**U.S.
      Securities and Exchange Commission**


**Washington,
      D.C. 20549**









**FORM
      10-QSB**










x **QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**




**For the Quarterly Period Ended** **August 31, 2006**





o **TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**




**For the Transition Period from** **_______
      to _______**









**CAPITAL
      RESOURCE FUNDING, INC.**


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







**North
                Carolina**
            **54-2142880****(State
                or other jurisdiction of**
            **(IRS
                Employer identification No.)****incorporation
                or organization)**





**2212
      Lantern Way Circle, Cornelius, North Carolina 28031**


**(Address
      of principal executive offices)**





**(704)
      564-1676**


**(Issuer's
      telephone number, including area code)**












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





Number
      of
      shares of common stock outstanding as of October 18, 2006: 12,422,971





Number
      of
      shares of preferred stock outstanding as of October 18, 2006: -0-




Note:
      The
      information contained in this Form 10-QSB should be read in conjunction with
      its
      other recent public filings regarding its announcement of an executed Plan
      of
      Exchange with an unrelated entity and other related disclosures.












ITEM
      1.




**Capital
                  Resource Funding, Inc.**BALANCE
                  SHEETAS
                  OF AUGUST 31, 2006**ASSETS**CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              17,060TOTAL
                  CURRENT ASSETS
              
              
              17,060FIXED
                  ASSETSComputer
                  equipment
              
              
              4,035Accumulated
                  depreciation
              
              
              (335
              )TOTAL
                  FIXED ASSETS
              
              
              3,700TOTAL
                  ASSETS
              
              $
              20,760**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**CURRENT
                  LIABILITIESAccrued
                  Interest
              
              $
              2,358Notes
                  Payable
              
              
              62,77865,136STOCKHOLDERS'
                  DEFICITConvertible
                  Preferred Stock ($.00000005 par value, 100,000,000shares
                  authorized; none issued and outstanding at August 31,
                  2006)
              
              
              -Common
                  Stock ($.00000005 par value, 100,000,000 shares
                  authorized;12,422,971
                  issued and outstanding at August 31, 2006)
              
              
              1Additional
                  Paid in Capital
              
              
              590,431Retained
                  Deficit
              
              
              (634,808
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (44,376
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              20,760




2


**Capital
                  Resource Funding, Inc.**STATEMENTS
                  OF OPERATIONSFOR
                  THE THREE MONTHS ENDED AUGUST 31, 2006 AND 20053
                  Months Ended 8/31/06
              
              3
                  Months Ended 8/31/05REVENUES:Commissions
                  Earned
              
              $
              17,486
              
              $
              542TOTAL
                  REVENUE
              
              $
              17,486
              
              $
              542EXPENSES:Operating
                  ExpensesSelling,
                  general, and administrative
              
              $
              30,666
              
              $
              587Common
                  stock issued for consulting fees
              
              
              333,243
              
              
              -TOTAL
                  EXPENSES
              
              
              363,909
              
              
              587OPERATING
                  (LOSS)
              
              
              (346,423
              )
              
              (45
              )Interest
                  Expense
              
              
              1,107
              
              
              3711,107
              
              
              371NET
                  (LOSS)
              
              $
              (347,530
              )
              $
              (416
              )Net
                  (loss) per share-basic
                  and fully diluted
              
              $
              (0.03
              )
              $
              *Weighted
                  average shares outstanding
              
              
              11,756,486
              
              
              10,790,000*
                  less than $.01 per share.




3


**Capital
                  Resource Funding, Inc.**STATEMENTS
                  OF CASH FLOWSFOR
                  THE THREE MONTHS ENDED AUGUST 31, 2006 AND 20053
                  Months Ended 8/31/06
              
              3
                  Months Ended 8/31/05CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  (loss)
              
              $
              (347,530
              )
              $
              (416
              )Adjustments
                  to reconcile net (loss) to net cash used in operations:Non-cash
                  itemsCommon
                  stock issued for services rendered
              
              
              333,243
              
              
              -Depreciation
              
              
              67
              
              
              -Accrued
                  interest
              
              
              582
              
              
              -NET
                  CASH (USED IN) OPERATING ACTIVITIES
              
              
              (13,638
              )
              
              (416
              )NET
                  (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (13,638
              )
              
              (416
              )NET
                  (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (13,638
              )
              
              (416
              )CASH
                  AND CASH EQUIVALENTS:BEGINNING
                  OF THE PERIOD
              
              
              30,698
              
              
              2,040END
                  OF THE PERIOD
              
              
              17,060
              
              
              1,624




4




**CAPITAL
      RESOURCE FUNDING, INC**


NOTES
      TO
      FINANCIAL STATEMENTS


FOR
      THE
      QUARTER ENDED AUGUST 31, 2006







NOTE
      A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Business
      Activity —Capital
      Resource Funding, Inc. (“We, Our, Us”) was organized under the laws of the State
      of North Carolina on February 2, 2004 as a subchapter S-Corporation. We are
      in
      the business of providing consultative services to small to mid sized businesses
      in need of financing sources ranging from SBA loans, commercial mortgages,
      factoring and asset based loans. The financial statements set forth above
      reflect all of the costs of doing business. Our fiscal year-end is May 31,
      as
      elected.





Cash
      and Cash Equivalents —For
      purposes of the Statement of Cash Flows, we consider liquid investments with
      an
      original maturity of three months or less to be cash equivalents.





Management’s
      Use of Estimates —The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America 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
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. Actual results could differ from those
      estimates.





Revenue
      Recognition —Our
      revenue is derived primarily from brokering income which ranges from one time
      origination fees to on-going monthly commissions paid for the life of the
      financing. For purposes of one-time origination fees, revenue is recognized
      as
      earned when each loan deal is finalized. For purposes of on-going monthly
      commissions paid for the life of the financing, revenue is recognized as earned
      based on the total of the gross monthly financing fees generated.





Comprehensive
      Income (Loss) —We
      adopted Financial Accounting Standards Board Statement of Financial Accounting
      Standards (SFAS) No. 130, *“Reporting
      Comprehensive Income”* ,
      which
      establishes standards for the reporting and display of comprehensive income
      and
      its components in the financial statements. There were no items of comprehensive
      income (loss) applicable to us during the period covered in the financial
      statements.





Advertising
      Costs —Advertising
      costs are expensed as incurred. The advertising expense totaled $-0- for the
      three months ended August 31, 2006 and 2005, respectively.





Income
      Taxes —The
      S
      Corporation is not a taxpaying entity for federal and state income tax purposes
      and thus no provisions for income taxes has been recognized. Income of the
      S
      Corporation is taxed to the shareholders in their respective
      returns.





Fair
      Value of Financial Instruments —The
      carrying amounts reported in the balance sheet for cash, fixed assets, accrued
      interest and notes payable approximate fair value based on the short-term
      maturity of these instruments.





5


**CAPITAL
      RESOURCE FUNDING, INC**


NOTES
      TO
      FINANCIAL STATEMENTS


FOR
      THE
      QUARTER ENDED AUGUST 31, 2006







NOTE
      A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)





Net
      Income per Common Share —Statement
      of Financial Accounting Standard (SFAS) No. 128 requires dual presentation
      of
      basic and diluted earnings per share (EPS) with a reconciliation of the
      numerator and denominator of the EPS computations. Basic earnings per share
      amounts are based on the weighted average shares of common stock outstanding.
      If
      applicable, diluted earnings per share would assume the conversion, exercise
      or
      issuance of all potential common stock instruments such as options, warrants
      and
      convertible securities, unless the effect is to reduce a loss or increase
      earnings per share. Accordingly, this presentation has been adopted for the
      period presented. There were no adjustments required to net income for the
      period presented in the computation of diluted earnings per share.





Impairment
      of Long-Lived Assets —We
      evaluate the recoverability of its fixed assets and other assets in accordance
      with Statement of Financial Accounting Standards No. 144, “ *Accounting
      for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144’).* SFAS 144
      requires recognition of impairment of long-lived assets in the event the net
      book value of such assets exceeds its expected cash flows, it is considered
      to
      be impaired and is written down to fair value, which is determined based on
      either discounted future cash flows or appraised values. We adopted the
      statement on inception. No impairments of these types of assets were recognized
      during the three months ended August 31, 2006 based upon a management review
      of
      such assets.





Recent
      Accounting Pronouncements -
      In
      June 2006, the Financial Accounting Standards Board (“FASB”) ratified the
      provisions of Emerging Issues Task Force (“EITF”) Issue No. 06-3, “How
      Taxes Collected from Customers and Remitted to Governmental Authorities Should
      Be Presented in the Income Statement (that is, Gross versus Net Presentation).”
EITF Issue No. 06-3 requires that the presentation of taxes within
      revenue-producing transactions between a seller and a customer, including but
      not limited to sales, use, value added, and some excise taxes, should be on
      either a gross (included in revenue and cost) or a net (excluded from revenue)
      basis.





In
      addition, for any such taxes that are reported on a gross basis, a company
      should disclose the amounts of those taxes in interim and annual financial
      statements for each period for which an income statement is presented if those
      amounts are significant. The disclosure of those taxes can be done on an
      aggregate basis. EITF Issue No. 06-3 is effective for fiscal years
      beginning after December 15, 2006, which will be our third quarter of
      fiscal 2007. We expect that the adoption of EITF Issue No. 06-3 will not
      have a material impact on our consolidated results of operations or financial
      position.





On
      July
      13, 2006, the FASB released FIN 48, “Accounting for Uncertainty in Income Taxes
      - an Interpretation of FASB Statement 109.”  FIN 48 requires companies to
      evaluate and disclose material uncertain tax positions it has taken with various
      taxing jurisdictions. We are currently reviewing FIN 48 and are unable to
      determine the effect, if any, that FIN 48 will have to our consolidated
      operating results, consolidated financial position, or future consolidated
      cash
      flows.





6
 
  **CAPITAL
        RESOURCE FUNDING, INC**


NOTES
      TO
      FINANCIAL STATEMENTS


FOR
      THE
      QUARTER ENDED AUGUST 31, 2006







NOTE
      B—SUPPLEMENTAL CASH FLOW INFORMATION





Supplemental
      disclosures of cash flow information for the three months ended August 31,
      2006
      is summarized as follows:





Cash
      paid
      during the three months ended August 31, 2006 for interest and income
      taxes:




Income
      Taxes $
      ---


Interest $525





NOTE
      C—SEGMENT REPORTING





In
      June
      1997, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards No. 131, *“Disclosures
      about Segments of an Enterprise and Related Information.”* This
      statement requires companies to report information about operating segments
      in
      interim and annual financial statements. It also requires segment disclosures
      about products and services, geographic areas and major customers. We determined
      that we did not have any separately reportable operating segments as of August
      31, 2006.





NOTE
      D—COMMITMENTS





We
      are
      provided with its office facilities from its officers and majority shareholder,
      on a month-to-month basis for $500 per month.





NOTE E
      - GOING
      CONCERN





We
      have
      limited revenue of $17,486 for the three months ended August 31, 2006 and we
      suffered a net loss from operations subsequent for the three months ended August
      31, 2006 of $347,530. We have collective notes payable in the amount of $62,778
      as of August 31, 2006, with $17,060 in cash at August 31, 2006, and a net
      working capital deficit of $48,076 as of August 31, 2006. These factors raise
      substantial doubt about our ability to continue as a going concern.





The
      pertinent conditions and events giving rise to the assessment of substantial
      doubt about our ability to continue as a going concern for a period of time
      are
      addressed in the previous paragraph, where we describe two conditions that
      substantiate our going concern opinion: net loss and the incurrence of a note
      payable subsequent to year-end. The possible effects of such conditions are
      a
      lack of positive cash flow and the inability to repay the note as it comes
      due.
      These conditions are significant and there are no mitigating factors. There
      could be a possible discontinuance of operations in the event that our plan
      does
      not work.





Management’s
      plans in regard to this matter are to raise equity capital and seek strategic
      relationships and alliances in order to increase sales in an effort to generate
      positive cash flow and be able to repay the note as it comes due. Additionally,
      we will have to rely upon equity infusions from investors in order to improve
      liquidity and sustain operations. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




We
      deem
      all recorded assets to be recoverable and classification of liabilities to
      be
      proper.




7




ITEM
      2.  MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





The
      discussion contained in this Form 10-QSB contains “forward-looking statements”
that involve risk and uncertainties. These statements may be identified by
      the
      use of terminology such as “believes”, “expects”, “may”, or “should”, or
“anticipates”, or expressing this terminology negatively or similar expressions
      or by discussions of strategy. The cautionary statements made in this Form
      10-QSB should be read as being applicable to all related forward-looking
      statements wherever they appear in this Form 10-QSB. Our actual results could
      differ materially from those discussed in this Form 10-QSB. Important factors
      that could cause or contribute to such differences include those discussed
      under
      the caption entitled “risk factors,” as well as those discussed elsewhere in
      this Form 10-QSB.




OUR
      COMPANY




We
      were
      incorporated in North Carolina on February 2, 2004 to engage in the business
      of
      commercial finance brokerage and consulting. We are currently engaged and plan
      to continue in the commercial finance brokerage and consulting
      business.




We
      have acted
      and intend to continue to act as a broker for commercial finance transactions.
      The different types of commercial financing that we intend to broker are:
      Commercial Mortgages, Asset-Based Lines of Credit, Commercial Leasing, Accounts
      Receivable Financing (also known as “Factoring”) and Purchase Order Financing.
      To date, we have successfully brokered four financing transactions totaling
      $11,094 in fees, consisting of two mortgage transactions totaling $3,044, seven
      monthly broker fees for one factoring transaction and one broker fee in
      connection with a commercial lease transaction. Therefore, we have only received
      fees in connection with four closed transactions.




In
      performing
      all of these brokering services, we have and propose to represent our clients
      in
      all aspects of assisting with the assessment of funding needs and
      qualifications, and identifying and making presentations to the most suitable
      funding sources.





Results
      of Operations.





Revenue.




We
      recorded
      revenue of $17,486 for the three months ended August 31, 2006, versus
      revenue of $542 for the same period ended in August 31, 2005. Sales
      consisted of commissions earned on funded loans as follows:





·
            Broker
                fees in connection with factoring of accounts
                receivable.




All
      sales
      transactions were with unrelated parties.




Expenses.




Total
      expenses for the three months ended August 31, 2006 were $363,909, versus
      expenses of $587 for the same period ended in August 31, 2005. The increase
      of
      $322,322 was primarily due to the issuance of 1,332,971 common shares for
      services rendered in the quarter ended August 31, 2006 which generated $333,243
      in expenses. The expenses for the three months ended August 31, 2005 were
      attributable to miscellaneous
      and sundry costs.




8




We
      expect
      increases in expenses through the year 2006 as we move toward developing our
      business plan and registering our common stock. In addition, we expect
      professional fees to increase to around $30,000 per annum for compliance with
      the reporting requirements of the Securities Exchange Act of 1934, as amended.
      We also expect rent, phone, travel and web-hosting to increase to $12,800 per
      annum, internet advertising to increase to $36,000 per annum, and salaries
      to
      increase to $40,000 per annum.




We
      do not
      have any lease agreements for our facilities and do not currently have any
      employment agreements.





Income
      Taxes




We
      did not
      have any federal or state income tax expense for the three months ended August
      31, 2005 due to the accumulated loss.




Income/
      Losses.




Net
      loss for
      the three months ended August 31, 2006 was ($347,530), or ($.03) per share,
      versus the net loss of $542, or less than $.01 per share, for the same period
      ended August 31, 2005. The net loss for the three months ended August 31, 2006
      was due to the limited revenues from commissions and common stock issuance
      for
      services rendered as noted above. We expect to continue to incur losses at
      least
      through the fiscal year 2006, partly attributable to the fair value of expected
      services to be received. In addition, there can be no assurance that we will
      achieve or maintain profitability or that our revenue growth can be sustained
      in
      the future.




Impact
      of
      Inflation.




We
      believe
      that inflation has had a negligible effect on operations since inception. We
      believe that we can offset inflationary increases in the cost of operations
      by
      increasing sales and improving operating efficiencies.





Liquidity
      and Capital Resources.




Cash
      flows
      used in operations for the three months ended August 31, 2006 were $13,638,
      versus cash flow used of $416 used in operations for the same period ended
      August 31, 2005. Cash flows were primarily attributable to a net loss for both
      quarters ended in August 31, 2006 and 2005. Cash received for commissions and
      broker fees for the three months ended August 31, 2006 was $17,486 versus $542
      in the prior comparable period.




There
      were no
      cash flows from investing or financing activities for the both quarters ended
      August 31, 2006 and 2005.




Overall,
      we
      have funded our cash needs for the three months ended August 31, 2006 with
      excess cash from prior periods that we have been using in subsequent periods.
      If
      we are unable to receive additional cash, we may need to rely on financing
      from
      outside sources through debt or equity transactions. Our officer is under no
      legal obligation to provide us with capital infusions. As described above under
      Liquidity and Capital Resources for the three months ended August 31, 2006,
      our
      cash flow and cash needs for the future are significant. Cash flows for the
      three months ended August 31, 2006 has decreased and our cash needs have
      increased as a result of our results of operations during the period.




9




Failure
      to
      obtain such financing could have a material adverse effect on our operations
      and
      financial condition. This could include an inability to do sufficient
      advertising for the services we provide, which would make us less competitive
      in
      the marketplace. We could also find it more difficult to enter into strategic
      joint venture relationships with third parties. Finally, it would most likely
      delay the implementation of our business plan. An alternative plan of operation
      in the event of a failure to obtain financing would be to continue operations
      as
      currently configured, with the result being little, if any, projected growth.
      Another alternative would be to enter into a joint venture with a brokerage
      firm
      that has working capital available, albeit on less favorable terms than had
      we
      obtained financing, for the development of our business plan.




We
      had cash
      on hand of only $17,060 and a working capital deficit of $48,076 as of August
      31, 2006. In addition to the line of credit, we may need to seek additional
      outside sources of funding, such as equity or debt placements. We will also
      rely
      on the existence of our projected revenue from our business operations, if
      any.
      A lack of significant revenues during the remainder of 2006 will significantly
      affect our cash position and move us towards a position where the raising of
      additional funds through equity or debt financing will have to be necessary.
      Our
      current level of operations would require capital of approximately $1,000 to
      sustain operations through fiscal year 2006 and approximately $35,000 per year
      thereafter. Any modifications to our business plans, such the hiring of
      additional employees and the principal making a full-time commitment to the
      business, which would require the payment of his salary and expenses, may
      require additional capital for us to operate. There can be no assurance that
      additional capital will be available to us when needed or available on terms
      favorable to us.




No
      officer or
      director, nor any other person or entity is liable for, surety or otherwise
      provides a guarantee for our line of credit with First Citizens
      Bank.




On
      a
      long-term basis, liquidity is dependent on continuation and expansion of
      operations, receipt of revenues, and additional infusions of capital and debt
      financing. We are considering launching a local advertising campaign. Our
      current capital and revenues are insufficient to fund such marketing. If we
      choose to launch such a campaign, we will require substantially more capital.
      If
      necessary, we will raise this capital through an additional stock offering.
      However, there can be no assurance that we will be able to obtain additional
      equity or debt financing in the future, if at all. If we are unable to raise
      additional capital, our growth potential will be adversely affected and we
      will
      have to significantly modify our plans. For example, if we unable to raise
      sufficient capital to develop our business plan, we may need to:





§
            Seek
                projects that are less in value or that may be projected to be less
                profitable, or


§
            Seek
                business that is outside our immediate area to bring some revenue
                to
                us.




Demand
      for
      the products and services will be dependent on, among other things, market
      acceptance of our services, the commercial finance brokering market in general,
      and general economic conditions, which are cyclical in nature. Inasmuch as
      a
      major portion of our activities is the receipt of revenues from commissions
      earned, our business operations may be adversely affected by our competitors
      and
      prolonged recession periods.




10




Our
      success
      will be dependent upon implementing our plan of operations and the risks
      associated with our business plan. We operate a small commercial finance
      brokerage business in the Charlotte, North Carolina area. We see a need to
      strengthen our position in these markets. We are considering expanding our
      operations through aggressively marketing our services. We project that we
      may
      become profitable on a self-sustaining basis in 24-36 months. However, there
      can
      be no assurances that we will ever become profitable on a self-sustaining
      basis.




Our
      cash on
      hand as of the latest balance sheet date is insufficient to fund our operations
      and our expectations of cash inflows will not meet our cash requirements for
      the
      next twelve months. This is reflecting in the “going concern” opinion that has
      been issued by our auditor. We intend to raise cash through additional debt
      and
      equity financings, however, there is no assurance that we will be successful
      in
      this regard.




Critical
      Accounting Policies and Estimates




We
      have
      identified the following policies as critical to our business operations and
      the
      understanding of our results of operations. This listing is not a comprehensive
      list of all of our accounting policies. In many cases, the accounting treatment
      of a particular transaction is specifically dictated by accounting principles
      generally accepted in the United States, with no need for management's judgment
      in their application. There are also areas in which management's judgment in
      selecting any available alternative would not produce a materially different
      result. However, certain of our accounting policies are particularly important
      to the portrayal of our financial position and results of operations and may
      require the application of significant judgment by our management; as a result,
      they are subject to an inherent degree of uncertainty. In applying those
      policies, our management uses its judgment to determine the appropriate
      assumptions to be used in the determination of certain estimates. Those
      estimates are based on our historical experience, our observance of trends
      in
      the industry, and information available from other outside sources, as
      appropriate. For a more detailed discussion on the application of these and
      other accounting policies, see "Note 1 - Summary of significant account
      policies" in our financial statements and related notes on Form 10-KSB. Our
      critical accounting policies and estimates are as follows:





Revenue
      Recognition





The
      Company’s revenue is derived primarily from brokering income which ranges from
      one time origination fees to on-going monthly commissions paid for the life
      of
      the financing. For purposes of one-time origination fees, revenue is recognized
      as earned when each loan deal is finalized. For purposes of on-going monthly
      commissions paid for the life of the financing, revenue is recognized as earned
      based on the total of the gross monthly financing fees generated.





Impairment
      of Long-Lived Assets





The
      Company evaluates the recoverability of its fixed assets and other assets in
      accordance with Statement of Financial Accounting Standards No. 144,
“ *Accounting
      for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144’).* SFAS 144
      requires recognition of impairment of long-lived assets in the event the net
      book value of such assets exceeds its expected cash flows, it is considered
      to
      be impaired and is written down to fair value, which is determined based on
      either discounted future cash flows or appraised values. The Company adopted
      the
      statement on inception. No impairments of these types of assets were recognized
      during the three month ended August 31, 2006 based upon a management review
      of
      such assets.




11




ITEM
      3.  CONTROLS
      AND PROCEDURES





Quarterly
      Evaluation of Controls


As
        of the
        end of the period covered by this quarterly report on Form 10-QSB, we evaluated
        the effectiveness of the design and operation of (i) our disclosure controls
        and
        procedures ("Disclosure Controls"), and (ii) our internal control over financial
        reporting ("Internal Controls"). This evaluation ("Evaluation") was performed
        by
        our President and Chief Executive Officer for the quarter ending August 31,
        2006, David Koran (“CEO”) and by our Chief Financial Officer for the quarter
        ending August 31, 2006, Laura Koran, (“CFO”). In this section, we present the
        conclusions of our CEO based on and as of the date of the Evaluation, (i)
        with
        respect to the effectiveness of our Disclosure Controls, and (ii) with respect
        to any change in our Internal Controls that occurred during the most recent
        fiscal quarter that has materially affected, or is reasonably likely to
        materially affect our Internal Controls.





CEO
      and
      CFO Certifications




Attached
      to
      this quarterly report, as Exhibits 31.1 and 31.2, are certain certifications
      of
      the CEO and CFO, which are required in accordance with the Exchange Act and
      the
      Commission's rules implementing such section (the "Rule 13a-14(a)/15d-14(a)
      Certifications"). This section of the quarterly report contains the information
      concerning the Evaluation referred to in the Rule 13a-14(a)/15d-14(a)
      Certifications. This information should be read in conjunction with the Rule
      13a-14(a)/15d-14(a) Certifications for a more complete understanding of the
      topic presented.




Disclosure
      Controls and Internal Controls




Disclosure
      Controls are procedures designed with the objective of ensuring that information
      required to be disclosed in our reports filed with the Commission under the
      Exchange Act, such as this quarterly report, is recorded, processed, summarized
      and reported within the time period specified in the Commission's rules and
      forms. Disclosure Controls are also designed with the objective of ensuring
      that
      material information relating to the Company is made known to the CEO and the
      CFO by others, particularly during the period in which the applicable report
      is
      being prepared. Internal Controls, on the other hand, are procedures which
      are
      designed with the objective of providing reasonable assurance that (i) our
      transactions are properly authorized, (ii) our assets are safeguarded against
      unauthorized or improper use, and (iii) our transactions are properly recorded
      and reported, all to permit the preparation of complete and accurate financial
      statements in conformity with accounting principals generally accepted in the
      United States.





Limitations
      on the Effectiveness of Controls




Our
      management does not expect that our Disclosure Controls or our Internal Controls
      will prevent all error and all fraud. A control system, no matter how well
      developed and operated, can provide only reasonable, but not absolute assurance
      that the objectives of the control system are met. Further, the design of the
      control system must reflect the fact that there are resource constraints, and
      the benefits of controls must be considered relative to their costs. Because
      of
      the inherent limitations in all control systems, no evaluation of controls
      can
      provide absolute assurance that all control issues and instances so of fraud,
      if
      any, within the Company have been detected. These inherent limitations include
      the realities that judgments in decision -making can be faulty, and that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management override of the control. The design of a system
      of controls also is based in part upon certain assumptions about the likelihood
      of future events, and there can be no assurance that any design will succeed
      in
      achieving its stated objectives under all potential future conditions. Over
      time, control may become inadequate because of changes in conditions, or because
      the degree of compliance with the policies or procedures may deteriorate.
      Because of the inherent limitations in a cost-effective control system,
      misstatements due to error or fraud may occur and not be detected.




12





Scope
      of
      the Evaluation




The
      CEO and
      CFO's evaluation of our Disclosure Controls and Internal Controls included
      a
      review of the controls' (i) objectives, (ii) design, (iii) implementation,
      and
      (iv) the effect of the controls on the information generated for use in this
      quarterly report. In the course of the Evaluation, the CEO and CFO sought to
      identify data errors, control problems, acts of fraud, and they sought to
      confirm that appropriate corrective action, including process improvements,
      was
      being undertaken. This type of evaluation is done on a quarterly basis so that
      the conclusions concerning the effectiveness of our controls can be reported
      in
      our quarterly reports on Form 10-QSB and annual reports on Form 10-KSB. The
      overall goals of these various evaluation activities are to monitor our
      Disclosure Controls and our Internal Controls, and to make modifications if
      and
      as necessary. Our external auditors also review Internal Controls in connection
      with their audit and review activities. Our intent in this regard is that the
      Disclosure Controls and the Internal Controls will be maintained as dynamic
      systems that change (including improvements and corrections) as conditions
      warrant.




Among
      other matters, we sought in our Evaluation to determine whether there were
      any
      significant deficiencies or material weaknesses in our Internal Controls, which
      are reasonably likely to adversely affect our ability to record, process,
      summarize and report financial information, or whether we had identified any
      acts of fraud, whether or not material, involving management or other employees
      who have a significant role in our Internal Controls. This information was
      important for both the Evaluation, generally, and because the Rule
      13a-14(a)/15d-14(a) Certifications, Item 5, require that the CEO and CFO
      disclose that information to our Board (audit committee), and to our independent
      auditors, and to report on related matters in this section of the quarterly
      report. In the professional auditing literature, "significant deficiencies"
      are
      referred to as "reportable conditions". These are control issues that could
      have
      significant adverse affect on the ability to record, process, summarize and
      report financial data in the financial statements. A "material weakness" is
      defined in the auditing literature as a particularly serious reportable
      condition where the internal control does not reduce, to a relatively low level,
      the risk that misstatement cause by error or fraud may occur in amounts that
      would be material in relation to the financial statements and not be detected
      within a timely period by employee in the normal course of performing their
      assigned functions. We also sought to deal with other controls matters in the
      Evaluation, and in each case, if a problem was identified, we considered what
      revisions, improvements and/or corrections to make in accordance with our
      ongoing procedures.


Conclusions





Based
      upon the Evaluation, our disclosure controls and procedures are designed to
      provide reasonable assurance of achieving our objectives. Our CEO and CFO have
      concluded that our disclosure controls and procedures are effective at that
      reasonable assurance level to ensure that material information relating to
      the
      Company is made known to management, including the CEO and CFO, particularly
      during the period when our periodic reports are being prepared, and that our
      Internal Controls are effective at that assurance level to provide reasonable
      assurance that our financial statements are fairly presented inconformity with
      accounting principals generally accepted in the United States. Additionally,
      there has been no change in our Internal Controls that occurred during our
      most
      recent fiscal quarter that has materially affected, or is reasonably likely
      to
      affect, our Internal Controls.




13





PART
      II. OTHER
      INFORMATION





Item
      1.
      Legal Proceedings





None.





Item
      2.
      Changes in Securities





During
      the quarter ended August 31, 2006, we issued 1,332,471 restricted common shares
      for services rendered during the quarter.




Item
      3.
      Defaults Upon Senior Securities





None.





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





None.





Item
      5.
      Other Information





None.





Item
      6.
      Exhibits and Reports on Form 8-K





(a)
      Exhibits


31.1 CEO Certification pursuant to Section 302
 31.2 CFO Certification pursuant to Section 302
 32.1
        CEO Certification pursuant to Section 906
 32.2 CFO Certification pursuant to Section 906




(b)
      Reports on Form 8-K




Forms
      8-K was
      issued on September 7, 2006 and October 2, 2006 for entry into a material
      agreement i.e. Plan of Exchange, with an unrelated entity.





14
 
  **SIGNATURES**





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








**CAPITAL
                RESOURCE FUNDING, INC.**
              **(Registrant)**Date: October
                18, 2006
            By:
            /s/ David
                KoranDavid
                Koran
              President
                and Chief Executive Officer
              For
                the quarter ending August 31, 2006








**CAPITAL
                RESOURCE FUNDING, INC.**
              **(Registrant)**Date: October
                18, 2006
            By:
            /s/ Laura
                KoranLaura
                Koran
              Chief
                Financial Officer
              For
                  the quarter ending August 31,
                  2006




15