussion and Analysis of Financial Condition and Results of Operations
discusses our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period.  On an on-going basis, management evaluates its estimates and
judgments, including those related to credit provisions, intangible assets,
contingencies and litigation and income taxes.  Management bases its
estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
Management believes the following critical accounting policies, among others,
reflect the more significant judgments and estimates used in the preparation of
our financial statements.




22





Results
of Operations




Three
Months Ended September 30, 2008 vs. Three Months Ended September 30,
2007





Finance
revenues increased 177.4% for the three months ended September 30, 2008 to
$338,356 compared to $121,996 for the comparable period of the prior
year.   The change in revenue was primarily due to an increase in
the number of clients. As of September 30, 2008, the Company had 88 active
clients compared to 13 clients as of September 30, 2007.





Net
interest income decreased by $45,870 for the three months ended September 30,
2008 to $5,087 compared to $ 50,957for the comparable period of the prior
year. This change is primarily due to the decrease in cash on hand due to the
Company’s using its cash to fund its purchasing of clients’ accounts
receivable.





The
Company had a provision for credit losses of $226 for the three months ended
September 30, 2008 compared to a provision for credit losses for the three
months ended September 30, 2007 of $22,000.





Operating
expenses for the three months ended September 30, 2008 were $583,644 compared to
$380,074 for the comparable period of the prior year, a 53.5%
increase.  This increase is primarily attributable to the Company’s
incurring additional costs for increased payroll, marketing, professional, rent,
insurance and other operating expenses to grow Anchor’s core business, build an
infrastructure to support anticipated growth and operate as a publicly reported
company.  In addition, the Company began leasing its own offices in
Charlotte on June 1, 2007 and opened an Executive and Sales office in Boca
Raton, Florida in August, 2007. Rent expense increased by $21,371 for the three
months ended September 30, 2008 to $34,845 compared to $ 13,474 for the
comparable period of the prior year.





Net Loss
for the three months ended September 30, 2008 was $240,427 compared to $225,121
for the comparable period of the prior year.




23





The
following table compares the operating results for the three months ended
September 30, 2008 and September 30, 2007:





Three
      Months Ended September 30,2008
                      
                      
                      2007
                      
                      
                      $
      Change
                      
                      
                      %
      ChangeFinance
      revenues
                      
                      $
                      338,356
                      
                      
                      $
                      121,996
                      
                      
                      $
                      216,360
                      
                      
                      
                      177.4Interest
      income, net
                      
                      
                      5,087
                      
                      
                      
                      50,957
                      
                      
                      
                      (45,870
                      )
                      
                      
                      (90.0
                      )Net
      finance revenues
                      
                      
                      343,443
                      
                      
                      
                      172,953
                      
                      
                      
                      170,490
                      
                      
                      
                      98.6Provision
      for credit losses
                      
                      
                      (226
                      )
                      
                      
                      (22,000
                      )
                      
                      
                      21,774
                      
                      
                      
                      (99.0
                      )Finance
      revenues, net of interest expense and credit losses
                      
                      
                      343,217
                      
                      
                      
                      150,953
                      
                      
                      
                      192,264
                      
                      
                      
                      127.4Operating
      expenses
                      
                      
                      583,644
                      
                      
                      
                      380,074
                      
                      
                      
                      203,570
                      
                      
                      
                      53.5Net
      loss before income taxes
                      
                      
                      (240,427
                      )
                      
                      
                      (229,121
                      )
                      
                      
                      (10,306
                      )
                      
                      
                      0.5Income
      tax benefit:
                      
                      
                      
                      
                      
                      
                      4,000
                      
                      
                      
                      (4,000
                      )Net
      loss
                      
                      $
                      (240,427
                      )
                      
                      $
                      (225,121
                      )
                      
                      $
                      (15,306
                      )
                      
                      
                      6.8





Key changes in certain
selling, general and administrative expenses:





Three
      Months EndedSeptember
      30,2008
                      
                      
                      2007
                      
                      
                      $
      Change
                      
                      ExplanationPayroll,
      payroll taxes and benefits
                      
                      
                      266,000
                      
                      
                      
                      139,863
                      
                      
                      
                      126,137
                      
                      Increased
      payroll and health benefits for sales and back office
      personnel.Advertising
                      
                      
                      78,507
                      
                      
                      
                      64,778
                      
                      
                      
                      13,729
                      
                      Increased
      marketingRent
                      
                      
                      34,845
                      
                      
                      
                      13,474
                      
                      
                      
                      21,371
                      
                      Rent
      expense for North Carolina and Florida offices.$
                      379,352
                      
                      
                      $
                      218,115
                      
                      
                      $
                      161,237




Client
Accounts




As of and
for the three months ended September 30, 2008, we have  four clients
that account for an aggregate of approximately 25.8% of our accounts receivable
portfolio and  approximately 19% of our revenues. The transactions and
balances with these clients as of and for the three months ended September 30,
2008 are summarized below:





Percentage
      of Accounts Receivable
              Percentage
      of Revenues ForPortfolio
      As of
              The
      Three Months EndedEntity
              September
      30, 2008
              September
      30, 2008Transportation
      Company in Tennessee
              5.3%
              5.9%Medical
      Staffing Company in New York
              8.0%
              6.6%Medical
      Staffing Company in New York
              6.3%
              4.7%Behavorial
      & Educational Service firm in Hawaii
              6.3%
              1.8%




24




A
client’s fraud could cause us to suffer material losses.





Nine
Months Ended September 30, 2008 vs. Nine Months Ended September 30,
2007





Finance
revenues increased 176.6% for the nine months ended September 30, 2008 to
$823,533 compared to $297,740 for the comparable period of the prior
year.   The change in revenue was primarily due to an increase in
the number of clients. As of September 30, 2008, the Company had 88 active
clients compared to 13 clients as of September 30, 2007.





Net
interest income decreased by $87,515 for the nine months ended September 30,
2008 to $39,606 compared to $127,121 for the comparable period of the prior
year.  This change is primarily due to the decrease in cash on hand due to
the Company’s using its cash to fund its purchasing of clients’ accounts
receivable.




The
Company had a provision for credit losses of $5,270 for the nine months ended
September 30, 2008 compared to a provision for credit losses for the nine months
ended September 30, 2007 of $22,000.





Operating
expenses for the nine months ended September 30, 2008 were $1,805,549 compared
to $939,530 for the comparable period of the prior year, a 92.2%
increase.  This increase is primarily attributable to the Company’s
incurring additional costs for increased payroll, marketing, professional, rent,
insurance and other operating expenses to grow Anchor’s core business, build an
infrastructure to support anticipated growth and operate as a publicly reporting
company. In addition, the Company began leasing its own offices in Charlotte on
June 1, 2007 and opened an Executive and Sales office in Boca Raton, Florida in
August, 2007. Rent expense increased by $88,684 for the nine months ended
September 30, 2008 to $103,896 compared to $ 15,212 for the comparable period of
the prior year.





Net Loss
for the nine months ended September 30, 2008 was $(947,680) compared to
$(515,669) for the comparable period of the prior year.





The
following table compares the operating results for the nine months ended
September 30, 2008 and September 30, 2007:




Nine
      Months Ended September 30,2008
                        
                        
                        2007
                        
                        
                        $
      Change
                        
                        
                        %
      ChangeFinance
      revenues
                        
                        $
                        823,533
                        
                        
                        $
                        297,740
                        
                        
                        $
                        525,793
                        
                        
                        
                        176.6Interest
      income, net
                        
                        
                        39,606
                        
                        
                        
                        127,121
                        
                        
                        
                        (87,515
                        )
                        
                        
                        (68.8
                        )Net
      finance revenues
                        
                        
                        863,139
                        
                        
                        
                        424,861
                        
                        
                        
                        438,278
                        
                        
                        
                        103.2Provision
      for credit losses
                        
                        
                        (5,270
                        )
                        
                        
                        (22,000
                        )
                        
                        
                        16,730
                        
                        
                        
                        (76.0
                        )Finance
      revenues, net of interest expense and credit losses
                        
                        
                        857,869
                        
                        
                        
                        402,861
                        
                        
                        
                        455,008
                        
                        
                        
                        112.9Operating
      expenses
                        
                        
                        1,805,549
                        
                        
                        
                        939,530
                        
                        
                        
                        866,019
                        
                        
                        
                        92.2Net
      loss before income taxes
                        
                        
                        (947,680
                        )
                        
                        
                        (536,669
                        )
                        
                        
                        (411,011
                        )
                        
                        
                        76.6Income
      tax benefit:
                        
                        
                        
                        
                        
                        
                        21,000
                        
                        
                        
                        (21,000
                        )Net
      Loss
                        
                        $
                        (947,680
                        )
                        
                        $
                        (515,669
                        )
                        
                        $
                        (432,011
                        )
                        
                        
                        83.8




Key changes in certain
selling, general and administrative expenses:





Nine
      Months EndedSeptember
      30,2008
                  
                  
                  2007
                  
                  
                  $
      Change
                  
                  ExplanationPayroll,
      payroll taxes and benefits
                  
                  
                  802,560
                  
                  
                  
                  323,251
                  
                  
                  
                  479,309
                  
                  Increased
      payroll and health benefits for sales and back office
      personnel.Advertising
                  
                  
                  309,096
                  
                  
                  
                  151,685
                  
                  
                  
                  157,411
                  
                  Increased
      marketingRent
                  
                  
                  103,896
                  
                  
                  
                  15,212
                  
                  
                  
                  88,684
                  
                  Rent
      expense for North Carolina and Florida offices.$
                  1,215,552
                  
                  
                  $
                  490,148
                  
                  
                  $
                  725,404





25





Client
Accounts





As of and
for the nine months ended September 30, 2008, we have  four clients
that account for an aggregate of approximately 25.9% of our accounts receivable
portfolio and  approximately 18.9% of our revenues. The transactions
and balances with these clients as of and for the nine months ended September
30, 2008 are summarized below:




Percentage
      of Accounts Receivable
              Percentage
      of Revenues ForPortfolio
      As of
              The
      Nine Months EndedEntity
              September
      30, 2008
              September
      30, 2008Transportation
      Company in Tennessee
              5.3%
              3.3%Medical
      Staffing Company in New York
              8.0%
              8.6%Medical
      Staffing Company in New York
              6.3%
              4.5%Behavorial
      & Educational Service firm in Hawaii
              6.3%
              2.5%




A
client’s fraud could cause us to suffer material losses.





Liquidity
and Capital Resources





Cash
Flow Summary




Cash
Flows from Operating Activities





Net cash
used by operating activities was $2,822,924 for the nine months ended September
30, 2008 and was primarily due to our net loss for the period and cash used in
acquiring operating assets, primarily to purchase accounts receivable. Cash used
for operating assets and liabilities was primarily due to an increase of
$1,800,239 in retained interest in accounts receivable. Increases and decreases
in prepaid expenses, accounts payable, accrued payroll and accrued expenses were
primarily the result of timing of payments and receipts.





Net cash
used by operating activities was $1,166,455 for the nine months ended September
30, 2007 and was primarily due to our net loss for the period and cash used by
operating assets, primarily to purchase accounts receivable, and liabilities.
The net loss was $515,669 for the nine months ended September 30, 2007. Cash
used by operating assets and liabilities was primarily due to an increase of
$774,814 in retained interest in accounts receivable. Decreases in accounts
payable, offset by increases in accrued payroll and accrued expenses were
primarily the result of timing of payments and receipts. Net cash provided by
operating activities was lower for the nine months ended September 30, 2008
compared to the same period last year primarily due to the increased purchase of
accounts receivable and the loss incurred in the current period of $937,680
compared to a net loss of $515,669 for the nine months ended September 30,
2007.




26




Cash
Flows from Investing Activities




For the
nine months ended September 30, 2008, net cash used in investing activities was
$27,147 for the purchase of property and equipment.





For the
nine months ended September 30, 2007, net cash used in investing activities was
$85,367 for the purchase of property and equipment.




Cash
Flows from Financing Activities





Net cash
provided by financing activities was $0 for the nine months ended September 30,
2008.





Net cash
provided by financing activities was $5,455,964 for the nine months ended
September 30, 2007. This was primarily the result of $6,712,500 of proceeds from
the sale of Preferred Stock offset by $1,209,383 of payments related to costs of
the sale.





Between
January 31, 2007 and April 5, 2007, we raised $6,712,500 in gross proceeds from
the sale of 1,342,500 shares of our Series 1 Convertible Preferred Stock to
expand our operations both internally and through possible acquisitions as more
fully described under “Description of Business.”




Capital
Resources





We
previously had the availability of a $1 million line of credit through September
5, 2007 with an institutional asset based lender which advanced funds against
“eligible accounts receivable” as defined in Anchor’s agreement with its
institutional lender. This facility, which was secured by our assets, contained
certain covenants related to tangible net worth and change in control. In the
event that we failed to comply with the covenant(s) and the lender did not waive
such non-compliance, we would have been in default of our credit agreement,
which could have subjected us to penalty rates of interest and accelerate the
maturity of the outstanding balances.  On June 28, 2007, we notified
our lender of our desire to terminate the facility agreement immediately and the
lender subsequently agreed to our request.





On
October 22, 2008, Anchor entered into agreements to secure a revolving line of
credit of up to $1,500,000 in total from George Rubin and Morry Rubin, each of
whom are affiliates of Anchor. Each revolving credit note, of which there are
two, is in the principal amount of $750,000 or such other amount that shall have
been advanced and be outstanding and remain unpaid. Each note bears interest at
the rate of 12% per annum and is repayable upon the earlier of (i) demand by
lender and (ii) immediately prior to or on the date of Anchor’s entry into a
loan agreement with an institutional lender.  To secure Anchor’s
obligations under the notes, Anchor granted to each lender a security interest
in substantially all the assets of Anchor.  The purpose of this line
of credit is to support Anchor’s growing and expanding business.





We intend
to seek to obtain a new institutional credit facility. In the event we are not
able to obtain adequate credit facilities for our factoring and acquisition
needs on commercially reasonable terms, our ability to operate and expand our
business and complete one or more acquisitions would be significantly impacted
and our financial condition and results of operations could suffer.







ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Market
risk is the risk of loss arising from adverse changes in market rates and
prices, such as interest rates, foreign currency exchange rates and commodity
prices. Our primary exposure to market risk is interest rate risk associated
with our short term money market investments. The Company does not have any
financial instruments held for trading or other speculative purposes and does
not invest in derivative financial instruments, interest rate swaps or other
investments that alter interest rate exposure. The Company does not have any
credit facilities with variable interest rates.




27




ITEM
      4.
            CONTROLS
      AND PROCEDURES





The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company's Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-15(e). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. The Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective at the reasonable
assurance level at the end of our most recent quarter. There have been no
changes in the Company's disclosure controls and procedures or in other factors
that could affect the disclosure controls subsequent to the date the Company
completed its evaluation. Therefore, no corrective actions were
taken.





Management
has not yet completed, and is not yet required to have completed, its assessment
of the effectiveness of internal control over financial reporting as required by
Section 404 of the Sarbanes-Oxley Act of 2002, as amended.




PART
II. OTHER INFORMATION




ITEM
      1.
            LEGAL
      PROCEEDINGS:




As of the
filing date of this Form 10-Q we are not a party to any pending legal
proceedings.




Item
      1A.
            Risk
      Factors




As a
Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item
10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting
obligations and therefore are not required to provide the information requested
by this Item 1A.




ITEM
      2.
            CHANGES
      IN SECURITIES.




(a)                   For
the nine months ended September 30, 2008 there were no sales of unregistered
securities, except as follows:




Date
      of Sale
              
              Title
      of Security
              
              Number
                Sold
              
              Consideration
                Received,
                Commissions
              
              Purchasers
              
              Exemption
      from
                Registration
                ClaimedFebruary
      21
                and
      May 28,
                2008
              
              Common
      Stock
              
              Options
      to
                purchase
                102,000
      common
                Shares
              
              Securities
      granted under Equity Compensation Plan; no cash received; no commissions
      paid
              
              Directors
      and
                Officers
              
              Section
      4(2) of the Securities Act of 1933 and/or Rule 506
promulgated
                thereunder
      (6)January
                2008
              
              Series
      1
                Preferred
                Stock
              
              94,865
      Shares
              
              Annual
      Stock Dividend
              
              All
                Preferred
                Stock
                Investors
              
              Section
      2(3) –
                No
      sale
                (Preferred
      Stock
                Dividend)March
      and
                April
      2008
              
              Common
      Stock
              
              1,119,823
      Shares
              
              Conversion
      of
                Series
      1 Preferred
                Stock
      into Common
                Stock;
      no cash received;
                no
      commissions paid
              
              Certain
                Preferred
                Stock
      Investors
              
              Section
      3(a)(9)-
                Exchange
      of
                Securities




(b)  Rule
463 of the Securities Act is not applicable to the Company.


(c)  In
the nine months ended September 30, 2008, there were no repurchases by the
Company of its Common Stock.




28




ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES




Not
applicable.




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




Not
applicable.




ITEM
      5.
            OTHER
      INFORMATION:




Not
applicable.




ITEM
      6.
            EXHIBITS:





Except
for the exhibits listed below as filed herewith or unless otherwise noted, all
other required exhibits have been previously filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, on
Form 10-SB, as amended (file no.0-52589).





Exhibit
                Number
              Description2.1
              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 – Florida10.7
                  Facilities
      Lease – North Carolina10.8
                  Second
      Facilities Lease-North Carolina (1)10.9
                  Facilities
      Lease for Additional Space – Charlotte, NC* (Incorporated by
      reference to the Registrant’s Form 10-Q/A filed for the quarter ended
      March 31, 2008.)10.10
                  Revolving
      credit note dated October 22, 2008 by and between Anchor and George Rubin.
      (2)10.11
                  Revolving
      credit note dated October 22, 2008 by and between Anchor and Morry Rubin.
      (2)11
                  Statement-re:Compensation
      of earnings per share-See Consolidated Statements of operations and notes
      to financial statements31.1
                  Chief
      Executive Officer Rule 13a-14(a)/15d-14(a) Certification
  *31.2
                  Chief
      Financial Officer Rule 13a-14(a)/15d-14(a) Certification
  *32.1
                  Chief
      Executive Officer Section 1350 Certification *32.2
                  Chief
      Financial Officer Section 1350 Certification *99.1
                  2007
      Omnibus Equity Compensation Plan99.2
                  Form
      of Non-Qualified Option under 2007 Omnibus Equity Compensation
      Plan99.3
                  Press
      Release – Third Quarter
Earnings*


*Filed
herewith.


(1)  Incorporated
by reference to the Registrant’s Form 10-Q for the quarter ended June 30,
2007.


(2)  Incorporated
by reference to the Registrant’s Form 8-K – date of earliest event – October 22,
2008/





29








SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




ANCHOR
      FUNDING SERVICES, INC.Date:  November
      13, 2008
              By:
              /s/ Morry
      F. RubinMorry
      F. RubinChief
      Executive Officer




Date:
      November 13, 2008
                By:
                /s/ Brad
      BernsteinBrad
      BernsteinPresident
      and Chief Financial Officer


























30