UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-QSB


(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, 2008[   ]
            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 small business issuer 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
              
              55405(Address
      of principal executive offices)
              
              (Zip
      Code)




Issuer’s
telephone number, including area code:




(612)
767-5037








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





APPLICABLE
ONLY TO CORPORATE ISSUERS





State
      the number of shares outstanding of each of the issuer's classes of common
      equity, as of the last practicable date. As of May 15, 2008 the Company
      had issued and outstanding 105,685,097 shares of common
    stock.Transitional
      Small Business Disclosure Format (check
      one):  Yes   [ ]     No   [X]


1


WHY USA FINANCIAL GROUP, INC.


FORM
10-QSB


FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2008


INDEX




PART
      I. FINANCIAL INFORMATIONItem 1.
            
            Financial
      StatementsCondensed
      Consolidated Balance Sheets at March 31, 2008 (unaudited) and December 31,
      2007
            
            3Condensed Consolidated Statements of Operations for the three
      months ended March 31, 2008 and 2007
      (unaudited)
            
            4Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      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
            
            14Item 3A(T).
            
            Controls
      and Procedures
            
            22PART
      II. OTHER INFORMATIONItem 1.
            
            Legal
      Proceedings
            
            23Item 1A.
            
            Risk
      Factors
            
            23Item 2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            23Item 3.
            
            Defaults
      Upon Senior Securities
            
            23Item 4.
            
            Submission
      of Matters to Vote of Security Holders
            
            23Item 5.
            
            Other
      Information
            
            23Item 6.
            
            Exhibits
            
            23Signature
            
            24Exhibit
      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
      31,2008
              
              
              December
      31, 2007(audited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              2,263
              
              
              $
              46,176Accounts
      receivables, net of allowance for doubtful accounts
              
              
              47,086
              
              
              
              59,325Prepaid
      assets and other
              
              
              88,357
              
              
              
              106,287Total
      current assets
              
              
              137,076
              
              
              
              211,788PROPERTY
      AND EQUIPMENT—Net
              
              
              488,317
              
              
              
              497,484GOODWILL
              
              
              784,815
              
              
              
              784,815OTHER
      NONCURRENT ASSETS
              
              
              9,077
              
              
              
              29,226TOTAL
              
              $
              1,419,915
              
              
              $
              1,523,313LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Warehouse
      and bank lines
              
              $
              99,383
              
              
              $
              99,789Current
      portion of obligation under capital leases
              
              
              -
              
              
              
              1,538Current
      portion of notes payable and convertible debentures
              
              
              523,319
              
              
              
              473,319Current
      portion of mortgage notes payable
              
              
              34,081
              
              
              
              88,427Bank
      overdraft
              
              
              16,441
              
              
              
              -Accounts
      payable
              
              
              386,873
              
              
              
              347,174Accrued
      expense and other liabilities
              
              
              741,376
              
              
              
              689,187Total
      current liabilities
              
              
              1,801,473
              
              
              
              1,699,434MORTGAGE
      NOTES PAYABLE
              
              
              830,640
              
              
              
              839,307NOTES
      PAYABLE AND CONVERTIBLE DEBENTURES
              
              
              235,000
              
              
              
              110,000COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITY (DEFICIT):Common
      stock, $.001 par value, 250,000,000 shares authorized; 108,992,160
      sharesissued
      and outstanding for March 31, 2008 and December 31, 2007
              
              
              108,993
              
              
              
              108,993Additional
      paid in capital
              
              
              10,059,684
              
              
              
              10,059,684Preferred
      Stock, $.01 par value, 50,000,000 shares authorized; 40,000
      sharesissued
      and outstanding for March 31, 2008 and December 31, 2007
              
              
              400
              
              
              
              400Accumulated
      deficit
              
              
              (11,616,275
              )
              
              
              (11,294,505
              )Total
      stockholders’ equity (deficit)
              
              
              (1,447,198
              )
              
              
              (1,125,428
              )TOTAL
              
              $
              1,419,915
              
              
              $
              1,523,313
  See
accompanying notes to consolidated financial statements.





3


WHY
USA FINANCIAL GROUP, INC.


Condensed
Consolidated Statement of Operations


For
the Three Months Ended





March
      31, 2008
              
              
              March
      31, 2007NET
      REVENUES
              
              $
              367,846
              
              
              $
              701,595COST
      OF REVENUES
              
              
              203,828
              
              
              
              443,523Gross
      margin
              
              
              164,018
              
              
              
              258,072SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
              
              
              445,965
              
              
              
              432,683DEPRECIATION
      AND AMORTIZATION EXPENSE
              
              
              10,899
              
              
              
              12,190OPERATING
      INCOME (LOSS)
              
              
              (292,846
              )
              
              
              (186,801
              )OTHER
      INCOME (EXPENSE):Interest
      expense
              
              
              (37,117
              )
              
              
              (46,857
              )Interest
      income
              
              
              19
              
              
              
              3Other
      income
              
              
              9,774
              
              
              
              105,757Total
      other income (expense)
              
              
              (27,3246
              )
              
              
              58,903INCOME
      (LOSS) BEFORE TAXES
              
              
              (320,170
              )
              
              
              (127,898
              )Income
      tax expense
              
              
              (1,600
              )
              
              
              (1,600
              )NET
      INCOME (LOSS)
              
              $
              (321,770
              )
              
              $
              (129,498
              )BASIC
      AND DILUTED INCOME (LOSS) PER SHARE:Net
      income (loss)
              
              $
              (0.00
              )
              
              $
              (0.00
              )WEIGHTED
      AVERAGE SHARES USED :Basic
      and Diluted
              
              
              108,992,160
              
              
              
              92,319,434







4


WHY
USA FINANCIAL GROUP, INC.


Condensed
Consolidated Statement of Cash Flows


For
the Three Months Ended





March
      31, 2008
              
              
              March
      31, 2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss) from continuing operations
              
              $
              (321,770
              )
              
              $
              (129,498
              )Adjustments
      to reconcile net loss to net cash (used in) provided byoperating
      activities:Depreciation
      and amortization
              
              
              10,899
              
              
              
              12,190Provision
      for (benefit from) doubtful accounts
              
              
              36,707
              
              
              
              (11,577
              )Effect
      of changes in operating assets and liabilities:Trade
      receivables
              
              
              (24,469
              )
              
              
              26,854Prepaid
      expenses and other current assets
              
              
              17,930
              
              
              
              1,266Accounts
      payable
              
              
              39,699
              
              
              
              9,991Accrued
      expenses
              
              
              52,189
              
              
              
              50,696Other
              
              
              18,418
              
              
              
              11,579Net
      cash used in operating activities
              
              
              (170,397
              )
              
              
              (28,499
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of property and equipment
              
              
              -
              
              
              
              (4,001
              )Net
      cash (used in) provided by investing activities
              
              
              -
              
              
              
              (4,001
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      on revolving credit facility, netof
      mortgages held for resale
              
              
              (406
              )
              
              
              202Repayments
      of mortgages payable
              
              
              (63,013
              )
              
              
              (3,579
              )Proceeds
      from notes payable and convertible debentures
              
              
              175,000
              
              
              
              162,500Bank
      overdraft
              
              
              16,441
              
              
              
              -Repayment
      of obligations under capital leases
              
              
              (1,538
              )
              
              
              (1,574
              )Net
      cash provided by financing activities
              
              
              126,484
              
              
              
              157,549NET
      DECREASE IN CASH AND CASH EQUIVALENTS
              
              
              (43,913
              )
              
              
              125,049CASH
      AND CASH EQUIVALENTS—Beginning of period
              
              
              46,176
              
              
              
              14,267CASH
      AND CASH EQUIVALENTS—End of period
              
              $
              2,263
              
              
              $
              139,316SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid for taxes
              
              $
              1,600
              
              
              $
              -Cash
      paid for interest
              
              $
              13,706
              
              
              $
              24,505




See
accompanying notes to 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 consolidated financial
statements should be read in conjunction with the audited financial statements
included in our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2007 filed with the SEC on May 5, 2008.




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, liabilities,
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.




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
consolidated financial statements of the Company include the parent company, WHY
USA Financial Group, Inc., 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 a mortgage broker and prior to the 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.




6





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 $100,000. As
of March 31, 2008 the Company did not have 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.





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 $30,469 at March 31, 2008. Bad
debts (recoveries) totaled $36,707 and $(11,577) for the three month periods
ended March 31, 2008 and 2007, respectively. The Company has experienced no
credit losses from its mortgage lending operations.





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-KSB with
the SEC, May 5, 2008 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, mortgage loans held for resale,
accounts payable, accrued expenses and other current liabilities, warehouse and
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 direct origination fees and brokered loan fees. Deferred origination
fees and expenses are recognized at the time a loan is sold, and servicing is
released. 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 both the straight-line and accelerated methods (double
declining balance 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.





7





Impairment of Long-Lived
Assets





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.




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. 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.




Goodwill
is attributable to the acquisitions of Discover and TCS. The Company in
connection with the acquisition of Discover recorded goodwill of $1,016,570. The
Company in connection with the acquisition of TCS recorded goodwill of
$1,318,456. The Company has recorded impairment losses accumulating $1,550,211,
to reflect goodwill impairment on the acquisitions of Discover and
TCS.





As of
March 31, 2008 goodwill associated with the Discover acquisition is recorded at
$784,815.





Revenue
Recognition





Revenue
from loan originations are recognized at the time the mortgage loan closes or is
funded. Gain on sale of servicing mortgage loans represents service release
premiums on loans originated in-house. The gain is recognized when the funded
loan is sold and the proceeds are received. 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 resells 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.




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.




8




Effective
January 1, 2007, 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.




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 2008. 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 2008 and
into 2009 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 in the 1st quarter of 2008
after hitting bottom during the 4th quarter of 2007, measured by its “pipeline”
tool. There is no assurance that the Company can continue to improve upon its
service offerings and projected revenue to reach positive cash flow let alone
breakeven.




Since
inception through March 31, 2008, the Company had an accumulated deficit of
$11,616,275. 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, 2009. 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.




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 COMBINATIONS




In June
2001, the FASB adopted SFAS No. 141 (SFAS 141) “Business Combinations,” SFAS No.
142 (SFAS 142) “Goodwill and Other Intangible Assets” and in August 2001, SFAS
No. 144 (SFAS 144) “Accounting for the Impairment or Disposal of Long-Lived
Assets.” The Company's accounting procedures have been amended to adapt these
statements at the earliest date the statements became effective. For further
information regarding business combinations and acquisitions please refer to our
annual report filed on Form 10-KSB with the SEC on May 5, 2008.




9




NOTE 3 –
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
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, 2008Revenues
                
                $
                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 income(loss)
                
                $
                (38,199
                )
                
                $
                (116,017
                )
                
                $
                (127,731
                )
                
                $
                (281,947
                )Additions(dispositions)
      to segmented assets
                
                $
                (28,692
                )
                
                $
                (35,808
                )
                
                $
                (38,898
                )
                
                $
                (103,398
                )Segment
      assets at March 31, 2008
                
                $
                39,953
                
                
                $
                1,328,928
                
                
                $
                51,034
                
                
                $
                1,419,915For
      three month period ending March 31, 2007Revenues
                
                $
                47,198
                
                
                $
                654,397
                
                
                $
                -
                
                
                $
                701,595Cost
      of revenues
                
                
                17,898
                
                
                
                425,625
                
                
                
                -
                
                
                
                443,523General
      and administrative expenses
                
                
                46,756
                
                
                
                305,568
                
                
                
                80,359
                
                
                
                432,683Net
      operating income(loss)
                
                $
                (17,456
                )
                
                $
                (339,155
                )
                
                $
                (80,359
                )
                
                $
                (174,611
                )





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, 2008
              
              
              March
      31, 2007NET
      OPERATING INCOME (LOSS) FROM SEGMENTS
              
              $
              (281,947
              )
              
              $
              (174,611
              )DEPRECIATION
      AND AMORTIZATION EXPENSE
              
              
              10,899
              
              
              
              12,190OPERATING
      INCOME (LOSS)
              
              
              (292,846
              )
              
              
              (186,801
              )OTHER
      INCOME (EXPENSE):Interest
      expense
              
              
              (37,117
              )
              
              
              (46,857
              )Interest
      income
              
              
              19
              
              
              
              3Other
      income
              
              
              9,774
              
              
              
              105,757Total
      other income (expense)
              
              
              (23,547
              )
              
              
              58,903INCOME
      (LOSS) BEFORE TAXES
              
              $
              (320,170
              )
              
              $
              (127,898
              )




10





NOTE 4 -
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 5 –
MORTGAGE NOTES PAYABLE





Mortgage
notes payable consist of the following at March 31, 2008 and December 31, 2007,
respectively:





March
      31,2008
              
              
              December
      31, 2007(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 November 2010,
      collateralized by a building
              
              $
              864,721
              
              
              $
              872,734Note
      Payable - individual (secured by property), interest due monthly. Interest
      payable at 7.5%, note due and payable January 2005.
              
              
              -
              
              
              
              55,000Total
      mortgage notes payable
              
              
              864,721
              
              
              
              927,734Less
      current maturities
              
              
              34,081
              
              
              
              88,427Long
      term portion of mortgage notes payable
              
              $
              830,640
              
              
              $
              839,307





Settlement and Mediated
Judgment $150,000 Mortgage Note Payable





During
the year ended December 31, 2007 the Company entered into a settlement and
mediated judgment with the holder of the $150,000 mortgage note payable. The
settlement required payments of $175,000 in cash and the issuance of 1,000,000
shares of the Company’s common stock to the holder. At December 31, 2007 the
Company owed $55,000 on the mediated judgment. Pursuant to the settlement
agreement the Company made final payment to the holder on March 11, 2008. The
Company has the right to redeem or first right of refusal to repurchase the
shares from the holder at any time for 3 years in whole or in part at a price of
$0.05 per share.





Refinance of Discover
Building and Land





During
the year ended December 31, 2007 the Company refinanced its property located in
Minneapolis, Minnesota. The prior mortgage note payable was set to mature in
February 2008. The Company through another financial institution entered into a
new mortgage note payable to pay off the prior mortgage note payable. The new
mortgage note matures in November 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.




11





NOTE 6 –
NOTES PAYABLE AND CONVERTIBLE DEBENTURES





Notes
payable and convertible debentures consist of the following at March 31, 2008
and December 31, 2007, respectively:





March
      31,2008
              
              
              December
      31, 2007(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.
              
              
              73,319
              
              
              
              73,319Convertible
      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
              
              
              100,000
              
              
              
              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 investments 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
              
              
              225,000
              
              
              
              50,000Total
      notes payable and convertible debentures
              
              
              758,319
              
              
              
              583,319Less
      current maturities
              
              
              523,319
              
              
              
              473,319Long
      term portion of notes payable and convertible debentures
              
              $
              235,000
              
              
              $
              110,000





Convertible Debentures
2003





As of
March 31, 2008 the Company was in default with respect to its $300,000 in
convertible debentures (the 2003 Debentures). The 2003 Debentures were due and
payable November 30, 2006.  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 debentures are convertible at $0.20 per common
share.





Convertible Debentures 2005,
2006, 2007, 2008





As of
March 31, 2008 the Company had outstanding $385,000 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 8
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.





NOTE 7 –
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 expires in 2010 and 2009,
respectively.





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.




12


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, 2008 the Company has included
in accrued expense approximately $580,000 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, 2008, currently
cannot be ascertained, the Company believes that any resulting liability should
not materially affect the Company’s consolidated financial
statements.





NOTE 8 -
PROPERTY AND EQUIPMENT





The
Company's property and equipment by significant category consist of the
following at March 31, 2008 and December 31, 2007, respectively:





March
      31,2007
              
              
              December
      31, 2007(audited)Furniture
      and equipment
              
              $
              168,911
              
              
              $
              168,911Building
      and improvements
              
              
              468,716
              
              
              
              468,716Land
              
              
              100,000
              
              
              
              100,000Total
      property and equipment
              
              
              737,627
              
              
              
              737,627Less
      accumulated depreciation
              
              
              (249,310
              )
              
              
              (240,143
              )$
              488,317
              
              
              $
              497,484





NOTE 9 -
RELATED PARTY TRANSACTIONS





During
the three month period ended March 31, 2008, 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, 2008 funds received
under these short-term arrangements totaled $175,000.





NOTE 11 -
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, 2008, the Company had $8.5 million and $4.1 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.




13





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-KSB.




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 believes that with the acquisitions of Discover Mortgage and TCS
Mortgage it may soon reach the size and scope of business that will produce
continued growth in revenues and cash flows. In addition, with improving
economies of scale, additional skill sets, increased service offerings,
improving margins and the sale of selected assets the Company expects to begin
showing operating income. The Company has incurred significant losses, and as of
March 31, 2008 had an accumulated deficit of approximately $11.6 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,
and (3) new franchise sales.





14





RESULTS
OF OPERATIONS




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.




Even late
into 2007, it became apparent that the sub-prime mortgage market continues to be
strained which in turn affects the financial services industry. As a mortgage
broker, WHY USA does not have any exposure to the weakening sub-prime market,
and has no liability to purchase defaulted loans. As a result, management
believes that even though the sub-prime market has weakened, the negative impact
on future revenues will be minimal. Given that we have stabilized ourselves for
2008 even with the weakened sub-prime market, revenues are increasing over 2007
on a quarter to quarter basis, as we experience a growing demand 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 currently we are experiencing an increase of “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 $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.




We
believe that gross margin in future periods may be affected by, among other
things, the integration of acquired businesses in addition to increased
services, competitive conditions, our ability to make additional productivity
improvements and the acceptance of government products as a replacement for
non-government products.




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.




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.




15




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 $10,829.




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.




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.




Comparison
of the Three Month Periods Ended March 31, 2007 and 2006




Revenues




Net
revenues decreased $435,895 or 38% for the three months ended March 31,
2007 compared to the three months ended March 31, 2006. The decrease was a
result of the continued softening of the mortgage and real estate industry and
the decision to exit the mortgage banking business. Management believed the
market was entering into a high risk period and that the sub-prime market
meltdown would start to affect the integrity of the Company’s core business as
well.




Cost
of Revenues




Cost of
revenues decreased $266,120 or 38% for the three months ended March 31,
2007 compared to the three months ended March 31, 2006. Cost of revenues
increased slightly as a percentage relative to our decrease in net revenues
for the year. Costs of revenue which consists of primarily direct costs
associated with our products and services, was 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
increased to 63% for the three months ended March 31, 2007 compared to 62%
for the three months ended March 31, 2006. Gross margin
decreased to 37% for the three months ended March 31, 2007 compared to
38% for the three months ended March 31, 2006.




Operating
Expenses




Selling, General and Administrative.For the three months ended March 31, 2007, selling, general and
administrative expenses decreased $170,006 or 28% compared to the three months
ended March 31, 2006. The decrease was a result of several 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, 2007
decreased $4,188 or 26% compared to the three months ended March 31, 2006.
Depreciation and amortization expense for the three months ended March 31, 2007
was $12,190.




Other
Income (Expense)




Interest Expense. Interest
expense was $46,857 for the three months ended March 31, 2007 compared to
$122,796 for the three months ended March 31, 2006. The reason for the $75,939
reduction in interest expense was the conversion of several convertible
debentures that occurred during 2006 as well as the retirement of other debt and
financial obligations.




Other Income (Expense), Net.
Other income (expense), net, for the three months ended March 31, 2007 and
the three months ended March 31, 2006 was $105,757 and none, respectively.
For the 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.




16




LIQUIDITY
AND CAPITAL RESOURCES




Operating Activities.
Operating activities used net cash of $170,397 during the three month period
ended March 31, 2008 primarily from a net loss of $321,770 offset by net
non-cash charges of $47,606. Changes in operating assets and liabilities
provided a net increase of $103,767 in cash during the period. Within the
non-cash charges, the primary driver was bad debt expense of approximately
$37,000. The primary drivers of cash usage from changes in operating assets and
liabilities was an increase in accounts payable and accrued expenses
of approximately $92,000 which was partially offset by a decrease in trade
receivables of approximately $24,000.




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, 2008 was
zero.




Financing Activities. Net cash
provided by financing activities totaled $126,484 for the three month period
ended March 31, 2008 which includes the payments on existing debt of
approximately $63,000. Of the payments on existing debt the Company made a final
payment on its arbitrated settlement of $55,000 to a prior mortgage note holder.
 For the three month period ended March 31, 2008 we received $175,000 in
proceeds from various short-term note obligations entered into by one of our
directors. The Company for the three month period ended March 31, 2008 incurred
a bank overdraft of $16,441.




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, 2008, we had cash and cash equivalents of approximately $2,000. Our
working capital deficit was $1,664,397 as of March 31, 2008. This includes along
with accounts payable outstanding, bank
overdraft of $16,441,bank line of credit of $99,383, short term debt and
lease obligations of $557,400, as well as accrued expense and other of $741,376.
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 second 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 March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161). This
statement is intended to improve transparency in financial reporting by
requiring enhanced disclosures of an entity's derivative instruments and hedging
activities and their effects on the entity's financial position, financial
performance, and cash flows. SFAS 161 applies to all derivative instruments
within the scope of SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) as well as related hedged items, bifurcated derivatives,
and nonderivative instruments that are designated and qualify as hedging
instruments. Entities with instruments subject to SFAS 161 must provide more
robust qualitative disclosures and expanded quantitative disclosures. SFAS 161
is effective prospectively for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
permitted. We are currently evaluating the disclosure implications of this
statement.




17




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-QSB 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-KSB, filed with the Securities and Exchange Commission on May 5, 2008.
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.




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-KSB, Quarterly Reports on Form 10-QSB, our Current
Reports on Form 8-K and any amendments thereto are made available without charge
on our website.




The
following lists the name of the entity, state of incorporation, and/or date of
formation and acquisition of our wholly-owned subsidiaries as well as parent
company: WHY USA Financial Group, Inc., 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.




18




The
Company through its subsidiary TCS is a mortgage broker and prior to 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.




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 of Form 10-QSB.




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 initial 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 WHY USA North America, Inc and Northwest
Financial Ltd. became wholly-owned subsidiaries. Northwest Financial Ltd.
transferred 100% of its operations to Discover Mortgage Corporation 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 acquisition strategy is to establish a
national presence in our industry over the coming years, which we believe will
provide economies of scale in our operations due to an increase in our revenue
base through acquisition. Moreover, we believe more favorable terms will be
achieved from financial institutions that provide mortgage funding as our
lending transactions increase through size.




19




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; which ever 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 38 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. We estimate that our current franchisees include more than 350
licensed real estate agents who in the aggregate generate between 250 and 275
monthly real estate transactions.




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 $4.3 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.




20




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 and estimates $2.28 trillion for 2007, $2.23 trillion for 2008
and $2.14 trillion in 2009.




Large
banks and mortgage lenders like Wells Fargo, Bank of America/Countrywide, and
Washington Mutual 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 primary 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.




Recently
many lenders that specialized in this type of sub-prime product have gone out of
business. Many of these 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 360 mortgages and fee income of $2.0 million in
2007. 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.




21




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, 2007. Although the Company may be out of compliance with this
requirement for the quarter ended March 31, 2008, management believes that the
annual renewal requirement will be met by or prior to December 31, 2008.
Maintaining a license with HUD allows TCS to originate FHA loans that it would
not otherwise be able to originate. Approximately five 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.




ITEM 3A(T).
            Controls
      and Procedures




Evaluation
of Disclosure Controls and Procedures




Our
management evaluated, under the supervision and with the participation of our
principal executive officer and our principal financial officer, the
effectiveness of the design and operation of our disclosure controls and
procedures as of March 31, 2008 pursuant to Rule 13a-15(b) under the
Securities Exchange Act of 1934 (the “Exchange Act”). Based upon their
evaluation, our principal executive officer and our principal financial officer
concluded that our disclosure controls and procedures were effective as of
March 31, 2008 to ensure that information required to be disclosed by us in
the reports we file or submit under the Exchange Act is recorded, processed,
summarized, and reported, within the time periods specified in the Securities
and Exchange Commission’s rules and forms, and to ensure that information
required to be disclosed by us in the reports we file or submit under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and principal financial officers, as appropriate, to allow
timely decisions regarding required disclosures.




22




Changes
in Internal Control over Financial Reporting




There was
no change in our internal control over financial reporting that occurred during
the quarter ended March 31, 2008 that has materially affected, or is
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, 2008, currently
cannot be ascertained, the Company believes that any resulting liability should
not materially affect the Company’s consolidated financial
statements.




ITEM 1A.
            Risk
      Factors




There are
no material changes from risk factors disclosed in our Form 10-KSB for the year
ended December 31, 2007, as filed on May 5, 2008.




ITEM 2.
            Unregistered
      Sales of Equity Securities and Use of Proceedsa)
            None.b)
            None.c)
            None.





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.




23




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
      20, 2008/s/  KENNETH
      J. YONIKA
              Kenneth
      J. Yonika
            
            Chief
      Financial Officer (Principal Financial Officer)
            
            May
      20, 2008










24




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 November 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 March 31, 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