UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-Q


(Mark
One)


[X]
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended March 31, 2009[   ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from _______________________
      to _______________________ .




Commission
file number 000-30601





WHY
USA FINANCIAL GROUP, INC.


(Exact
name of registrant as specified in its charter)


Nevada
            
            87-0390603(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)2801
      S. Wayzata Boulevard, Suite 100,
              Minneapolis,
      MN
              (Address
      of principal executive offices)
            
            55405
              (Zip
      Code)






(612)
767-5037


(Registrants
telephone number, including area code)




N/A


(Former
name, former address, and former 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
      [_]      No [X]






Indicate
      by check mark whether the registrant has submitted electronically and
      posted on its corporate Web site, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulation S-T
      (§232.405 of this chapter) during the preceding 12 months (or for such
      shorter period that the registrant was required to submit and post such
      files).Yes
      [_]      No [X]


Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of
      “accelerated filer and large accelerated filer” in Rule 12b-2 of the
      Exchange Act. (Check one):Large
      accelerated filer  [_]
            Accelerated
      filer  [_]
            Non-accelerated
      filer  [X]





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




Shares
outstanding of the Registrant’s common stock:




Class
            Shares
      Outstanding at May 13, 2009Common
      Stock, $.001 par value
            108,866,522














WHY
USA FINANCIAL GROUP, INC.


FORM
10-Q


FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2009


INDEX




PART
      I. FINANCIAL INFORMATIONItem 1.
            
            Financial
      StatementsCondensed
      Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December
      31, 2008
            
            3Condensed Consolidated Statements of Operations for the three
      months ended March 31, 2009, 2008 and 2007
      (unaudited)
            
            4Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      2009, 2008 and 2007 (unaudited)
            
            5Notes
      to Condensed Consolidated Financial Statements (unaudited)
            
            6Item 2.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            15Item 3.
            
            Quantitative
      and Qualitative Disclosures about Market Risk
            
            24Item 4.
            
            Controls
      and Procedures
            
            24PART
      II. OTHER INFORMATIONItem 1.
            
            Legal
      Proceedings
            
            24Item 1A.
            
            Risk
      Factors
            
            25Item 2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            25Item 3.
            
            Defaults
      Upon Senior Securities
            
            25Item 4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            25Item 5.
            
            Other
      Information
            
            25Item 6.
            
            Exhibits
            
            25Signature
            
            25Exhibit
      31.1Exhibit
      31.2Exhibit
      32.1Exhibit
      32.2








2





PART
I.    Financial Information





ITEM 1.
            Financial
      Statements





WHY USA FINANCIAL GROUP, INC.


Condensed
Consolidated Balance Sheets as of





March
      31, 2009
              (unaudited)
            
            
            December
      31, 2008
              (audited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            29,323
            
            
            $
            52,921Accounts
      receivables, net of allowance for doubtful accounts
            
            
            23,541
            
            
            
            18,771Prepaid
      assets and other  assets
            
            
            12,917
            
            
            
            22,823Total
      current assets
            
            
            65,781
            
            
            
            94,515PROPERTY
      AND EQUIPMENT—Net
            
            
            468,838
            
            
            
            479,223GOODWILL
            
            
            729,028
            
            
            
            729,028RESTRICTED
      CASH
            
            
            50,000
            
            
            
            50,000TOTAL
            
            $
            1,313,647
            
            
            $
            1,352,766LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)CURRENT
      LIABILITIES:Warehouse
      and bank lines
            
            $
            98,117
            
            
            $
            97,570Current
      portion of obligation under capital leases
            
            
            2,392
            
            
            
            2,392Current
      portion of notes payable and convertible debentures
            
            
            657,262
            
            
            
            544,767Current
      portion of mortgage notes payable
            
            
            36,816
            
            
            
            36,112Bank
      overdraft
            
            
            -
            
            
            
            2,066Accounts
      payable
            
            
            569,945
            
            
            
            499,649Accrued
      expense and other liabilities
            
            
            1,047,975
            
            
            
            975,890Total
      current liabilities
            
            
            2,412,507
            
            
            
            2,158,446MORTGAGE
      NOTES PAYABLE
            
            
            799,548
            
            
            
            809,672NOTES
      PAYABLE AND CONVERTIBLE DEBENTURES
            
            
            950,200
            
            
            
            950,200OBLIGATIONS
      UNDER CAPITAL LEASES
            
            
            184
            
            
            
            736Total
      Liabilities
            
            
            4,162,439
            
            
            
            3,919,054COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITY (DEFICIT):Common
      stock, $.001 par value, 250,000,000 shares authorized;108,866,522
      and 108,268,022 shares issued and outstanding for 2009 and 2008,
      respectively
            
            
            108,867
            
            
            
            108,269Additional
      paid in capital
            
            
            10,036,499
            
            
            
            10,005,408Preferred
      Stock, $.01 par value, 50,000,000 shares authorized;40,000 shares
      issued and outstanding for 2009 and 2008,
    respectively
            
            
            400
            
            
            
            400Accumulated
      deficit
            
            
            (12,994,558
            )
            
            
            (12,680,365
            )Total
      stockholders’ equity (deficit)
            
            
            (2,848,792
            )
            
            
            (2,566,288
            )TOTAL
            
            $
            1,313,647
            
            
            $
            1,352,766See
      accompanying notes to condensed consolidated financial
      statements.






3




WHY
USA FINANCIAL GROUP, INC.


Condensed
Consolidated Statements of Operations for the Three Months Ended


(Unaudited)





March
      31, 2009
            
            
            March
      31, 2008
            
            
            March
      31, 2007(unaudited)
            
            
            (unaudited)
            
            
            (unaudited)NET
      REVENUES
            
            $
            239,643
            
            
            $
            367,846
            
            
            $
            701,595COST
      OF REVENUES, excluding depreciation and amortization
    expense
            
            
            135,666
            
            
            
            203,828
            
            
            
            443,523Gross
      margin
            
            
            103,977
            
            
            
            164,018
            
            
            
            258,072SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            349,435
            
            
            
            445,965
            
            
            
            432,683LOSS
      ON DISPOSAL OF FIXED ASSETS
            
            
            1,873
            
            
            
            -
            
            
            
            -DEPRECIATION
      AND AMORTIZATION EXPENSE
            
            
            8,512
            
            
            
            10,899
            
            
            
            12,190OPERATING
      INCOME (LOSS)
            
            
            (255,843
            )
            
            
            (292,846
            )
            
            
            (186,801
            )OTHER
      (EXPENSE) INCOME:Interest
      expense
            
            
            (56,750
            )
            
            
            (37,117
            )
            
            
            (46,857
            )Interest
      income
            
            
            -
            
            
            
            19
            
            
            
            3Other
      income
            
            
            -
            
            
            
            9,774
            
            
            
            105,757Total
      other (expense) income
            
            
            (56,750
            )
            
            
            (27,324
            )
            
            
            58,903LOSS
      BEFORE TAXES
            
            
            (312,593
            )
            
            
            (320,170
            )
            
            
            (127,898
            )Income
      tax expense
            
            
            (1,600
            )
            
            
            (1,600
            )
            
            
            (1,600
            )NET
      LOSS
            
            $
            (314,193
            )
            
            $
            (321,770
            )
            
            $
            (129,498
            )BASIC
      AND DILUTED LOSS PER SHARE:Net
      loss
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )WEIGHTED
      AVERAGE SHARES USED :Basic
      and Diluted
            
            
            108,766,772
            
            
            
            108,992,160
            
            
            
            92,319,434


See
accompanying notes to condensed consolidated financial
statements.





4





WHY
USA FINANCIAL GROUP, INC.


Condensed
Consolidated Statements of Cash Flows for the Three Months Ended


(Unaudited)





March
      31, 2009
            
            
            March
      31, 2008
            
            
            March
      31, 2007(unaudited)
            
            
            (unaudited)
            
            
            (unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss from continuing operations
            
            $
            (314,193
            )
            
            $
            (321,770
            )
            
            $
            (129,498
            )Adjustments
      to reconcile net loss to net cash (used in) provided
      by operating activities:Depreciation
      and amortization
            
            
            8,512
            
            
            
            10,899
            
            
            
            12,190Provision
      for (benefit from) doubtful accounts
            
            
            13,600
            
            
            
            36,707
            
            
            
            (11,577
            )Loss
      on disposal of fixed assets
            
            
            1,873
            
            
            
            -
            
            
            
            -Effect
      of changes in operating assets and liabilities:Trade
      receivables
            
            
            (18,371
            )
            
            
            (24,469
            )
            
            
            26,854Prepaid
      expenses and other current assets
            
            
            9,906
            
            
            
            17,930
            
            
            
            1,266Accounts
      payable
            
            
            76,986
            
            
            
            39,699
            
            
            
            9,991Accrued
      expenses
            
            
            72,085
            
            
            
            52,189
            
            
            
            50,696Other
            
            
            -
            
            
            
            18,418
            
            
            
            11,579Net
      cash used in operating activities
            
            
            (149,602
            )
            
            
            (170,397
            )
            
            
            (28,499
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of property and equipment
            
            
            -
            
            
            
            -
            
            
            
            (4,001
            )Net
      cash used in investing activities
            
            
            -
            
            
            
            -
            
            
            
            (4,001
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds/(repayments)
      on revolving credit facility
            
            
            547
            
            
            
            (406
            )
            
            
            202Repayments
      of mortgages payable
            
            
            (9,420
            )
            
            
            (63,013
            )
            
            
            (3,579
            )Proceeds
      from notes payable and convertible debentures
            
            
            137,495
            
            
            
            175,000
            
            
            
            162,500Bank
      overdraft
            
            
            (2,066
            )
            
            
            16,441
            
            
            
            -Repayment
      of obligations under capital leases
            
            
            (552
            )
            
            
            (1,538
            )
            
            
            (1,574
            )Net
      cash provided by financing activities
            
            
            126,004
            
            
            
            126,484
            
            
            
            157,549NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (23,598
            )
            
            
            (43,913
            )
            
            
            125,049CASH
      AND CASH EQUIVALENTS—Beginning of period
            
            
            52,921
            
            
            
            46,176
            
            
            
            14,267CASH
      AND CASH EQUIVALENTS—End of period
            
            $
            29,323
            
            
            $
            2,263
            
            
            $
            139,316SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid for taxes
            
            $
            -
            
            
            $
            1,600
            
            
            $
            -Cash
      paid for interest
            
            $
            22,192
            
            
            $
            13,706
            
            
            $
            24,505Common
      stock issued pursuant to conversion of debentures, principal and
      interest
            
            $
            31,689
            
            
            $
            -
            
            
            $
            -




See
accompanying notes to condensed consolidated financial statements.





5





WHY USA
FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





NOTE 1 –
BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT
ACCOUNTS




Financial Statement
Preparation




The
unaudited consolidated financial statements have been prepared by WHY USA
Financial Group, Inc.  according to the rules and regulations of the
Securities and Exchange Commission (SEC) and, therefore, certain information and
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
omitted.




In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements for the periods presented reflect all adjustments, which
are normal and recurring, necessary to fairly state the financial position,
results of operations and cash flows. These unaudited condensed consolidated
financial statements should be read in conjunction with the audited financial
statements included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008 filed with the SEC on March 31, 2009.




Principles of Consolidation
and Basis of Accounting




The
condensed consolidated financial statements include the accounts of WHY USA
Financial Group, Inc. and its wholly-owned subsidiaries (the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation.





The
Company’s policy is to use the accrual method of accounting and to prepare and
present the consolidated financial statements in accordance with accounting
principles generally accepted in the United States.





Business Activity and
Organization





The
condensed consolidated financial statements of the Company include the parent
company, WHY USA Financial Group, Inc., which was incorporated as a Utah
corporation in 1980 and reorganized as a Nevada corporation in 1983, Northwest
Financial Ltd. (Northwest), acquired in 1999, incorporated as a Minnesota
corporation, WHY USA North America, Inc. (NA) acquired in 1999, incorporated as
a Wisconsin corporation, and TCS Mortgage, Inc. and its wholly-owned
subsidiaries (TCS). TCS includes the parent company, TCS Mortgage, Inc.
(acquired in 2003 by WHY USA Financial Group, Inc. and incorporated as a
California corporation), TCS Realty, Inc. (Realty) formed in 2004 as a
California corporation, and Discover Mortgage Corporation (Discover) acquired
through a capital contribution from WHY USA Financial Group, Inc. and
incorporated as a Minnesota corporation.





The
Company through its subsidiary TCS, is currently a mortgage broker only and
prior to year ending December 31, 2006, TCS was a mortgage banker with its own
line of credit; the Company through Realty is a full service realtor operating
in the Southern California market; the Company through Discover provides
mortgage broker services in the state of Minnesota; and the Company through its
subsidiary NA provides franchised real estate operations to franchisees located
in 14 states, these services center around the WHY USA –“America’s Real Estate
Alternative”® - $990 program.





Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures 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.





Cash Equivalents and
Concentration of Risk





The
Company maintains checking, money market and savings accounts at financial
institutions located in California and Minnesota. Accounts at each bank are
insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 (FDIC
temporary increase through December 31, 2009). As of March 31, 2009 the Company
did not have any uninsured cash balances. The Company has not experienced losses
in such accounts and management believes it places its cash on deposit with
financial institutions which are financially stable.







6




As of
March 31, 2009 and December 31, 2008, the Company held $50,000 in restricted
cash classified as a non-current asset held to maturity. The restricted cash
secures a letter of credit held with a financial institution. The certificate of
deposit matures on May 5, 2012 and is held with an FDIC insured financial
institution.




Instruments and Fair Value
Measurement





The
Company adopted SFAS 157, Fair
Value Measurements,which defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. The
Company adopted this standard partially in 2008 for financial assets and
liabilities measured at fair value on a recurring basis due to the deferral
period provided by FSP 157-2, Effective Date of SFAS 157.
Subsequently, the Company adopted the standard for non-financial assets and
liabilities measured at fair value on a nonrecurring basis in the current year.
The framework requires for the valuation of assets and liabilities subject to
fair value measurements using a three tiered approach.





The
statement requires fair value measurement be classified and disclosed in one of
the following three categories:





Level 1:
Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities;





Level 2:
Quoted prices for similar assets and liabilities in active markets, quoted
prices in markets that are not active, or inputs which are observable, either
directly or indirectly, for substantially the full term of the asset or
liability;





Level 3:
Prices or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (i.e. supported by little or no
market activity).





Assets
and Liabilities Measured at Fair Value on a Recurring Basis





The
following table represents the financial instruments measured at fair value on a
recurring basis on the consolidated financial statements of the Company subject
to SFAS 157 and the valuation approach applied to each class of the financial
instruments:





Fair
      Value Measurements at Reporting Date Using (unaudited)Quoted
      Prices inBalance
      at
                          
                          Active
      Markets
                          
                          Significant
      Other
                          
                          SignificantMarch
      31,
                          
                          for
      Identical Assets
                          
                          Observable
      Inputs
                          
                          Unobservable
      InputsDescription
                          2009
                          
                          (Level
      1)
                          
                          (Level
      2)
                          
                          (Level
      3)Bank
      time deposits
                          
                          $
                          50,000
                          
                          
                          $
                          50,000
                          
                          
                          $
                          -
                          
                          
                          $
                          -Assets-derivative
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Total
      assets
                          
                          $
                          50,000
                          
                          
                          $
                          50,000
                          
                          
                          $
                          -
                          
                          
                          $
                          -Liabilities-derivative
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Total
      liabilities
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -





At
March 31, 2009, the carrying value of the financial instruments measured
and classified within Level 1 are based on quoted prices and marked to market.
As of March 31, 2009 there are no unrealized gains or losses required to be
recorded as related to these investments.





Assets
and Liabilities Measured at Fair Value on a Nonrecurring Basis





The
non-financial assets and liabilities are recognized at fair value subsequent to
initial recognition when they are deemed to be other-than-temporarily impaired.
There were no non-financial assets and liabilities measured at fair value on a
nonrecurring basis for the three months ended March 31, 2009.








7





Accounts and Notes
Receivable, Allowances and Fair Market Value





In
accordance with Financial Accounting Standard No. 107, the Company's receivables
and notes represent credit risks associated with real estate transactions
originating with its franchisees. The Company extends credit as a result of its
franchise agreements with its franchisees. The franchisee's ability to repay is
generally predicated upon their ability to earn income from their real estate
transactions. Franchisees are generally paid a commission on real estate
transactions and must then remit a portion of that income to the Company. The
Company has an allowance for doubtful accounts of $75,270 at March 31, 2009. Bad
debts totaled $13,600 and $36,707 for the three month periods ended March 31,
2009 and 2008, respectively.





Segment
Information




The
Company operates in two segments: Real Estate Franchise (REF) and Mortgage
Brokerage (MB). The Company has no intersegment revenues that are material to
the overall consolidated financial statements. The Company does not currently
segregate assets by segment as a majority of the Company’s total assets are
shared or considered non-segment assets which are segregated as “corporate.” The
Company has determined that it is not useful to assign its shared assets to
individual segments. Based on the aggregation criteria of Statement of Financial
Accounting Standards No. 131, “Disclosures about Segments of an Enterprise
and Related Information,” (SFAS 131) the Company’s service offerings in the MB
segment share similar economic characteristics, but are different from the
economic characteristics of the service offerings of our REF segment. As a
result of using the aggregation guidelines under SFAS 131, there is no logical
subgrouping of service offerings within either the MB or REF
segments.





No
material changes have occurred since year end requiring additional disclosure on
an interim basis. Please refer to our annual report filed on Form 10-K with the
SEC, March 31, 2009 for further information relative to our
segments.




Financial
Instruments





The
carrying amounts of financial instruments such as cash, accounts receivable,
prepaid and other current assets, accounts payable, accrued expenses and other
current liabilities, bank lines, mortgage notes payable, promissory notes and
debentures payable and capital leases approximate the related fair values due to
the short-term maturities of these instruments.





Brokered Loan
Fees





Loan fees
include brokered loan fees. Brokered loan fees represent fees received by TCS
and Discover for placing a loan with a lender, whereby no further obligation
exists.  The loan fee is recognized at the time the borrower and
lender sign final loan documents and the loan is funded.





Property and Equipment
Capitalization Policies





Property
and equipment is stated at cost and depreciated over the estimated useful lives
of the assets using the straight-line method.  Amortization of
leasehold improvements is computed on the straight-line method over the shorter
of the lease term or the estimated useful lives of the assets. Maintenance and
repairs are charged to operations as incurred. When assets are sold, or
otherwise disposed of, the cost and related accumulated depreciation are removed
from the accounts and any gain or loss is included in operating
expense.





Impairment of
Goodwill





Goodwill
represents the excess purchase price of net tangible and intangible assets
acquired in business combinations over their estimated fair value. Goodwill is
allocated to the Company’s segments based on the nature of the product line of
the acquired entity. In accordance with Statement of Financial Accounting
Standards No. 141, “Business Combinations” (SFAS 141) and Statement of
Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (SFAS 142), goodwill is tested for impairment on an annual basis and
earlier if there is an indicator of impairment. Furthermore, SFAS 142 requires
purchased intangible assets other than goodwill to be amortized over their
useful lives unless these lives are determined to be indefinite.







8





The
Company performs its goodwill impairment tests annually during the fourth
quarter of its fiscal year and earlier if an event or circumstance indicates
that impairment has occurred. During the years ended December 31, 2008 and 2007,
we determined that it was necessary to evaluate goodwill for impairment between
annual tests, in accordance with SFAS 142. The evaluation between annual
testing dates was due to the deteriorating conditions in certain housing markets
and the significant reduction in loans being funded during those years. The
process of evaluating goodwill for impairment involves the determination of the
fair value of our reporting units. Inherent in such fair value determinations
are certain judgments and estimates relating to future cash flows, including our
interpretation of current economic indicators and market valuations, and
assumptions about our strategic plans with regard to our operations. Due to the
uncertainties associated with such estimates, actual results could differ from
such estimates.  Goodwill associated with our reporting unit is
determined by that fair value of the building owned by the reporting unit. We
estimate the fair value of the building by obtaining an appraisal each year
which occurs during the winter months (which corresponded to our refinancing in
2007). This appraisal provides management with a realistic fair value during a
period which activities for like-kind property sales are at its lowest. In
addition the Company utilized a combination of valuation methods including a
discounted cash flow analysis and the guideline companies’ method to estimate
the fair value of the reporting unit. Based on this analysis, the Company
determined that impairment did exist, and as a result, an impairment charge was
recorded during the year which coincided with the 4th quarter
of 2007 and 2008, respectively.




Goodwill
is attributable to the acquisition of Discover. The Company, in connection with
the acquisition of Discover, recorded goodwill of $1,016,570. The Company did
not record any impairment losses for the three month periods ended March 31,
2009 and 2008, respectively, to reflect goodwill impairment on the acquisition
of Discover.





As of
March 31, 2009, goodwill associated with the Discover acquisition is recorded at
$729,028.





Accrued Expense and Other
Liabilities





Accrued
expenses and other liabilities consist of the following:





March
      31, 2009
              (unaudited)
            
            
            December
      31, 2008 (audited)Accrued
      compensation - officer
            
            $
            753,750
            
            
            $
            710,000Accrued
      compensation - other - and taxes
            
            
            91,063
            
            
            
            93,269Accrued
      interest
            
            
            203,162
            
            
            
            172,621$
            1,047,975
            
            
            $
            975,890





Revenue
Recognition





Revenue
from loan originations are recognized at the time the mortgage loan closes or is
funded. The majority of revenue receivables are collected within five business
days. Real estate transaction fees are recognized at the closing of a real
estate transaction by a franchisee. The Company does not service a loan
portfolio and sells all of the loans it originates.





In
accordance with Financial Accounting Standard No. 45, the Company defers
recognition of new franchise sales until the commencement of operations by the
new franchisee. The new franchisee opens his/her real estate sales office in
his/her “protected” territory and receives training and marketing support, real
estate documents and other sales aids from the Company. These activities
generally occur within one month of the purchase of the franchise. All costs,
services and conditions related to new franchise sales have been incurred or
performed prior to the recognition of income from new franchise
sales.





Accounting for Share-Based
Compensation




The
Company accounts for share based compensation using Statement of Financial
Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS
123R) using the modified-prospective-transition method. Under this method,
share-based compensation cost is measured at the grant date based on the
estimated fair value of the award and is recognized as expense over the
employee’s requisite service period for all share-based awards granted, modified
or cancelled as of January 1, 2006.




Prior to
January 1, 2006, the Company accounted for its share-based awards under the
recognition and measurement principles of APB 25 and its related interpretations
and adopted the disclosure only provision of SFAS 123. Accordingly, no
compensation cost was recognized for the employee stock option plan or employee
stock purchase plan under the fair value recognition provisions of
SFAS 123.







9





Income
Taxes




Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes, using enacted tax rates in effect for
the year in which the differences are expected to reverse. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.




Effective
January 1, 2008, the Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN48). FIN48 prescribes a
more-likely-than-not threshold for financial statement recognition and
measurement of a tax position taken or expected to be taken in a return. The
adoption of this interpretation did not have a material impact on our financial
statements.





Earnings per
Share





Basic
income (loss) per share excludes dilution and is computed by dividing income
(loss) by the weighted average number of common shares outstanding during the
reported periods. Diluted income (loss) per share reflects the potential
dilution that could occur if stock options and other commitments to issue common
stock were exercised.




Diluted
income (loss) per share reflects the potential dilution that could occur from
the following items:




●
            
            Convertible
      debentures where the effect of those securities are
    dilutive;





●
            
            Dilutive
      stock options; and





●
            
            Dilutive
      common stock warrants.




As the
Company has incurred losses, it has excluded shares related to convertible
debentures, stock options or warrants from its calculation of diluted net loss
per share, as the effect of their inclusion would be anti-dilutive.




Going Concern and
Management’s Plan




The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate the continuation of the Company as a going concern and assume
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has incurred losses from operations since inception.
Management anticipates incurring additional losses in 2009. Further, the Company
may incur additional losses thereafter, depending on its ability to generate
revenues from the offering of its varied services, or to enter into any or a
sufficient number of joint ventures. The Company’s revenue to date has been
steadily decreasing, even with the acquisition of TCS in 2003. There is no
assurance that the Company can successfully rebuild its revenue base in 2009 and
into 2010 to the scale that it will need to provide positive cash flow from
operations. The Company’s service offerings along with the new FHA qualifying
loan limits seem to be receiving market acceptance as the Company’s anticipated
or projected revenue projects seem to be increasing after hitting bottom during
the 4th quarter
of 2008, measured by its “pipeline” tool. There is no assurance that the Company
can improve upon its service offerings and projected revenue to reach positive
cash flow let alone breakeven.




Since
inception through March 31, 2009, the Company had an accumulated deficit of
$12,994,558. Management of the Company believes that recent funding from the use
of convertible debentures and the issuance of common stock in satisfaction of
certain debt obligations will allow us to continue operations and execute our
business plan.




Management
believes the Company can raise adequate capital to keep the Company functioning
through March 31, 2010. Management believes sufficient funding can be secured
through the use of its convertible debentures, as well as offerings of preferred
and common stock through private placements to institutional and other finance
sources. However, no assurance can be given that the Company can obtain
additional working capital, or if obtained, that such funding will not cause
substantial dilution to shareholders of the Company. If the Company is unable to
raise additional funds, it may be forced to change or delay its contemplated
expansion and business plan.







10




These
condensed consolidated financial statements do not require any additional
adjustments relating to the recoverability of recorded asset amounts that might
be necessary as a result of the above uncertainty.




NOTE 2 –
BUSINESS SEGMENTS





The
Company has two reportable segments: real estate franchise (REF) and mortgage
origination/brokering (MB). The Company operations are conducted regionally
within the United States; Upper Midwestern states as well as the Southwest
(which includes Southern California and Nevada).





The
Company does not have intersegment revenues that are material to the condensed
consolidated financial statements. In addition, the Company does not segregate
all assets by segment as a majority of the Company’s total assets are shared or
considered non-segment assets. As a result, the Company has determined it is not
useful, nor appropriate, to assign its shared assets to individual
segments.





The
Company’s accounting policies for both of its segments are the same as those
described in the summary of significant accounting policies and significant
accounts. Management evaluates segment performance based on segment profit or
loss before income taxes and non-recurring gains and losses. Transfers between
segments, if occurring, are valued at market.




The table
below reports segment financial information. Our segment entitled “Other”
includes assets and operations not specifically associated with the other
defined segments, including corporate assets and investments. We measure the
performance of our segments based on total net revenues less costs of revenues
and general and administrative expenses, a measure we define as net operating
income (loss) (NOI). We believe that NOI is an important supplemental measure of
operating performance for our segments because it provides a measure of the core
operations that is unaffected by depreciation, amortization, financing and other
non-core expenses; this measure is particularly useful in our opinion in
evaluating the performance of segments, as well as individual
subsidiaries.




Real
      Estate
            
            
            MortgageFranchise
            
            
            Brokerage
            
            
            Other
            
            
            TotalFor
      three month period ending March 31, 2009 (unaudited)Revenues
            
            $
            27,571
            
            
            $
            212,072
            
            
            $
            -
            
            
            $
            239,643Cost
      of revenues
            
            
            -
            
            
            
            135,666
            
            
            
            -
            
            
            
            135,666General
      and administrative expenses
            
            
            39,140
            
            
            
            201,058
            
            
            
            109,237
            
            
            
            349,435Net
      operating loss
            
            $
            (11,569
            )
            
            $
            (124,652
            )
            
            $
            (109,237
            )
            
            $
            (245,458
            )Additions(dispositions)
      to segmented assets
            
            $
            (3,563
            )
            
            $
            (35,592
            )
            
            $
            36
            
            
            $
            (39,119
            )Segment
      assets at March 31, 2009
            
            $
            20,005
            
            
            $
            1,293,498
            
            
            $
            144
            
            
            $
            1,313,647For
      three month period ending March 31, 2008 (unaudited)Revenues
            
            $
            37,428
            
            
            $
            330,418
            
            
            $
            -
            
            
            $
            367,846Cost
      of revenues
            
            
            14,698
            
            
            
            189,130
            
            
            
            -
            
            
            
            203,828General
      and administrative expenses
            
            
            60,929
            
            
            
            257,305
            
            
            
            127,731
            
            
            
            445,965Net
      operating loss
            
            $
            (38,199
            )
            
            $
            (116,017
            )
            
            $
            (127,731
            )
            
            $
            (281,947
            )






The
following table reconciles our NOI for reportable segments to income from
continuing operations as reported on our condensed consolidated statement of
operations:





March
      31, 2009

                (unaudited)
            
            
            March
      31, 2008

                (unaudited)NET
      OPERATING LOSS FROM SEGMENTS
            
            $
            (245,458
            )
            
            $
            (281,947
            )LOSS
      ON DISPOSAL OF FIXED ASSETS
            
            
            1,873
            
            
            
            -DEPRECIATION
      AND AMORTIZATION EXPENSE
            
            
            8,512
            
            
            
            10,899OPERATING
      LOSS
            
            
            (255,843
            )
            
            
            (292,846
            )Interest
      expense
            
            
            (56,750
            )
            
            
            (37,117
            )Interest
      income
            
            
            -
            
            
            
            19Other
      income
            
            
            -
            
            
            
            9,774LOSS
      BEFORE TAXES
            
            $
            (312,593
            )
            
            $
            (320,170
            )








11


NOTE 3 -
BANK LINE OF CREDIT





The
Company through its Discover operations has a line of credit with a financial
institution to meet short-term working capital requirements. Under this credit
facility the Company has $100,000 of unsecured revolving line credit which bears
interest payable monthly at prime plus 3.75% per annum. There are no parent
guarantees or covenants associated with this facility.





NOTE 4 –
MORTGAGE NOTES PAYABLE





Mortgage
notes payable consist of the following at March 31, 2009 and December 31, 2008,
respectively:


March
      31,2009
              (unaudited)
            
            
            December
      31, 2008
              (audited)Mortgage
      Payable - financial institution (secured by property), monthly
      installments of principal and interest of $8,294 including interest at
      7.75% per annum with all unpaid principal due May 2010, collateralized by
      a building
            
            $
            836,364
            
            
            $
            845,784Less
      current maturities
            
            
            36,816
            
            
            
            36,112Long
      term portion of mortgage notes payable
            
            $
            799,548
            
            
            $
            809,672





Refinance of Discover
Building and Land





During
the year ended December 31, 2008 the Company refinanced its property located in
Minneapolis, Minnesota. The prior mortgage note payable was set to mature in
February 2009. The Company through another financial institution entered into a
new mortgage note payable to refinance its mortgage. The new mortgage note
matures in May 2010 and is collateralized by the building and land. The new
mortgage note is personally guaranteed as well by a director of the Company in
the event of default.





NOTE 5 –
NOTES PAYABLE AND CONVERTIBLE DEBENTURES





Notes
payable and convertible debentures consist of the following at March 31, 2009
and December 31, 2008, respectively:


March
      31, 2009
            
            
            December
      31, 2008(unaudited)
            
            
            (audited)Convertible
      Debentures - TCS acquisition, 21 members, principal and interest due and
      payable November 2006, monthly payments of interest in arrears at 7.5% per
      annum. Certain payment restrictions apply and the debentures are
      convertible into common stock of the Company at a price of $0.20 per
      share
            
            $
            300,000
            
            
            $
            300,000Note
      Payable - individual, principal and interest due and payable December
      2008, interest at 5.03% per annum and the note is
    unsecured.
            
            
            72,767
            
            
            
            72,767Note
      Payable - individual, principal and interest due and payable December
      2008, interest at 16% per annum and the note is unsecured.
            
            
            7,000
            
            
            
            7,000Note
      Payable - individual, principal and interest due and payable December
      2008, interest at 8% per annum and the note is unsecured.
            
            
            5,000
            
            
            
            5,000Note
      Payable - related party (individual) principal and interest due and
      payable December 2009, interest at 8% per annum and the note is
      unsecured.
            
            
            37,495
            
            
            
            -Note
      Payable - individual principal and interest due and payable April 2009,
      interest at 10% per annum and the note is unsecured. The note is
      convertible into the Company’s convertible debenture instrument yielding
      7% interest and terms. Note contains a feature to extend for a 1⁄2
      point
            
            
            100,000
            
            
            
            -Convertible
      Debentures - 2005 investment by five investors, principal and interest due
      and payable 36 months from the date of investment, monthly payments of
      interest in arrears at 7.0% per annum. The debentures are convertible into
      common stock of the Company based on a discount to market of 7% of the
      30-day trailing average price of the Company's common
stock
            
            
            75,000
            
            
            
            100,000Convertible
      Debentures - 2006 investment by four investors, principal and interest due
      and payable 36 months from the date of investment, monthly payments of
      interest in arrears at 7.0% per annum. The debentures are convertible into
      common stock of the Company based on a discount to market of 7% of the
      30-day trailing average price of the Company's common
    stock.
            
            
            60,000
            
            
            
            60,000Convertible
      Debentures - 2007/2008 investment by one investor, principal and interest
      due and payable 36 months from the date of investment, monthly payments of
      interest in arrears at 7.0% per annum. The debentures are convertible into
      common stock of the Company based on a discount to market of 7% of the
      30-day trailing average price of the Company's common
stock
            
            
            950,200
            
            
            
            950,200Total
      notes payable and convertible debentures
            
            
            1,607,462
            
            
            
            1,494,967Less
      current maturities
            
            
            657,262
            
            
            
            544,767Long
      term portion of notes payable and convertible debentures
            
            $
            950,200
            
            
            $
            950,200




12





Convertible Debentures
2003





As of
March 31, 2009 the Company was in default with respect to its $300,000 in
convertible debentures (the 2003 Debentures). The 2003 Debentures were due and
payable May 30, 2007.  The 2003 Debentures bear interest at a rate of
7.5% per annum payable in arrears by one month. Interest payments may be
deferred until maturity, based on a formula provided that the Company is showing
a net loss or negative earnings before interest, taxes, depreciation and
amortization (EBITDA). The Company has the right to pay principal and accrued
interest through common stock of the Company provided that the average closing
price of the Company's common stock exceeds $0.20 for ten consecutive trading
days prior to the date of payment. The 10 holders of the 2003 Debentures have
the option to convert into shares of common stock at anytime subject to 30 days
prior notice to the Company. The 2003 Debentures are convertible at $0.20 per
common share at any time by the holder.





Convertible Debentures 2005,
2006, 2007, 2008





As of
March 31, 2009 the Company had outstanding $1,085,200 in convertible debentures
(the Post-2003 Debentures). The Post-2003 Debentures are due and payable three
years from the date of the original issuance.  The Post-2003
Debentures bear interest at a rate of 7.0% per annum payable monthly. The 10
holders of the Post-2003 Debentures have the option to convert into shares of
common stock upon written notice to the Company. The debentures are convertible
into common stock at a price equal to 93% of the average 30 day closing price of
the Company’s publicly traded common stock prior to notice of
conversion.





During
the three month period ended March 31, 2009 we issued a total of 598,500 shares
of common stock to a holder of a convertible debenture, in the amount of
$25,000, of the Company, as conversion of the debenture and accrued
interest.





NOTE 6 –
COMMITMENTS AND CONTINGENCIES





Operating
Leases





The
Company leases office space for its subsidiaries in two markets, San Diego and
Las Vegas. The Company’s corporate and REF operations occupy space in its
Minneapolis building. TCS’s San Diego and Las Vegas operations lease office
space under operating leases that both expire in 2010.





Lease
Income





The
Company leases a portion of its Minneapolis commercial property to various
tenants, which require them to pay a monthly base rent. Most tenants are on
month-to-month agreements with the Company. Currently one long term lease tenant
occupies space in this building with the remainder being occupied by Discover
and short term tenants.





Executive Employment
Agreements





The
Company has an executive employment agreement with its chief executive officer
which provides for cash compensation of $100,000 per annum as well as equity
compensation of $75,000 per annum. As of March 31, 2009 the Company has included
in accrued expense approximately $754,000 in compensation due to its executive
officer. As part of the Company’s agreement with the executive officer the
Company will issue shares of common stock based on a pre-determined formula for
past due compensation and enter into a new employment agreement with the
executive officer. As part of the Company’s efforts to conserve cash and control
expenditures during its cost-cutting plan the executive officer had deferred
payment of his compensation during the past four years.





Litigation





The
Company is subject to other potential liabilities under government regulations
and various claims and legal actions that may be asserted. Matters may arise in
the ordinary course and conduct of the Company’s business, as well as through
its acquisitions. Claim estimates that are probable and can be reasonably
estimated are reflected as liabilities of the Company. The ultimate resolution
of these matters is subject to many uncertainties. It is reasonably possible
that matters, which may be asserted, could ultimately be decided unfavorably for
the Company. Although the amount of liability at March 31, 2009, currently
cannot be ascertained, the Company believes that any resulting liability should
not materially affect the Company’s consolidated financial
statements.








13





NOTE 7 -
PROPERTY AND EQUIPMENT





The
Company's property and equipment by significant category consist of the
following at March 31, 2009 and December 31, 2008, respectively:





March
      31, 2009
            
            
            December
      31, 2008(unaudited)
            
            
            (audited)Furniture
      and equipment
            
            $
            150,028
            
            
            $
            162,424Building
      and improvements
            
            
            468,716
            
            
            
            468,716Land
            
            
            100,000
            
            
            
            100,000Total
      property and equipment
            
            
            718,744
            
            
            
            731,140Less
      accumulated depreciation
            
            
            (249,906
            )
            
            
            (251,917
            )$
            468,838
            
            
            $
            479,223





NOTE 8 -
RELATED PARTY TRANSACTIONS





During
the three month period ended March 31, 2009, the Company entered into several
short-term arrangements with a current director of the Company for working
capital funds. For the three month period ended March 31, 2009 funds received
under these short-term arrangements totaled $37,945 which is included in notes
payable and convertible debentures.





NOTE 9 -
INCOME TAXES




In June
2006, the FASB issued Interpretation No. 48 (FIN 48), “Accounting for
Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for
Income Taxes.” FIN 48 clarifies the accounting for uncertain tax positions.
FIN 48 prescribes a comprehensive model for how companies should recognize,
measure, present and disclose in their financial statements uncertain tax
positions taken or expected to be taken on a tax return. Under FIN 48, tax
benefits shall initially be recognized in the financial statements when it is
more likely than not the position will be sustained upon examination by the tax
authorities. Such tax positions shall initially and subsequently be measured as
the largest amount of tax benefit that is greater than 50% likely of being
realized upon ultimate settlement with the tax authority, assuming full
knowledge of the position and all relevant facts. FIN 48 also revises disclosure
requirements to include an annual tabular rollforward of unrecognized tax
benefits. The provisions of this interpretation are required to be adopted for
fiscal periods beginning after December 15, 2006. The Company adopted this
provision beginning January 1, 2007. Net impact due to the adoption of FIN
48 was no decrease to retained earnings.




Prior to
their acquisitions, Discover Mortgage was taxed as a Sub S Corporation, and TCS
Mortgage, Inc. was party to a tax sharing agreement with its former parent. The
Company pays minimum franchise taxes of $800 per year for each California
corporate entity that does business as part of the consolidated
entity.




At March
31, 2009, the Company had $8.4 million and $4.8 million of federal and state net
operating losses (NOL) carry forwards, respectively. It is more likely than not
that the Company will not fully realize certain federal or states’ NOL’s. The
federal and state NOL carry forwards begin to expire in 2019 and 2014,
respectively.




The
realization of any future income tax benefits from the utilization of net
operating losses may be severely limited. Federal and state tax laws contain
complicated change of control provisions (generally when a more than 50 percent
ownership change occurs within a three-year period), which, if triggered, could
limit or eliminate the use of the Company's net operating loss
carry-forwards.







14








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




The
following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Unaudited Condensed
Consolidated Financial Statements and Notes thereto included elsewhere in this
report and the Consolidated Financial Statements and Notes thereto included in
our annual report on Form 10-K.




OVERVIEW




We are in
the business of providing real estate and mortgage financial
services primarily for transactions involving sales, purchases or financing
of residential properties. Our business is conducted through three
wholly-owned subsidiaries, Discover Mortgage Corporation and TCS Mortgage,
Inc. which operate in the mortgage brokerage and mortgage banking business;
and WHY USA North America Inc. which operates in the real estate franchise
business. Our primary mission is to develop and provide professional
residential real estate and mortgage banking services and support both to
our network of franchise real estate brokers and their customers and to new
home, resale home and refinancing mortgage borrowers dealing directly with
our mortgage lending offices.




We
conduct our business through two principal segments:




Ø
            Real Estate Franchise (REF).The Company’s REF operations are conducted regionally within the
      United States; Upper Midwestern states as well as several other states
      with limited franchise areas.




Ø
            Mortgage Broker and
      Originations (MB). The Company’s MB operations are conducted
      regionally within the United States; Upper Midwestern states as well as
      the Southwest (which includes Southern California and
    Nevada).




The
Company has incurred significant losses, and as of March 31, 2009 had an
accumulated deficit of approximately $13.0 million. The Company intends to
expend considerable financial and management resources on sales and marketing,
development of additional financial service offerings, strategic acquisitions
and alliances, and expanded operations to support larger-scale business
operations. Accordingly, the Company may continue incurring losses incident to
future growth. There can be no assurance that the Company's revenues will
increase to the levels necessary to achieve profitability or generate enough
cash from operations in the future.





The
Company's prospects must also be considered in light of the risks, difficulties,
and expenses frequently encountered by companies in their early stage of
development, particularly companies in rapidly changing markets such as ours. To
address these risks, the Company must, among other things, maintain existing,
and develop new relationships with mortgage lenders, real estate brokers and
franchisees, and potential residential customers in the general public;
implement and successfully execute its business and marketing strategy; continue
to develop and upgrade transaction-processing systems; provide quality customer
service; respond to competitive developments; and attract, retain and motivate
qualified personnel. There can be no assurance the Company will be successful in
addressing such risks, and the failure to do so would harm the Company's
business, financial condition, and results of operations. The Company's current
and future expense levels are based on its planned operations and estimates of
future revenues. Revenue and operating results generally depend upon the volume
and timing of mortgages originated and real estate closings completed, which are
rather difficult to forecast. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfalls. Any
significant shortfall of revenue would have an immediate adverse effect on the
Company's business. In view of the changing nature of both the financial
services industry and the overall national economy, the Company is unable to
accurately forecast its revenue. Accordingly, we believe that period-to-period
comparisons of our operating results are not very meaningful and should not be
relied upon as an indication of future performance.





The
Company's material sources of revenue in order of priority are from: (1)
mortgage origination and related mortgage lending fees, (2) WHY USA franchise
fees/royalties received from our franchisees based on their ongoing business,
(3) new franchise sales, and (4) real estate sales commissions.








15





RESULTS
OF OPERATIONS




Comparison
of the Three Month Periods Ended March 31, 2009 and 2008




Revenues




Net
revenues decreased $128,203 or 35% for the three months ended March 31, 2009
compared to the three months ended March 31, 2008. The decrease was a result of
the significant softening of the mortgage and real estate industry. Summer 2008
was a time of great turmoil for the financial services industry. WHY USA was not
in the business of sub-prime single-family residential mortgages, so the Company
was not exposed to the disruption in the market. However, the general market
continues to experience a ripple effect that business both in mortgage and real
estate transactions have almost ceased to exist. It is important to note that
the Company continued to maintain the highest underwriting standards in its loan
portfolio, regardless of the loan type, a decision that is part of its core
business philosophy. By maintaining historically excellent credit standards, the
Company was able to focus on providing high levels of customer service and
expanding its product offerings in spite of these difficult market
conditions.




Over the
prior two years it was readily apparent that the sub-prime mortgage market
continues to be strained which in turn affected the overall financial services
industry. As a mortgage broker, WHY USA and its business practices did not
have any specific exposure to the sub-prime market, no liability to purchase
defaulted loans. As a result, management believes that even though the sub-prime
market has ceased to exist, the negative impact from the sub-prime market
fallout continues to affect future revenues. Given that we continue to work
on stabilizing ourselves in a weakened sub-prime market, revenues continued
to decrease for 2008 (even into Q1 2009), even though we are experiencing a
growing demand and need for FHA insured loans. The purpose of the FHA insured
program is to allow non- Fannie Mae and Freddie Mac approved borrowers’
access to non sub-prime loan programs. Therefore we are experiencing an increase
of the “Government” sponsored loan programs that allow more flexible lending
criteria, picking up much of the slack in the traditional “sub-prime”
loans.




Cost
of Revenues




Cost of
revenues decreased $68,162 or 33% for the three months ended March 31, 2009
compared to the three months ended March 31, 2008. Cost of revenues dropped at a
slightly lower rate compared to our decrease in net revenues for the three month
period. Costs of revenue which consists primarily of direct costs associated
with our products and services, as well were affected by the sub-prime and
financial services market weakening. Commission expense and direct costs
continue to remain fairly constant as a percentage with slight cost savings due
to a competitive environment. Cost of revenues as a percentage of net revenues
increased to 57% for the three months ended March 31, 2009 compared to 55% for
the three months ended March 31, 2008. Gross margin as a percentage of net
revenues decreased to 43% for the three months ended March 31, 2009 compared to
45% for the three months ended March 31, 2008.




Operating
Expenses




Selling,General and Administrative.For the three months ended March 31, 2009, selling, general and
administrative expenses decreased by $94,657 or 21% compared to the three months
ended March 31, 2008. The decrease for the three months ended March 31, 2009
resulted from a decrease in professional services for the Company’s year end
audits as well as continuing cost savings initiatives which include staffing and
salary reductions along with reductions in employee benefits, professional
services, occupancy costs, and other expenses.




We
continue to pursue programs and initiatives to improve our efficiency in the
general and administrative area. These programs focus in the areas of process
improvement and automation relative to our mortgage and non-franchise real
estate business and its support as well as support services needed for our
holding company. We expect that over time these actions will result in
additional declines in our general and administrative expenses as a percent of
revenues.




Loss/Gain on Disposal of
Assets. Loss on disposal of fixed assets for the three months ended
was $1,873, compared to none for the three months ended March 31, 2008,
which for the three month period ended in 2009 represents the excess of cost
basis over the proceeds received from the sale or disposal of the fixed or
intangible assets used in its operations.







16





Depreciation and Amortization.
Depreciation and amortization for the three months ended March 31, 2009
decreased $2,387 or 22% compared to the three months ended March 31, 2008.
Depreciation and amortization expense for the three months ended March 31, 2009
was $8,512.




Other
Income (Expense)




Interest Expense. Interest
expense was $56,750 for the three months ended March 31, 2009 compared to
$37,117 for the three months ended March 31, 2008. The primary reason for the
$19,633 increase in interest expense was an overall increase in borrowings from
a related party and third party.




Other Income (Expense), Net.
Other income (expense), net, for the three months ended March 31, 2009 and the
three months ended March 31, 2008 was $0 and $9,774, respectively. For three
months ended March 31, 2008 the Company received reimbursements from
non-mortgage/real estate business which are non-recurring in
nature.




Comparison
of the Three Month Periods Ended March 31, 2008 and 2007




Revenues




Net
revenues decreased $333,749 or 48% for the three months ended March 31, 2008
compared to the three months ended March 31, 2007. The decrease was a result of
the continued significant softening of the mortgage and real estate industry.
Summer 2007 was a time of great turmoil for the financial services industry. WHY
USA was not in the business of sub-prime single-family residential mortgages, so
the Company was not exposed to the disruption in the market. However, the
general market experienced a ripple effect that business both in mortgage and
real estate transactions almost ceased to exist. It is important to note that
the Company continued to maintain the highest underwriting standards in its loan
portfolio, regardless of the loan type, a decision that is part of its core
business philosophy. By maintaining historically excellent credit standards, the
Company was able to focus on providing high levels of customer service and
expanding its product offerings in spite of these difficult market
conditions.




Cost
of Revenues




Cost of
revenues decreased $239,695 or 54% for the three months ended March 31, 2008
compared to the three months ended March 31, 2007. Cost of revenues dropped at a
higher rate compared to the decrease in net revenues for the three month period.
Costs of revenue which consists of primarily direct costs associated with our
products and services, was as well affected by the sub-prime and financial
services market weakening. Commission expense and direct costs continue to
remain constant as a percentage with slight cost savings due to a competitive
environment. Cost of revenues as a percentage of net revenues decreased to 55%
for the three months ended March 31, 2008 compared to 63% for the three months
ended March 31, 2007. Gross margin increased to 45% for the three months ended
March 31, 2008 compared to 37% for the three months ended March 31,
2007.




Operating
Expenses




Selling,General and Administrative.For the three months ended March 31, 2008, selling, general and
administrative expenses increased by $13,282 or 3% compared to the three months
ended March 31, 2007. The increase for the three months ended March 31, 2008
resulted from approximately $60,000 in accounting and professional services
incurred in preparing for our audit and annual report on Form 10-KSB offset by
the continuing cost savings initiatives which include staffing and salary
reductions along with reductions in employee benefits, professional
services, occupancy costs, and other expenses.




Depreciation and
Amortization. Depreciation and
amortization for the three months ended March 31, 2008 decreased
$1,291 or 11% compared to the three months ended March 31, 2007.
Depreciation and amortization expense for the three months ended March 31, 2008
was $10,899.




Other
Income (Expense)




Interest Expense. Interest
expense was $37,117 for the three months ended March 31, 2008 compared to
$46,857 for the three months ended March 31, 2007. The primary reason for the
$9,740 reduction in interest expense was the conversion of several convertible
debentures retired in late 2007.







17




Other Income (Expense), Net.
Other income (expense), net, for the three months ended March 31, 2008 and the
three months ended March 31, 2007 was $9,774 and $105,757, respectively. For
three months ended March 31, 2007 the Company received payment on a liquidating
distribution from policy holder ownership interest. This distribution payment
was a one-time event for the Company.




LIQUIDITY
AND CAPITAL RESOURCES




Operating Activities.
Operating activities used net cash of $149,602 during the three month period
ended March 31, 2009 primarily from a net loss of $314,193 offset by non-cash
charges of $23,985. Changes in operating assets and liabilities provided a net
increase of $140,606 in cash during the period. Within non-cash charges, the
primary driver was bad debt expense of approximately $13,600. The primary
drivers of cash savings from changes in operating assets and liabilities
was an increase in accounts payable and accrued expenses of
approximately $149,000 which was partially offset by a increase in trade
receivables of approximately $18,000.




As a
result of working capital improvement and cost reduction programs, we expect to
utilize our working capital more effectively in the future resulting in our
ability to reinvest in activities that will increase the Company’s presence in
the marketplace. Our working capital factors, such as accounts receivable
collection and payables, are seasonal and, on an interim basis during the year,
may require an influx of short-term working capital.




Investing Activities. Net cash
used in investing activities for the three month period ended March 31, 2009 was
none.




Financing Activities. Net cash
provided by financing activities totaled $126,004 for the three month period
ended March 31, 2009 which includes payments on existing debt of approximately
$9,000.  For the three month period ended March 31, 2009 we received
approximately $137,000 in proceeds from various short-term note obligations
entered into by a director and a shareholder of the Company. The Company for the
three month period ended March 31, 2009 paid down its bank overdraft from year
end of $2,066.




We
continue to seek acquisition opportunities that support our Real Estate
Franchise and Mortgage Brokerage platforms. While we cannot predict the timing
or size of any future acquisitions, or if any will occur at all, a significant
amount of our cash and/or stock may be used to acquire companies, assets or
technologies. We could also choose to fund any acquisitions, at least partly,
with new debt or stock.




As of
March 31, 2009, we had cash and cash equivalents of approximately $29,000. Our
working capital deficit was $2,296,726 as of March 31, 2009. This includes along
with $569,945 of accounts payable outstanding, bank line of credit of $98,117,
short term debt and lease obligations of $696,470, as well as accrued expense
and other of $1,047,975. Cash used in operations primarily comes from our
service offerings with non-recurring expenses funded through the issuance of
convertible debentures.




We expect
that our current cash and cash equivalents, short-term and long-term
investments, short-term borrowings and/or the raising of additional capital,
along with funds from operations and interest income earned thereon will be
sufficient to fund our current operations through at least the third quarter of
2009. Our future capital requirements and the adequacy of our available funds
will depend on many factors, including future business acquisitions, our ability
to establish collaborative business arrangements, the cost involved in
preparing, filing, prosecuting, maintaining and enforcing business claims and
competing technological and market developments.




RECENT
ACCOUNTING PRONOUNCEMENTS


In
December 2007, the FASB revised Statement No. 141 (FAS 141R),
“Business Combinations,” which establishes principles and requirements for how
the acquirer in a business combination (i) recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed
and any noncontrolling interest in the acquiree, (ii) recognizes and measures
the goodwill acquired in the business combination or a gain from a bargain
purchase and (iii) determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of the
business combination. FAS 141R will be effective for the Company’s fiscal 2009
beginning January 1, 2009. The Company is in the process of determining the
effects, if any, the adoption of FAS 141R will have on its consolidated
financial statements.







18




FASB
Statement No. 157 (FAS 157), “Fair Value Measurements,” issued in
September 2006, defines fair value, establishes a framework for measuring
fair value and expands disclosures about assets and liabilities measured at fair
value in the financial statements. In February 2008, the FASB issued FASB
Staff Position 157-2 (FSP 157-2) which allows for the delay of the effective
date of FAS 157 for one year for all nonfinancial assets and liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis. The Company adopted FAS 157 for financial assets and
liabilities effective September 29, 2008 but elected a partial deferral
under the provision of FSP 157-2 related to nonfinancial assets and liabilities
that are measured at fair value on a nonrecurring basis, including goodwill,
wireless licenses, other intangible and long-lived assets, guarantees and asset
retirement obligations. The Company is in the process of determining the
effects, if any, FAS 157’s application to such nonfinancial assets and
liabilities will have on its consolidated financial statements.




In
April 2009, the FASB issued FASB Staff Position FAS 115-2 and FAS 124-2
(FSP 115-2 and 124-2), “Recognition and Presentation of Other-Than-Temporary
Impairments,” which amends the existing guidance on determining whether an
impairment is other-than-temporary for investments in debt securities. In
addition, the FASB issued FASB Staff Position FAS 157-4 (FSP 157-4),
“Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly,” which provides additional guidance on determining the fair value of
financial assets in an inactive market or when a distressed transaction is
present. FSP 115-2 and 124-2 and FSP 157-4 will be effective for the Company’s
third quarter of fiscal 2009, as the Company has not elected to early adopt
either FSP. The Company is in the process of determining the effects, if any,
the adoption of both FSPs will have on its consolidated financial
statements.




CRITICAL
ACCOUNTING POLICIES




Application
of Critical Accounting Policies




Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. On an on-going basis,
we evaluate these estimates, including those related to the allowance for
doubtful accounts, goodwill, intangible assets, stock-based compensation income
taxes, commitments and accrued liabilities. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.




We
consider accounting policies relating to the following areas to be both those
most important to the portrayal of our financial condition and those that
require the most subjective judgment:




●
            
            revenue
      recognition;●
            
            accounting
      for goodwill and other intangible assets;●
            
            accounting
      for franchise costs;●
            
            accounting
      for stock-based compensation; and●
            
            accounting
      for acquisition charges




Forward-looking Statements




Any
statements in this Quarterly Report on Form 10-Q about our expectations,
beliefs, plans, objectives, prospects, financial condition, assumptions or
future events or performance are not historical facts and are “forward-looking
statements” as that term is defined under the Federal Securities Laws. These
statements are often, but not always, made through the use of words or phrases
such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will”, “expects”,
“estimates,” “projects,” “positioned,” “strategy,” “outlook,” and similar words.
You should read statements that contain these types of words carefully. Such
forward-looking statements are subject to a number of risks, uncertainties and
other factors that could cause actual results to differ materially from what is
expressed or implied in such forward-looking statements. There may be events in
the future that we are not able to predict accurately or over which we have no
control. Potential risks and uncertainties include, but are not limited to,
those discussed below under “Risk Factors” and elsewhere in this Quarterly
Report as well as other risks and uncertainties detailed in our Annual Report on
Form 10-K, filed with the Securities and Exchange Commission on March 31, 2009.
We do not undertake any obligation to release publicly any revisions to such
forward-looking statements to reflect events or uncertainties after the date
hereof or to reflect the occurrence of unanticipated events.







19





Business




WHY USA
Financial Group, Inc. (the Company), is a Nevada corporation. Prior to acquiring
our real estate franchise subsidiary and our Minneapolis mortgage brokerage
business in December 1999, the Company was an inactive public company under the
name Triam Ltd., Inc. with no assets, which had not been engaged in active
operations for many years.  Our principal offices are located in
Minneapolis, Minnesota. Our website is http://www.whyusa.com.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q/Form 10-QSB,
Current Reports on Form 8-K and any amendments thereto are made available
without charge from our website or may be obtained from the United States
Securities and Exchange Commission website – http://www.sec.gov.




Financial
Information - Segments and Geographic Areas




We focus
our business on two principal business segments, Real Estate Franchise (REF) and
Mortgage Brokerage (MB). Financial information regarding these segments is
included within the notes to our condensed consolidated financial statements
included in this Quarterly Report on Form 10-Q.




The
Company has limited geographic concentrations within its business segments. Our
REF business segment currently operates in several Midwestern states, with
offices elsewhere in the continental United States. Our MB business segment
currently operates in California, Nevada, Minnesota and Wisconsin.




Description
of Our Business




Overview




WHY USA
Financial Group, Inc. (the Company), a Nevada corporation, is engaged in the
business of providing real estate and mortgage financial services primarily for
transactions involving the sale, purchase or financing of residential
properties. Our business is primarily conducted through three wholly-owned
subsidiaries: Discover Mortgage Corporation and TCS Mortgage, Inc. both operate
in the mortgage brokerage and mortgage banking business; and WHY USA North
America Inc., which operates in the real estate franchise business. Our primary
mission is to develop and provide professional residential real estate and
mortgage brokerage services and support, both to our network of franchise real
estate brokers and their customers and to new home, resale home and refinancing
mortgage borrowers dealing directly with our mortgage lending
offices.




The
Company was incorporated in Utah in 1980 and in 1983 was duly reorganized as a
Nevada corporation. Prior to acquiring our real estate franchise subsidiary and
our initial mortgage business in December 1999, the Company was an inactive
public company under a former name with no assets, which had not been engaged in
active operations for many years.




The
Company acquired both its real estate business, WHY USA North America, Inc. and
its first mortgage business, Northwest Financial Ltd., through a reorganization
and merger which occurred in 1999. Incident to this merger, the former
shareholders of these two companies acquired a majority interest in the
outstanding common stock of the Company. This was a reverse merger for financial
statement and operational purposes, and NA and Northwest became wholly-owned
subsidiaries. Northwest transferred 100% of its operations to Discover during
2002.




Acquisition
Strategy and Transactions




Since our
reorganization in 1999, a principal element of our business strategy has been to
expand our business through acquisitions of established operations in our
industry. The primary goal of our newfound acquisition strategy is to establish
a national presence in our industry over the coming years, which we believe will
provide economies of scale for our operations due to an increase in revenue base
through acquisitions. Moreover, we believe more favorable terms will be achieved
from financial institutions that provide mortgage funding as our lending
transactions increase through size.







20




Target
Markets




We divide
our target customer base into principally two categories:




●
            
            Mortgagers;
      and





●
            
            Real
      estate buyers and sellers.




While we
do not believe that any single customer or small group of customers is material
to our business as a whole or to either of our product segments (described
below), more than 50% of our customers in our target markets are located in the
Southern California region of the United States.





Service
Offerings




The
Company’s principal service offerings are outlined below.




WHY USA Real Estate
Franchise Program




Through
our WHY USA franchise system we offer independent real estate brokers and agents
a unique proprietary real estate management and marketing program. Our WHY USA
national franchise system, which is registered in 41 states, was developed in
the 1980's by an Arizona company. Its operations were moved to Wisconsin in the
1990's and we acquired this franchise program in 1999.  This business
is owned and operated under a wholly owned subsidiary, WHY USA North America,
Inc. a Wisconsin corporation. Our WHY USA franchise operations are headquartered
in Minneapolis.




The WHY
USA franchise is available to qualified licensed real estate brokers and their
agents, who must enter into a WHY USA Franchise Agreement in order to conduct
business under the WHY USA name and proprietary operational system. WHY USA
provides a unique, confidential plan for operating a real estate office,
consisting of a number of successful listing, selling, marketing and management
techniques developed over the years and supported by training programs,
copyrighted marketing methods, and educational materials.




The
initial franchise fee for a WHY USA real estate office is $9,990 for a
designated territory. Franchisees also pay ongoing transaction fees of $100 per
transaction or 6% of commission revenues; whichever is the lower of, providing
they must pay at least a monthly minimum of $400. Transactions are defined as
any closing or rental as a listing or selling agent, any referral or advance
fees received from a client, and any consulting, assistance or materials
purchase fees related to leasing or selling a property. The estimated initial
investment to commence business as a WHY USA franchisee is approximately $50,000
including the initial franchise fee. We provide substantial initial and ongoing
support to our franchisees including, assistance with locating an office,
provision of a confidential comprehensive Operations Manual, a training seminar
for new franchisees, training and promotional videos and brochures, sample
marketing materials, continuing advisory assistance regarding operations,
supplemental marketing and advertising materials, and advice regarding Internet
access capabilities and procedures.




The basic
WHY USA method for listing real property offers the selling owner an
alternative, whereby they can sell their home with full service from their WHY
USA broker for a fee of just $990. Sell the property to a friend, relative or
acquaintance without paying commissions in excess of $990.  This
proprietary system is designed to create listing opportunities for our franchise
brokers as well as offer the listing seller a true alternative to the
traditional real estate commission structure.




We
currently have 30 WHY USA franchise owners, with WHY USA offices in 14
states.  A majority of these offices are located in Minnesota and
several nearby Midwestern states, with the rest spread across the country. We
currently do not have a material presence in Eastern and Southern states,
although our future marketing plan includes directing substantial efforts toward
expansion.







21




Mortgage
BrokerageServices - Overview




We
acquired TCS Mortgage, Inc., as a wholly owned subsidiary, in December 2003.
 In 2004 we contributed another wholly owned subsidiary, Discover Mortgage,
under the TCS umbrella.  TCS is a full service mortgage broker,
specializing in residential mortgage finance.  TCS was formed in January
1984, and has established a reputation for providing fair and equitable home
loans to its clients and a high quality volume of mortgage product for its
correspondent lenders.  TCS has grown since its inception, averaging
revenues of more than $3.6 million over the past five years.  Over the past
twenty-five years, TCS has originated more than 7,000 mortgage transactions, in
excess of $3.0 billion in funded loan volume.




While TCS
specializes in loans that meet Freddie Mac or Fannie Mae underwriting criteria,
it also provides Federal Housing Administration, Veteran’s Administration,
non-conforming mortgage product, and home equity products for individuals across
a wide range of incomes and credit risks. TCS has established relationships
with many correspondents and wholesale lenders across the United States, and has
the ability to conduct operations in California, Nevada, Minnesota, and
Wisconsin, with fully staffed offices in San Diego, Las Vegas, and Minneapolis,
as well as satellite origination offices.




In this
highly competitive marketplace, TCS’s growth and success reflects a number of
essential factors: a skilled and professional client-oriented sales team, an
effective lending criterion with dependable high quality mortgage product,
repeat business from a large client base, as well as their referrals. With
a broad spectrum of products to offer its clients, TCS has been able to develop
solid relationships with homebuyers, realtors, homebuilders, financial planners,
accountants, and insurance agents; all of which provide TCS with loan
applicants.




As an
established mortgage broker, our objective is to continue to build a nationwide
broker infrastructure to further its mortgage business distribution
channel. TCS continues to focus on borrowers who meet conforming
underwriting guidelines. Our business principles are focused on originating
loans based upon the borrower’s credit worthiness and ability to repay the loan,
as well as the adequacy of the real estate collateral, while providing a high
degree of service to our clients. We believe that this business approach will
continue to contribute to our growth.




TCS’s
focus is to continue to generate organic growth within its existing markets of;
California, Nevada, Minnesota, and Wisconsin, where TCS is currently licensed,
through the recruitment of additional professional mortgage personnel. In
addition, we may seek expansion through acquisitions, mergers, or strategic
alliances in other market areas as the opportunity may arise. The Company,
nor TCS, has identified any merger or acquisition targets at this time. States
where property appreciation is constant or shows signs of growth will be
targeted.




Market
Overview




The residential mortgage industry has grown
significantly over the past 10 years, with loan originations totaling over $2.8
trillion in 2004. The Mortgage Bankers Association reported total
originations in 2006 of $2.50 trillion, $2.28 trillion for 2007, and estimates
$1.86 trillion for 2008 and $1.67 trillion for 2009, indicating a steady decline
from its highs early 2004/2005.




Large
banks and mortgage lenders like Wells Fargo, Bank of America/Countrywide, and
Washington Mutual/Chase fund the majority of mortgage loans
originated. Currently TCS delivers loan product to many industry leaders
such as these, under agreements and contractual relationships. However, the
industry is in a state of flux and TCS must continue to obtain and retain these
relationships in a difficult environment.




One of
the factors of recent growth in the mortgage industry was the impact of
sub-prime and Alt-A lenders. The majority of sub-prime loans are Adjustable
Rate Mortgages (ARMs). Unlike a traditional Fixed Rate Mortgage, where the
interest and monthly payments remain fixed for the term of the loan, with an
ARM, the interest rate is fixed only for a specific term, after which it will
periodically (annually or monthly) adjust up or down as a function of some
market index. Inasmuch as an ARM transfers part of the interest rate risk
from the lender to the borrower, less “qualified” borrowers are more easily able
to secure loans. Generally not long-term instruments, ARMs essentially
serve as a “bridge” loan for individuals to purchase a home, establish or
improve their credit and then secure a traditional mortgage at a more attractive
rate. These loans are then pooled into mortgage backed securities; credit
enhanced, rated, and then sold as financial instruments to a wide range of
investors. This portion of the market is currently in a state of
contraction.







22




Recently
many lenders that specialized in this type of sub-prime product have gone out of
business. Most loan products have been discontinued due to the current credit
crunch and this has had a negative effect on the industry as a whole. The
current trend is towards fixed rate, “A” paper product, which requires greater
documentation and “equity” in the property from the borrower. Currently
there are a number of governmental proposals that would further restrict and
regulate the Mortgage Industry. Also, there are a number of proposals that
would in fact assist the borrowers and provide additional product such as new
FHA guidelines, further capacity at Freddie Mac and Fannie Mae, and new capacity
at the rating agencies.




TCS
generated more than 200 mortgages and gross fee income of $1.0 million in 2008
from over $65 million in loans funding. This is largely attributable to the
diversification of mortgage products, a professional sales force, excellent
lender relationships, and strong attention to customer service.  While many
of our competitors have exited the market place we have maintained our staff and
facilities and are actively recruiting highly skilled talent that is available
in the market place.




Current Business Model –
Mortgage Broker




Today,
TCS operates strictly as a mortgage broker, securing loans on behalf of its
correspondent and wholesale lenders. The primary function of TCS is to
originate mortgage loans and broker those loans to approved lenders. We offer
conventional, FHA, VA, conforming and non-conforming mortgage products for
individuals across a wide range of incomes and credit risks. We do not make
underwriting decisions; underwriting decisions are ultimately the decision of
the funding lenders.




TCS
maintains stringent guidelines with regard to the mortgages it
originates. All candidates, whether identified through direct solicitation
by the sales team or an individual contacting the company through the website,
are required to provide a completed residential loan application, W-2's and/or
tax returns for the previous two (2) years, and recent bank, stock and
retirement account statements. Applicants may be required to provide
additional documents or verifications based upon their particular history –
i.e., have they ever filed for bankruptcy.




With
every completed application package, TCS’s primary objective is to ensure that
the borrower has the capacity to carry the anticipated payment
schedule. For each of its loan products, TCS has specific qualification
parameters, as designated by each lender, and it will review the applicant’s
credit history, asset portfolio, employment history, and property
values. Each situation is unique and evaluated on a case by case basis,
with the resulting loan specifically for that individual.




Competition




The major
competition for TCS comes from the following, but is not limited to; large
national lending institutions, local banks, credit unions, mortgage bankers, and
other privately owned mortgage companies which provide a variety of products.
There is substantial competition on both the national and local level and TCS
originates only a small portion of all loans originated in the areas in which it
is licensed.




TCS is
licensed with HUD as a Supervised Loan Correspondent. As such, we compete
with all HUD approved lenders in the areas we originate mortgage loans. TCS
is required to maintain a minimum adjusted net worth which was $113,000 ($63,000
for the main office plus $25,000 for each of its two HUD branch offices) at
December 31, 2008. Although the Company may be out of compliance with this
requirement for the quarter ended March 31, 2009, management believes that the
annual renewal requirement will be met by or prior to December 31, 2009.
Maintaining a license with HUD allows TCS to originate FHA loans that it would
not otherwise be able to originate. Approximately thirteen percent of our
business is currently derived from HUD/FHA loans; we expect this percentage to
grow dramatically with the improvements suggested by the government-controlled
agency. It has become difficult for smaller competitors to maintain these
requirements.




For the
year ended December 31, 2008 the Company through its wholly-owned subsidiary TCS
fell below the minimum adjusted net worth requirements as a Supervised Loan
Correspondent. The Company submitted with its required Lender Assessment an
action plan to correct the deficiency to its minimum adjusted net worth and
requested that HUD maintain its licensure as a Supervised Loan Correspondent. As
of the date of this report the Company has yet to receive a response in regards
to its proposed action plan. The Company cannot be certain these steps nor the
request of HUD will be successful in maintaining the licensing or prevent the
withdrawal of the licensing.







23




ITEM 3.
            Quantitative
      and Qualitative Disclosures about Market
Risk




Not
required for smaller reporting companies.




ITEM 4.
            Controls
      and Procedures




We maintain a system of disclosure controls
and procedures designed to ensure that information required to be disclosed in
our reports filed or submitted under the U.S. Securities Exchange Act of 1934,
as amended (Exchange Act), is recorded, processed, summarized and reported
within the time periods specified in the SEC rules and forms. These controls and
procedures are also designed to ensure that such information is accumulated and
communicated to the Company’s management, including the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), as appropriate to allow timely
decisions regarding required disclosure. Internal controls are procedures
designed to provide reasonable assurance that: transactions are properly
authorized; assets are safeguarded against unauthorized or improper use; and
transactions are properly recorded and reported, to permit the preparation of
our financial statements in conformity with generally accepted accounting
principles.




A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system's objectives will be met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple errors or mistakes.
Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with its policies or
procedures. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected. We
continuously evaluate our internal controls and make changes to improve them as
necessary. Our intent is to maintain our disclosure controls as dynamic systems
that change as conditions warrant.




An
evaluation was carried out, under the supervision of and with the participation
of our management, including our CEO and CFO, of the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rules 13a–15(e) and
15d–15(e) under the Exchange Act) as of the end of the period covered by this
report. Based upon the controls evaluation, our CEO and CFO have concluded that,
as of the end of the period covered by this Form 10-Q, the Company’s disclosure
controls and procedures are effective to provide reasonable assurance that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC
rules and forms, and is accumulated and communicated to our management,
including our CEO and CFO, as appropriate to allow timely decisions regarding
required disclosure.




There
were no changes in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter
ended March 31, 2009 that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.




PART
II. OTHER INFORMATION





ITEM 1.
            Legal
      Proceedings




The
Company is subject to other potential liabilities under government regulations
and various claims and legal actions that may be asserted. Matters may arise in
the ordinary course and conduct of the Company’s business, as well as through
its acquisitions. Claim estimates that are probable and can be reasonably
estimated are reflected as liabilities of the Company. The ultimate resolution
of these matters is subject to many uncertainties. It is reasonably possible
that matters, which may be asserted, could ultimately be decided unfavorably for
the Company. Although the amount of liability at March 31, 2009, currently
cannot be ascertained, the Company believes that any resulting liability should
not materially affect the Company’s consolidated financial
statements.







24




ITEM 1A.
            Risk
      Factors




There are
no material changes from risk factors disclosed in our Form 10-K for the year
ended December 31, 2008, as filed on March 31, 2009.




ITEM 2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds




During
the three months ended March 31, 2009 the Company made the following issuances
and sales of securities in reliance upon the exemption provided by Section 4(2)
of the Securities Act of 1933, as amended, Rule 506 of Regulation D
hereunder.




During
the three month period ended March 31, 2009 we issued a total of 598,500 shares
of common stock to a holder of convertible debentures in the amount of $25,000
of the Company as conversion of the debentures and accrued interest. The Company
valued the shares at a price of approximately $0.053 per share which was
determined to be fair market value. We relied on Section 4(2) of the Securities
Act.




ITEM 3.
            Defaults
      Upon Senior Securities




None.




ITEM 4.
            Submission
      of Matters to a Vote of Security Holdersa)
            None.b)
            None.c)
            None.d)
            None.





ITEM 5.
            Other
      Information




None.




ITEM 6.
            Exhibits
      and Reports on Form 8-K




Exhibits:
For a list of exhibits filed with this report, refer to the Index to
Exhibits.






SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated:




SIGNATURE
            
            TITLE
            
            DATE/s/
      JAMES B. KYLSTAD
              James
      B. Kylstad
            
            Chairman
      and Chief Executive Officer
      and Director (Principal Executive Officer)
            
            May
      15, 2009/s/  KENNETH
      J. YONIKA
              Kenneth
      J. Yonika
            
            Chief
      Financial Officer (Principal Financial Officer)
            
            May
      15, 2009







25




INDEX
TO EXHIBITS




EXHIBIT
              NUMBER
            
            DESCRIPTION
      OF DOCUMENT2.1
            
            Reorganization
      between the Black Butte Petroleum, Inc. and Triam Ltd., dated March 23,
      1983 (1)2.2
            
            Acquisition
      Agreement between Triam Ltd. and Northwest Financial Ltd., dated December
      16, 1999 (1)2.3
            
            Acquisition
      Agreement Addendum, datedDecember 20, 1999
      (1)2.4
            
            Stock
      Purchase Agreement dated September 24, 1999 between Northwest Financial
      Group, Inc., WHY USA NA, and its selling shareholders
  (1)2.5
            
            Addendum
      to Stock Purchase Agreement, dated December 30, 1999 including Assignment
      to Donald Riesterer    (1)2.6
            
            Share
      Exchange Agreement – Cashline transaction, dated February 8, 2001
      (3)2.7
            
            Business
      Combination Agreement to acquire Discover Mortgage Corp. effective January
      1, 2002 (2)3.1.1
            
            Articles
      of Triam Ltd., dated January 6, 1983 (1)3.1.2
            
            Amendment
      to Articles of Incorporation, March 4, 1983 (1)3.1.3
            
            Amendment
      to Articles of Incorporation, filed March 29, 1983 (1)3.1.4
            
            Articles
      of Merger, filed on May 9, 1999 (1)3.1.5
            
            Amendment
      to Articles of Incorporation, Jan. 10, 2000 (1)3.2
            
            Bylaws
      (1)10.2
            
            Stock
      Option Plan (2)10.3
            
            Sample
      Option Agreement (4)10.4
            
            Assignment
      and Assumption Agreement between Northwest Investment Trust and the
      Company Re: Cashline (4)10.5
            
            Assignment
      and Assumption Agreement between Northwest Investment Trust and the
      Company Re: Alliance West  (4)10.6
            
            Franchise
      Purchase Agreement, dated June 30, 2001
(4)




(1) Filed
with the Company's initial Filing on Form 10-SB on May 10, 2000.




(2) Filed
with the Company's Form 10-SB/A No. 1 on August 28, 2000.




(3) Filed
with the Company's Report on 8-K dated February 21, 2002.




(4) Filed
with the Company's Annual Report on 10-KSB on April 16, 2001.




EXHIBIT
              NUMBER
            
            DESCRIPTION
      OF DOCUMENT31.1
            
            Certification
      of Chief Executive Officer31.2
            
            Certification
      of Chief Financial Officer32.1
            
            Certification
      of Chief Executive Officer32.2
            
            Certification
      of Chief Financial Officer










26