**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
  **FORM
        10-Q**
  **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934.**
 
 **For
        the quarterly period ended June 30, 2007**
   ̈
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934.**
  **For
        the Transition Period from** **** **to** **** **.**
  **Commission
        file number: 1-15831**
  **MCF
        CORPORATION**
 **(Exact
        Name of Registrant as Specified in its Charter)**
  **Delaware**
                **(State
                  or Other Jurisdiction of**
                **Incorporation
                  or Organization)**
              
              **11-2936371**
                **(I.R.S.
                  Employer**
                **Identification
                  No.)**
  **600
                  California Street, 9th Floor**
                **San
                  Francisco, CA**
                **(Address
                  of Principal Executive Offices)**
              
              **94108**
                **(Zip
                  Code)**
  **(415)
        248-5600**
 **(Registrant's
        Telephone Number, Including Area Code)**
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
        during the preceding 12 months (or for such shorter period that the
        registrant was required to file such reports), and (2) has been
        subject to such filing requirements for the past 90 days.
        Yes x No  ̈
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
 
 Large
                  accelerated filer ̈
              Accelerated
                  filerx
              Non-accelerated
                  filer ̈
  Indicate
        by check mark whether the registrant is a shell company (as defined in
        Rule 12b-2 of the Act). Yes  ̈ No x
 
 The
        number of shares of Registrant's common stock outstanding as of August 6,
        2007
        was 12,149,174.
 
  **Form
        10-Q**
 **For
        the Three Months Ended June 30, 200**  **7**
  **Page
                  No.**PART
                  I FINANCIAL INFORMATIONITEM
                  1. Financial Statements (unaudited)Condensed
                  Consolidated Statements of Operations For the Three Months and
                  Six Months
                  Ended June 30, 2007 and 2006
              2Condensed
                  Consolidated Statements of Financial Condition as of June 30, 2007
                  and
                  December 31, 2006
              3Condensed
                  Consolidated Statements of Cash Flows For the Six Months Ended
                  June 30,
                  2007 and 2006
              4Notes
                  to Condensed Consolidated Financial Statements
              5ITEM
                  2. Management's Discussion and Analysis of Financial Condition
                  and Results
                  of Operations
              15ITEM
                  3. Quantitative and Qualitative Disclosures About Market
                  Risk
              24ITEM
                  4. Controls and Procedures
              24PART
                  II OTHER INFORMATIONITEM
                  1. Legal Proceedings
              25ITEM
                  1A. Risk Factors
              25ITEM
                  4. Submission of Matters to a Vote of Security Holders
              31ITEM
                  6. Exhibits
              32Signatures
              33Certifications
  1
 
 **PART
        I.  FINANCIAL INFORMATION**
  **Item
        1.   Financial Statements (unaudited)**
 
 **MCF
        CORPORATION**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(unaudited)**
  **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**
                
                **June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**Revenue:Commissions
                $
                7,717,573
                
                $
                7,945,580
                
                $
                14,883,280
                
                $
                16,643,708Principal
                    transactions
                
                5,712,652
                
                
                (735,951
                )
                
                8,325,776
                
                
                (332,650
                )Investment
                    banking
                
                5,631,556
                
                
                7,485,108
                
                
                9,864,027
                
                
                9,910,888Primary
                    research
                
                951,062
                
                
                ─
                
                
                951,062
                
                
                ─Advisory
                    and other fees
                
                359,506
                
                
                170,129
                
                
                671,348
                
                
                203,222Total
                    revenue
                
                20,372,349
                
                
                14,864,866
                
                
                34,695,493
                
                
                26,425,168Operating
                    expenses:Compensation
                    and benefits
                
                12,767,087
                
                
                11,719,319
                
                
                23,577,374
                
                
                21,453,092Brokerage
                    and clearing fees
                
                662,056
                
                
                706,256
                
                
                1,294,697
                
                
                1,388,860Cost
                    of primary research services
                
                395,218
                
                
                ─
                
                
                395,218
                
                
                ─Professional
                    services
                
                703,640
                
                
                842,058
                
                
                1,085,118
                
                
                1,283,381Occupancy
                    and equipment
                
                453,061
                
                
                407,334
                
                
                895,589
                
                
                789,155Communications
                    and technology
                
                884,010
                
                
                717,969
                
                
                1,696,946
                
                
                1,323,902Depreciation
                    and amortization
                
                182,027
                
                
                159,161
                
                
                363,048
                
                
                311,110Amortization
                    of intangible assets
                
                220,643
                
                
                ─
                
                
                220,643
                
                
                ─Travel
                    and entertainment
                
                685,416
                
                
                830,076
                
                
                1,154,618
                
                
                1,348,592Other
                
                1,124,415
                
                
                153,661
                
                
                1,716,359
                
                
                535,286Total
                    operating expenses
                
                18,077,573
                
                
                15,535,834
                
                
                32,399,610
                
                
                28,433,378Operating
                    income (loss)
                
                2,294,776
                
                
                (670,968
                )
                
                2,295,883
                
                
                (2,008,210
                )Interest
                    income
                
                107,461
                
                
                139,101
                
                
                229,954
                
                
                249,766Interest
                    expense
                
                (26,864
                )
                
                (473,806
                )
                
                (81,208
                )
                
                (542,897
                )Income
                    (loss) from continuing operations before taxes
                
                2,375,373
                
                
                (1,005,673
                )
                
                2,444,629
                
                
                (2,301,341
                )Income
                    tax expense
                
                (55,000
                )
                
                ─
                
                
                (55,000
                )
                
                ─Income
                    (loss) from continuing operations
                
                2,320,373
                
                
                (1,005,673
                )
                
                2,389,629
                
                
                (2,301,341
                )Loss
                    from discontinued operations
                
                ─
                
                
                (54,262
                )
                
                ─
                
                
                (108,202
                )Net
                    income (loss)
                $
                2,320,373
                
                $
                (1,059,935
                )
                $
                2,389,629
                
                $
                (2,409,543
                )Basic
                    net income (loss) per share:Income
                    (loss) from continuing operations
                $
                0.20
                
                $
                (0.10
                )
                $
                0.22
                
                $
                (0.23
                )Loss
                    from discontinued operations
                $
                ─
                
                $
                (0.01
                )
                $
                ─
                
                $
                (0.01
                )Net
                    income (loss)
                $
                0.20
                
                $
                (0.11
                )
                $
                0.22
                
                $
                (0.24
                )Diluted
                    net income (loss) per share:Income
                    (loss) from continuing operations
                $
                0.18
                
                $
                (0.10
                )
                $
                0.20
                
                $
                (0.23
                )Loss
                    from discontinued operations
                $
                ─
                
                $
                (0.01
                )
                $
                ─
                
                $
                (0.01
                )Net
                    income (loss)
                $
                0.18
                
                $
                (0.11
                )
                $
                0.20
                
                $
                (0.24
                )Weighted
                    average common shares outstanding:Basic
                
                11,657,775
                
                
                9,960,900
                
                
                11,000,702
                
                
                9,808,891Diluted
                
                12,856,306
                
                
                9,960,900
                
                
                12,208,965
                
                
                9,808,891
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
 2
 **MCF
          CORPORATION**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**
 **(unaudited)**
  **June
                    30,**
                  **2007**
                
                **December
                    31,**
                  **2006**ASSETSCash
                    and cash equivalents
                $
                16,130,529
                
                $
                13,746,590Securities
                    owned:Marketable,
                    at fair value
                
                13,690,559
                
                
                7,492,914Not
                    readily marketable, at estimated fair value
                
                1,717,282
                
                
                1,489,142Restricted
                    cash
                
                631,968
                
                
                629,427Due
                    from clearing broker
                
                1,126,441
                
                
                551,831Accounts
                    receivable, net
                
                2,870,376
                
                
                2,715,271Equipment
                    and fixtures, net
                
                1,387,904
                
                
                1,586,630Intangible
                    assets
                
                2,479,357
                
                
                314,963Goodwill
                
                3,171,969
                
                
                ─Prepaid
                    expenses and other assets
                
                1,453,589
                
                
                1,971,445Total
                    assets
                $
                44,659,974
                
                $
                30,498,213LIABILITIES
                    AND STOCKHOLDERS' EQUITYAccounts
                    payable
                $
                2,269,120
                
                $
                1,121,623Commissions
                    and bonus payable
                
                6,531,294
                
                
                7,711,805Accrued
                    expenses
                
                4,137,359
                
                
                2,285,670Due
                    to clearing and other brokers
                
                21,858
                
                
                11,114Securities
                    sold, not yet purchased
                
                4,177,032
                
                
                1,534,953Capital
                    lease obligation
                
                987,880
                
                
                1,292,378Convertible
                    notes payable, net
                
                192,247
                
                
                187,079Notes
                    payable
                
                90,556
                
                
                138,571Total
                    liabilities
                
                18,407,346
                
                
                14,283,193Commitments
                    and contingenciesStockholders'
                    equity:Preferred
                    stock, Series A--$0.0001 par value; 2,000,000 shares authorized;
                    0 shares
                    issued and outstanding as of June 30, 2007 and December 31, 2006,
                    respectively; aggregate liquidation preference of $0
                
                ─
                
                
                ─Preferred
                    stock, Series B--$0.0001 par value; 12,500,000 shares authorized;
                    1,250,000 shares issued and 0 shares outstanding as of June 30,
                    2007 and
                    December 31, 2006; aggregate liquidation preference of $0
                
                ─
                
                
                ─Preferred
                    stock, Series C--$0.0001 par value; 14,200,000 shares authorized;
                    1,685,714 shares issued and 0 shares outstanding as of June 30,
                    2007 and
                    December 31, 2006; aggregate liquidation preference of $0
                
                ─
                
                
                ─Common
                    stock, $0.0001 par value; 300,000,000 shares authorized; 12,160,458
                    and
                    10,602,720 shares issued and 12,134,020 and 10,602,720 shares
                    outstanding
                    as of June 30, 2007 and December 31, 2006, respectively
                
                1,217
                
                
                1,061Additional
                    paid-in capital
                
                122,390,284
                
                
                114,616,848Treasury
                    stock
                
                (125,613
                )
                
                --Accumulated
                    deficit
                
                (96,013,260
                )
                
                (98,402,889
                )Total
                    stockholders' equity
                
                26,252,628
                
                
                16,215,020Total
                    liabilities and stockholders' equity
                $
                44,659,974
                
                $
                30,498,213
  The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.
 3
  **MCF
          CORPORATION**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(unaudited)**
  **Six
                    Months Ended**
                  **June
                    30,****2007**
                
                **2006**Cash
                    flows from operating activities:Net
                    income (loss)
                $
                2,389,629
                
                $
                (2,409,543
                )Adjustments
                    to reconcile net income (loss) to cash provided by (used in)
                    operating
                    activities:Depreciation
                    and amortization
                
                363,048
                
                
                336,935Amortization
                    of intangible assets
                
                220,643
                
                
                ─Stock-based
                    compensation
                
                1,451,862
                
                
                1,982,049Amortization
                    of discounts on convertible notes payable
                
                5,166
                
                
                150,840Amortization
                    of debt issuance costs
                
                ─
                
                
                15,305Unrealized
                    (gain) loss on securities owned
                
                (5,680,368
                )
                
                1,255,288Bad
                    debt write-off
                
                228,167
                
                
                ─Other
                
                31,304
                
                
                13,055Changes
                    in operating assets and liabilities:Securities
                    owned
                
                1,896,662
                
                
                (3,178,269
                )Restricted
                    cash
                
                (2,541
                )
                
                (256,408
                )Due
                    from clearing broker
                
                (574,610
                )
                
                (514,899
                )Accounts
                    receivable
                
                628,898
                
                
                (478,082
                )Prepaid
                    expenses and other assets
                
                667,994
                
                
                (773,889
                )Accounts
                    payable
                
                570,326
                
                
                231,173Commissions
                    and bonus payable
                
                (1,368,234
                )
                
                (631,920
                )Accrued
                    expenses
                
                1,671,655
                
                
                (185,204
                )Due
                    to clearing and other brokers
                
                10,744
                
                
                (4,108
                )Net
                    cash provided by (used in) operating activities
                
                2,510,345
                
                
                (4,447,677
                )Cash
                    flows from investing activities:Cash
                    restricted for fund investment
                
                ─
                
                
                (6,639,366
                )Purchase
                    of equipment and fixtures
                
                (118,021
                )
                
                (268,786
                )Investment
                    in MedPanel
                
                (24,585
                )
                
                ─Investment
                    in Catalyst
                
                163,219
                
                
                (58,558
                )Net
                    cash provided by (used in) investing activities
                
                20,613
                
                
                (6,966,710
                )Cash
                    flows from financing activities:Proceeds
                    from the exercise of stock options and warrants
                
                102,937
                
                
                289,089Proceeds
                    from the issuance of common stock
                
                102,555
                
                
                339,430Proceeds
                    from the issuance of note payable ($6,112,171) and stock warrant
                    ($1,387,829)
                
                ─
                
                
                7,500,000Minority
                    interest in fund
                
                ─
                
                
                2,192,943Debt
                    service principal payments
                
                (352,511
                )
                
                (228,047
                )Net
                    cash provided by (used in) financing activities
                
                (147,019
                )
                
                10,093,415Increase
                    (decrease) in cash and cash equivalents
                
                2,383,939
                
                
                (1,320,972
                )Cash
                    and cash equivalents at beginning of period
                
                13,746,590
                
                
                11,138,923Cash
                    and cash equivalents at end of period
                $
                16,130,529
                
                $
                9,817,951Supplementary
                    disclosure of cash flow information:Cash
                    paid during the period:Interest
                $
                51,039
                
                $
                39,265Income
                    taxes
                $
                ─
                
                $
                10,300Reclassification
                    of deferred compensation
                $
                ─
                
                $
                3,146,839
 
 The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.  4
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(unaudited)**
  **1.
          Significant Accounting Policies**
  *Basis
          of Presentation*
  The
          interim financial statements included herein for MCF Corporation, or the
          Company, have been prepared, without audit, pursuant to the rules and
          regulations of the Securities and Exchange Commission. In the opinion of
          management, the financial statements included in this report reflect all
          normal
          recurring adjustments that the Company considers necessary for the fair
          presentation of the results of operations for the interim periods covered
          and
          the financial position of the Company at the date of the interim statement
          of
          financial condition. Certain information and footnote disclosures normally
          included in annual financial statements prepared in accordance with accounting
          principles generally accepted in the United States have been condensed
          or
          omitted pursuant to such rules and regulations. However, the Company believes
          that the disclosures are adequate to understand the information presented.
          The
          operating results for interim periods are not necessarily indicative of
          the
          operating results for the entire year. These financial statements should
          be read
          in conjunction with the Company's 2006 audited consolidated financial statements
          and notes thereto included in the Company's Annual Report on Form 10-K
          for the
          year ended December 31, 2006.
 
 *Reverse
          Stock Split*
  On
          August 4, 2006, the Company's Board of Directors approved a one-for-seven
          reverse stock split of the Company's common stock. The reverse stock split
          became effective at 11:59 pm, Eastern Time, on November 15, 2006. Pursuant
          to
          the reverse stock split, each seven shares of authorized and outstanding
          common
          stock was reclassified and combined into one share of new common stock.
          The
          reverse stock split did not change the number of authorized shares or the
          par
          value per share of common stock or preferred stock designated by the Company's
          Certificate of Incorporation. Currently, the Company has authorized 300,000,000
          shares of common stock and 27,450,000 shares of preferred stock. All references
          to share and per share data for all periods presented have been retroactively
          adjusted to give effect to the one-for-seven reverse stock split.
 
 *Acquisition
          of MedPanel, Inc.*
 
 On
          April 17, 2007, MCF Corporation completed the acquisition of MedPanel,
          Inc., or
          MedPanel, a privately-held company based in Cambridge, Massachusetts, pursuant
          to the terms of the Agreement and Plan of Merger dated November 6, 2006,
          by and
          among MCF Corporation, MedPanel Acquisition I Corp., Panel Intelligence,
          LLC,
          MedPanel, Inc. and William J. Febbo. MedPanel is an online medical market
          intelligence firm that serves life sciences companies and health care investors
          through its proprietary methodologies and vast network of leading physicians,
          medical researchers, allied health professionals and other important healthcare
          constituencies.
 
 *Securities
          Owned*
 
 “Securities
          owned” and “Securities sold, but not yet purchased” in the consolidated
          statements of financial condition consist of financial instruments carried
          at
          fair value or amounts that approximate fair value, with related unrealized
          gains
          or losses recognized in the results of operations. The fair value of a
          financial
          instrument is the amount at which the instrument could be exchanged in
          a current
          transaction between willing parties, other than in a forced or liquidation
          sale.
 
 Fair
          values of the financial instruments are generally obtained from quoted
          market
          prices in active markets, broker or dealer price quotations, or alternative
          pricing sources with reasonable levels of price transparency. To the extent
          certain financial instruments trade infrequently or are non-marketable
          securities and, therefore, have little or no price transparency, the Company
          values these instruments based on management's estimates. The fair value
          of
          these securities is subject to a high degree of volatility and may be
          susceptible to significant fluctuation in the near term. Securities that
          contain
          resale restrictions are stated at a discount to the value of readily marketable
          securities. Stock warrants are carried at a discount to fair value as determined
          by using the Black-Scholes Option Pricing model due to illiquidity.
 5
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  **1.
          Significant Accounting Policies - Continued**
  *Investment
          Banking Revenue*
  Investment
          banking revenue includes underwriting and private placement agency fees
          earned
          through the Company's participation in public offerings and private placements
          of equity and convertible debt securities and fees earned as financial
          advisor
          in mergers and acquisitions and similar transactions. Underwriting revenue
          is
          earned in securities offerings in which the Company acts as an underwriter
          and
          includes management fees, selling concessions and underwriting fees. Fee
          revenue
          relating to underwriting commitments is recorded when all significant items
          relating to the underwriting cycle have been completed and the amount of
          the
          underwriting revenue has been determined. This generally is the point at
          which
          all of the following have occurred: (i) the issuer's registration statement
          has
          become effective with the SEC, or other offering documents are finalized,
          (ii)
          the Company has made a firm commitment for the purchase of the shares or
          debt
          from the issuer, and (iii) the Company has been informed of the exact number
          of
          shares or the principal amount of debt that it has been allotted. Syndicate
          expenses related to securities offerings in which the Company acts as
          underwriter or agent are deferred until the related revenue is recognized
          or we
          determine that it is more likely than not that the securities offerings
          will not
          ultimately be completed. Merger and acquisition fees and other advisory
          service
          revenue are generally earned and recognized only upon successful completion
          of
          the engagement. Underwriting revenue is presented net of related expenses.
          Unreimbursed expenses associated with private placement and advisory
          transactions are recorded as expenses as incurred. As co-manager for registered
          equity underwriting transactions, management must estimate the Company's
          share
          of transaction related expenses incurred by the lead manager in order to
          recognize revenue. Transaction related expenses are deducted from the
          underwriting fee and therefore reduces the revenue that is recognized as
          co-manager. Such amounts are adjusted to reflect actual expenses in the
          period
          in which the Company receives the final settlement, typically 90 days following
          the closing of the transaction.
 
 *Commissions
          and Principal Transactions Revenue*
 
 Commissions
          revenue includes revenue resulting from executing stock exchange-listed
          securities, over-the counter securities and other transactions as agent
          for the
          Company's clients. Principal transactions consist of a portion of dealer
          spreads
          attributed to the Company's securities trading activities as principal
          in
          NASDAQ-listed and other securities, and include transactions derived from
          activities as a market-maker. Additionally, principal transactions include
          gains
          and losses resulting from market price fluctuations that occur while holding
          positions in trading security inventory. Commissions revenue and related
          clearing expenses are recorded on a trade-date basis as security transactions
          occur. Principal transactions in regular-way trades are recorded on the
          trade
          date, as if they had settled. Profit and loss arising from all securities
          and
          commodities transactions entered into for the account and risk of the Company
          are recorded on a trade-date basis.
 
 *Primary
          Research Revenue*
 
 Revenue
          from primary research services is recognized on a proportional performance
          basis
          as services are provided.
 
 *Cost
          of Primary Research Services*
 
 Direct
          costs associated with generating primary research revenue principally consist
          of
          panelist honorarium and recruitment costs. Medical experts receive cash
          honoraria for participating in qualitative panels and quantitative surveys.
          The
          Company pays the honoraria to the panelists when the panel or survey has
          been
          completed and records this expense as incurred.
 
 *Share-Based
          Compensation Expense*
 
 The
          Company measures and recognizes compensation expense based on estimated
          fair
          values for all share-based awards made to employees and directors, including
          stock options, non-vested stock, and participation in the Company's employee
          stock purchase plan. The Company estimates fair value of share-based awards
          on
          the date of grant using an option-pricing model. The value of the portion
          of the
          award that is ultimately expected to vest is recognized as expense in the
          Company's consolidated statements of operations over the requisite service
          periods. Share-based compensation expense recognized in the Company's
          consolidated statement of operations includes compensation expense for
          share-based awards granted (i) prior to, but not yet vested as of
          December 31, 2005, based on the grant date fair value, and
          (ii) subsequent to December 31, 2005. Compensation expense for all
          share-based awards subsequent to December 31, 2005 is recognized using the
          straight-line single-option method. Because share-based compensation expense
          is
          based on awards that are ultimately expected to vest, share-based compensation
          expense has been reduced to account for estimated forfeitures. Forfeitures
          are
          estimated at the time of grant and revised, if necessary, in subsequent
          periods
          if actual forfeitures differ from those estimates.
 6
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  
 **1.
          Significant Accounting Policies - Continued**
  To
          calculate option-based compensation, the Company uses the Black-Scholes
          option
          pricing model, which is affected by the Company's stock price as well as
          assumptions regarding a number of subjective variables. These variables
          include,
          but are not limited to the Company's expected stock price volatility over
          the
          term of the awards, and actual and projected employee stock option exercise
          behaviors. No tax benefits were attributed to the share-based compensation
          expense because a valuation allowance was maintained for all net deferred
          tax
          assets.
 
 *Income
          Taxes*
 
 The
          Company uses the asset and liability method of accounting for income taxes.
          Deferred tax assets and liabilities are recognized for the estimated future
          tax
          consequences attributable to differences between the financial statement
          carrying amounts of existing assets and liabilities and their respective
          tax
          bases. Deferred tax assets and liabilities are measured using enacted tax
          rates
          expected to apply to taxable income in the years in which those temporary
          differences are expected to be recovered or settled. A valuation allowance
          is
          recorded to reduce deferred tax assets to an amount whose realization is
          more
          likely than not. The effect on deferred tax assets and liabilities of a
          change
          in tax rates is recognized in the consolidated statements of operations
          in the
          period that includes the enactment date.
 
 *Segment
          Reporting*
 
 The
          Company organizes its operations into three operating segments for the
          purpose
          of making operating decisions and assessing performance. These operating
          segments are organized along operating subsidiaries, Merriman Curhan Ford
&
Co, MCF Asset Management, LLC and Panel Intelligence, LLC. Accordingly,
          the
          Company operates in Investment Banking and Asset Management operating segments
          in the United States during 2007 and 2006, and added a Primary Research
          operating segment in April 2007 with the acquisition of MedPanel (see Note
          No.
          3). However, only the Investment Banking segment produced operating results
          that
          were material to the Company during the three months and six months ended
          June
          30, 2007. Total assets for Panel Intelligence were $7,806,000 as of June
          30,
          2007. The results of operations for the Company’s Wealth Management segment
          for the three months and six months ended June 30, 2006 have been treated
          as
          discontinued operations since this business was sold in January 2007 (see
          Note
          No. 4).
 
 *Use
          of Estimates*
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States requires management to make estimates,
          judgments and assumptions that affect the reported amounts of assets,
          liabilities, revenue and expenses. Actual results could differ from those
          estimates.
 
 *New
          Accounting Pronouncements*
 
 In
          September 2006, the Financial Accounting Standards Board (FASB) issued
          SFAS 157,
“Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework
          for measuring fair value under generally accepted accounting principles,
          and
          expands disclosures about fair value measurements. SFAS 157 is effective
          for
          financial statements issued for fiscal years beginning after November 15,
          2007,
          and interim periods within those fiscal years. The Company is currently
          evaluating the impact the adoption of this statement could have on its
          financial
          condition, results of operations and cash flows.
 
 In
          February 2007, the FASB issued SFAS No. 159, “Fair Value Option for Financial
          Assets and Financial Liabilities”, which permits entities to choose to measure
          many financial instruments and certain other items at fair value that are
          not
          currently required to be measured at fair value and establishes presentation
          and
          disclosure requirements designed to facilitate comparisons between entities
          that
          choose different measurement attributes for similar types of assets and
          liabilities. SFAS No. 159 is effective for fiscal years beginning after
          November
          15, 2007. The Company is currently evaluating the impact, if any, that
          the
          adoption of SFAS No. 159 will have on its consolidated statements of financial
          condition, operations and cash flows.
 7
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  
 **1.
          Significant Accounting Policies - Continued**
  In
          June 2007, the American Institute of Certified Public Accountants (AICPA)
          issued
          Statement of Position (SOP) No. 07-1, “Clarification of the Scope of the Audit
          and Accounting Guide ‘Audits of Investment Companies’ and Accounting by Parent
          Companies and Equity Method Investors for Investments in Investment Companies.”
SOP No. 07-1 clarifies when an entity may apply the provisions of the Audit
          and
          Accounting Guide for Investment Companies (the Guide). Investment companies
          that
          are within the scope of the Guide report investments at fair value;
          consolidation or use of the equity method for investments is generally
          not
          appropriate. SOP No. 07-1 also addresses the retention of specialized investment
          company accounting by a parent company in consolidation or by an equity
          method
          investor. SOP No. 07-1 is effective for fiscal years beginning on or after
          December 15, 2007 with early adoption encouraged. In May 2007, the FASB
          issued
          FSP FIN No. 46-R-7, “Application of FIN 46-R to Investment Companies,” which
          amends FIN No. 46-R to make permanent the temporary deferral of the application
          of FIN No. 46-R to entities within the scope of the revised Guide under
          SOP No.
          07-1. FSP FIN No. 46-R-7 is effective upon adoption of SOP No 07-1. The
          firm is
          evaluating the impact of adopting SOP No. 07-1 and FSP FIN No. 46-R-7 on
          its
          financial condition, results of operations and cash flows.
 
 **2.
          Share-Based Compensation Expense**
 
 *Stock
          Options*
 
 As
          of June 30, 2007, there were 5,591,430 shares authorized for issuance under
          the
          Option Plans, and 612,858 shares authorized for issuance outside of the
          Option
          Plans. As of June 30, 2007, 579,974 shares were available for future option
          grants under the Option Plans. There were no shares available for future
          option
          grants outside of the Options Plans. Compensation expense for stock options
          during the three months and six months ended June 30, 2007 was $329,000
          and
          $649,000, respectively. Compensation expense for stock options during the
          three
          months and six months ended June 30, 2006 was $319,000 and $641,000,
          respectively.
 
 The
          following table is a summary of the Company's stock option activity for
          the six
          months ended June 30, 2007:
  **Options**
                  **Outstanding**
                
                **Weighted**
                  **Average**
                  **Exercise Price**Balance
                    as of December 31, 2006
                
                
                3,570,370
                
                $
                6.19Granted
                
                
                408,132
                
                
                4.72Exercised
                
                
                (39,583
                )
                
                (2.60
                )Canceled
                
                
                (65,721
                )
                
                (7.33
                )Balance
                    as of June 30, 2007
                
                
                3,873,198
                
                $
                6.05Exercisable
                    as of June 30, 2007
                
                
                3,000,711
                
                $
                6.06
 
 The
          following table summarizes information with respect to stock options outstanding
          at June 30, 2007:
  **Options
                      Outstanding**
                  
                  **Vested
                      Options****Range
                      of Exercise Price**
                  
                  **Number**
                  
                  **Weighted**
                    **Average**
                    **Remaining**
                    **Contractual**
                    **Life
                      (Years)**
                  
                  **Weighted**
                    **Average**
                    **Exercise**
                    **Price**
                  
                  **Aggregate**
                    **Intrinsic**
                    **Value**
                  
                  **Number**
                  
                  **Weighted**
                    **Average
                      Exercise**
                    **Price**
                  
                  **Aggregate**
                    **Intrinsic**
                    **Value**$
                      0.00 -- $ 3.50
                  
                  
                  2,038,205
                  
                  
                  5.54
                  
                  $
                  2.95
                  
                  $
                  4,209,505
                  
                  
                  2,036,864
                  
                  $
                  2.95
                  
                  $
                  4,207,346$
                      3.51 -- $ 7.00
                  
                  
                  893,048
                  
                  
                  8.19
                  
                  $
                  4.60
                  
                  
                  377,938
                  
                  
                  313,010
                  
                  
                  4.09
                  
                  
                  291,569$
                      7.01 -- $14.00
                  
                  
                  646,277
                  
                  
                  7.68
                  
                  $
                  8.86
                  
                  
                  ─
                  
                  
                  355,169
                  
                  
                  9.29
                  
                  
                  ─$14.01
                      -- $28.00
                  
                  
                  256,381
                  
                  
                  3.36
                  
                  $
                  22.04
                  
                  
                  ─
                  
                  
                  256,381
                  
                  
                  22.04
                  
                  
                  ─$28.01
                      -- $49.00
                  
                  
                  39,287
                  
                  
                  2.66
                  
                  $
                  49.00
                  
                  
                  ─
                  
                  
                  39,287
                  
                  
                  49.00
                  
                  
                  ─3,873,198
                  
                  
                  6.34
                  
                  $
                  6.05
                  
                  $
                  4,587,443
                  
                  
                  3,000,711
                  
                  $
                  6.06
                  
                  $
                  4,498,915
  8
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  **2.
          Share-Based Compensation Expense - continued**
 
 As
          of June 30, 2007, total unrecognized compensation expense related to unvested
          stock options was $3,038,000. This amount is expected to be recognized
          as
          expense over a weighted-average period of 1.43 years.
 
 *Non-Vested
          Stock*
  At
          the date of grant, the recipients of non-vested stock have most of the
          rights of
          a stockholder other than voting rights, subject to certain restrictions
          on
          transferability and a risk of forfeiture. Non-vested shares typically vest
          over
          a two to four year period beginning on the date of grant. The fair value
          of
          non-vested stock is equal to the market value of the shares on the date
          of
          grant. The Company recognizes the compensation expense for non-vested stock
          on a
          straight-line basis over the requisite service period. Compensation expense
          for
          non-vested stock during the three months and six months ended June 30,
          2007 was
          $327,000 and $688,000, respectively. Compensation expense for non-vested
          stock
          during the three months and six months ended June 30, 2006 was $564,000
          and
          $1,018,000, respectively.
 
 The
          following table is a summary of the Company's non-vested stock activity
          for the
          six months ended June 30, 2007:
 **Non-Vested**
                  **Stock**
                  **Outstanding**
                
                **Weighted**
                  **Average**
                  **Grant
                    Date**
                  **Fair
                    Value**
                
                **Intrinsic**
                  **Value
                    at**
                  **June
                    30, 2007**Balance
                    as of December 31, 2006
                
                
                306,009
                
                $
                10.04Granted
                
                
                65,308
                
                
                4.80Vested
                
                
                (167,787
                )
                
                (9.42
                )Canceled
                
                
                (17,689
                )
                
                (8.72
                )Balance
                    as of June 30, 2007
                
                
                185,841
                
                $
                8.87
                
                $
                932,922
  As
          of June 30, 2007, total unrecognized compensation expense related to non-vested
          stock was $1,163,000. This expense is expected to be recognized over a
          weighted-average period of 0.97 year.
  *2002
          Employee Stock Purchase Plan*
 
 The
          Company offers an Employee Stock Purchase Plan, or ESPP, to its employees.
          As of
          June 30, 2007, 21,565 shares were available for issuance under the ESPP. Compensation
          expense for ESPP during the three months and six months ended June 30,
          2007 was
          $58,000 and $115,000, respectively. Compensation expense for ESPP during the three months and six months ended
          June
          30, 2006 was $95,000 and $182,000, respectively.
 
 As
          of June 30, 2007, unrecognized compensation expense related to the ESPP
          was
          $74,000. This amount is expected to be recognized as expense over a
          weighted-average period of 0.32 year.
 
 *Fair
          Value and Assumptions Used to Calculate Fair Value*
  The
          weighted average fair value of each stock option granted for the three
          months
          and six months ended June 30, 2007 was $2.53 and $2.56, respectively. The
          weighted average fair value of each stock option granted for the three
          months
          and six months ended June 30, 2006 was $3.02 and $4.11, respectively. The
          fair value of each option award is estimated on the date of grant using
          the
          Black-Scholes Option Pricing Model, with the following assumptions for
          the six
          months ended June 30, 2007 and 2006:
  **Six
                    months Ended**
                  **June
                    30,****2007**
                
                **2006**Expected
                    volatility
                
                
                65.83
                %
                
                84.76
                %Expected
                    life (years)
                
                
                4.17
                
                
                4.69Risk-free
                    interest rate
                
                
                4.75
                %
                
                4.70
                %Expected
                    dividend yield
                
                
                0
                %
                
                0
                %
 9
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  
 **2.
          Share-Based Compensation Expense - continued**
 
 The
          weighted average fair value of the non-vested stock granted under the Company's
          stock option plans for the three months and six months ended June 30, 2007
          was
          $4.44 and 4.80 per share, respectively. The weighted average fair value
          of the
          non-vested stock granted under the Company's stock option plans for the
          three
          months and six months ended June 30, 2006 was $8.96 and 7.84 per share,
          respectively. The fair value of the non-vested stock award is estimated
          on the
          date of grant using the intrinsic value method.
 
 **3.** **Acquisition
          of MedPanel, Inc.**
  On
          April 17, 2007, MCF Corporation acquired 100 percent of the outstanding
          common
          shares of MedPanel, Inc. The results of MedPanel’s operations have been included
          in the consolidated financial statements since that date. MedPanel
          is an online medical market intelligence firm that serves life sciences
          companies and health care investors through its proprietary methodologies
          and
          vast network of leading physicians, medical researchers, allied health
          professionals and other important healthcare constituencies. As a result
          of the
          acquisition, the Company will provide independent market data and information
          to
          clients in the biotechnology, pharmaceutical, medical device, and financial
          industries by leveraging MedPanel’s proprietary methodology and vast network of
          medical experts.
 
 The
          Company paid $6.5 million in common stock for MedPanel. The value of the
          1,547,743 shares of common shares issued was determined based on the average
          market price of MCF Corporation’s common stock over the period including three
          days before and after the terms of the acquisition were agreed to and announced.
          The selling stockholders may also be entitled to additional consideration
          on the
          third anniversary from the closing which is based upon MedPanel achieving
          specific revenue and profitability milestones. The payment of the incentive
          consideration will be 50% in cash and 50% in the Company's common stock
          and may
          not exceed $11,455,000. The Company registered 1,548,119 shares of common
          stock
          with the Securities and Exchange Commission on Form S-4, file number 333-138870,
          originally filed November 21, 2006, as amended.
 
 The
          following table summarizes the estimated fair values of the assets acquired
          and
          liabilities assumed at the date of acquisition. The Company is in the process
          of
          obtaining third-party valuations of certain intangible assets; thus, the
          allocation of the purchase price is subject to refinement.
  **As
                    of**
                  **April
                    17, 2007**Cash
                    and cash equivalents
                
                $
                670,028Accounts
                    receivable
                
                
                1,023,325Equipment
                    and fixtures
                
                
                86,088Prepaid
                    expenses and other assets
                
                
                174,162Intangible
                    assets not subject to amortization:Registered
                    trademarks
                
                
                710,000Intangible
                    assets subject to amortization:Customer
                    relationships (56 month weighted-average useful life)
                
                
                990,000Customer
                    backlog (8 month weighted-average useful life)
                
                
                420,000Technology
                    platform (30 month weighted-average useful life)
                
                
                360,000Database
                    of registered panelists (24 weighted-average useful life)
                
                
                220,000Goodwill
                
                
                3,171,969Total
                    assets acquired
                
                
                7,825,572Accounts
                    payable
                
                
                (577,171
                )Accrued
                    expenses
                
                
                (463,300
                )Total
                    liabilities assumed
                
                
                (1,040,471
                )Net
                    assets acquired
                
                $
                6,785,101
 
 The
          $3,172,000 of goodwill was assigned to our Primary Research segment.
 10
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  **3.
          Acquisition of MedPanel, Inc. - continued**
 
 The
          following unaudited pro forma results of our operations for the three months
          and
          six months ended June 30, 2007 and 2006 assume the MedPanel acquisition
          occurred
          as of January 1, 2006. The pro forma results give effect to certain adjustments,
          including depreciation, amortization of intangible assets and related income
          tax
          effects. The pro forma results have been prepared for comparative purposes
          only
          and do not purport to indicate the results of operations which would actually
          have occurred had the combinations been in effect on the dates indicated
          or
          which may occur in the future.
  **Three
                      Months Ended**
                  
                  **Six
                      Months Ended****June
                      30,**
                    **2007**
                  
                  **June
                      30,**
                    **2006**
                  
                  **June
                      30,**
                    **2007**
                  
                  **June
                      30,**
                    **2006**Total
                      revenue
                  
                  $
                  20,767,434
                  
                  $
                  16,258,906
                  
                  $
                  36,823,895
                  
                  $
                  29,193,187Total
                      operating expenses
                  
                  
                  18,609,716
                  
                  
                  17,046,534
                  
                  
                  34,936,942
                  
                  
                  31,427,500Operating
                      income (loss)
                  
                  
                  2,157,718
                  
                  
                  (787,628
                  )
                  
                  1,886,953
                  
                  
                  (2,234,313
                  )Net
                      income (loss)
                  
                  $
                  2,183,308
                  
                  $
                  (1,179,344
                  )
                  $
                  1,982,848
                  
                  $
                  (2,641,831
                  )Basic
                      net income (loss) per share:
                  
                  $
                  0.18
                  
                  $
                  (0.10
                  )
                  $
                  0.17
                  
                  $
                  (0.23
                  )Diluted
                      net income (loss) per share:
                  
                  $
                  0.17
                  
                  $
                  (0.10
                  )
                  $
                  0.15
                  
                  $
                  (0.23
                  )Weighted
                      average common shares outstanding:Basic
                  
                  
                  11,921,532
                  
                  
                  11,461,020
                  
                  
                  11,879,225
                  
                  
                  11,309,011Diluted
                  
                  
                  13,135,495
                  
                  
                  11,461,020
                  
                  
                  13,136,321
                  
                  
                  11,309,011
  **4.
          Discontinued Operations**
  In
          December 2006, the Company decided to sell its Catalyst Financial Planning
&
Investment Management, Inc., or Catalyst, subsidiary and discontinue its
          wealth
          management activities. The sale of Catalyst closed in January 2007. As
          of
          December 31, 2006, Catalyst is being accounted for as held for sale in
          accordance with SFAS 144. As a result, the revenue and expenses of Catalyst
          and
          MCF Wealth Management, LLC for 2006 have been reclassified and included
          in
          discontinued operations in the consolidated statements of
          operations.
 
 The
          following revenue and expenses have been reclassified as discontinued operations
          for the three months and six months ended June 30, 2006:
  Period
                    Ended June 30, 2006Three
                    Months
                
                Six
                    MonthsRevenue
                
                $
                217,293
                
                $
                428,192Operating
                    expenses:Compensation
                    and benefits
                
                
                176,890
                
                
                373,062Professional
                    services
                
                
                20,740
                
                
                24,904Occupancy
                    and equipment
                
                
                22,801
                
                
                42,993Communications
                    and technology
                
                
                7,058
                
                
                11,213Depreciation
                    and amortization
                
                
                13,923
                
                
                25,825Travel
                    and entertainment
                
                
                21,209
                
                
                33,063Other
                    expenses
                
                
                10,011
                
                
                27,378272,632
                
                
                538,438Operating
                    loss
                
                
                (55,339
                )
                
                (110,246
                )Interest
                    income, net
                
                
                1,077
                
                
                2,044Net
                    loss
                
                $
                (54,262
                )
                $
                (108,202
                )
 11
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  **4.
          Discontinued Operations - Continued**
  The
          following assets and liabilities of operations held for sale have been
          included
          in the condensed consolidated statements of financial condition as of December
          31, 2006:
  Assets:Cash
                    and cash equivalents
                
                $
                68,503Accounts
                    receivable
                
                
                11,155Furniture
                    and equipment
                
                
                34,234Intangible
                    assets, net of accumulated amortization of $172,417
                
                
                314,963Prepaid
                    expenses and other assets
                
                
                24,024$
                452,879Liabilities:Accounts
                    payable
                
                
                --Commissions
                    and bonus payable
                
                
                8,368Accrued
                    liabilities
                
                
                87,176Capital
                    leases
                
                
                --$
                95,544
  **5.
          Income Taxes**
 
 At
          the end of each interim reporting period the Company calculates an effective
          tax
          rate based on the Company's estimate of the tax provision (benefit) that
          will be
          provided for the full year, stated as a percentage of estimated annual
          pre-tax
          income (loss). The tax provision (benefit) for the interim period is determined
          using this estimated annual effective tax rate. For the six months ended
          June
          30, 2007 and 2006, the Company recorded $55,000 and $0 as income tax
          expense.
 
 The
          effective tax rate differs from the statutory rate primarily due to the
          existence and utilization of net operating loss carryforwards which have
          been
          offset by a valuation allowance resulting in a tax provision equal to the
          companies expected current expense for the year. The
          Company historically has had current tax expense primarily
          related to alternative minimum, state and minimum tax
          liabilities.
  Historically
          and currently, the Company has recorded a valuation allowance on the
          deferred tax assets, the significant component of which relates to net
          operating
          loss tax carryforwards. Management continually evaluates the realizability
          of
          its deferred tax assets based upon negative and positive evidence
          available. Based on the evidence available at this time, the Company continues
          to conclude that it is not "more likely than not" that we will be able to
          realize the benefit of our deferred tax assets in the future.
 
 In
          July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
          in
          Income Taxes - an Interpretation of FASB Statement 109 (“FIN 48”). FIN 48 is
          effective for fiscal years beginning after December 15, 2006. FIN 48 prescribes
          a comprehensive model for how a company should recognize, measure, present,
          and
          disclose in its financial statements uncertain tax positions that a company
          has
          taken or expects to take on a tax return (including a decision whether
          to file
          or not to file a return in a particular jurisdiction). Under FIN 48, the
          financial statements reflect expected future tax consequences of such positions
          presuming the taxing authorities' full knowledge of the position and all
          relevant facts, but without considering time values. MCF Corporation adopted
          Interpretation No. 48 on January 1, 2007.
 
 As
          a result of the implementation of FIN 48, the Company recognized no adjustment
          in the liability for unrecognized income tax benefits and no corresponding
          change in retained earnings. The Company does not have any material accrued
          interest or penalties associated with any unrecognized tax benefits. Other
          than
          as discussed below, the Company does not believe it is reasonably
          possible that the Company's unrecognized tax benefits will significantly
          change
          within the next twelve months. The Company's policy is to account for interest,
          if any, as interest expense and penalties as income tax expense.
 
 There
          were no unrecognized tax benefits as of June 30, 2007. The Company is subject
          to
          taxation in the US and various state and foreign jurisdictions. The tax
          years
          2002-2006 remain open to examination by the federal and most state tax
          authorities.
 12
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  **6.
          Earnings (loss) per Share**
  The
          following is a reconciliation of the basic and diluted net income (loss)
          available to common stockholders and the number of shares used in the basic
          and
          diluted net income (loss) per common share computations for the periods
          presented:
 
 **Three
                    Months Ended June 30,**
                
                **Six
                    Months Ended June 30,****2007**
                
                **2006**
                
                **2007**
                
                **2006**Net
                    income (loss) available to stockholders - basic
                
                $
                2,320,373
                
                $
                (1,059,935
                )
                $
                2,389,629
                
                $
                (2,409,543
                )Interest
                    on dilutive securities
                
                
                4,084
                
                
                ─
                
                
                8,168
                
                
                ─Net
                    income (loss) available to stockholders - diluted
                
                $
                2,324,457
                
                $
                (1,059,935
                )
                $
                2,397,797
                
                $
                (2,409,543
                )Weighted-average
                    number of common shares - basic
                
                
                11,657,775
                
                
                9,960,900
                
                
                11,000,702
                
                
                9,808,891Exercise
                    or conversion of all potentially dilutive common shares
                    outstanding
                
                
                1,198,531
                
                
                ─
                
                
                1,208,263
                
                
                ─Weighted-average
                    number of common shares - diluted
                
                
                12,856,306
                
                
                9,960,900
                
                
                12,208,965
                
                
                9,808,891Basic
                    net income (loss) per common share:Income
                    (loss) from continuing operations
                
                $
                0.20
                
                $
                (0.10
                )
                $
                0.22
                
                $
                (0.23
                )Loss
                    from discontinued operations
                
                $
                ─
                
                $
                (0.01
                )
                $
                ─
                
                $
                (0.01
                )Net
                    income (loss)
                
                $
                0.20
                
                $
                (0.11
                )
                $
                0.22
                
                $
                (0.24
                )Diluted
                    net loss per common share:Income
                    (loss) from continuing operations
                
                $
                0.18
                
                $
                (0.10
                )
                $
                0.20
                
                $
                (0.23
                )Loss
                    from discontinued operations
                
                $
                ─
                
                $
                (0.01
                )
                $
                ─
                
                $
                (0.01
                )Net
                    income (loss)
                
                $
                0.18
                
                $
                (0.11
                )
                $
                0.20
                
                $
                (0.24
                )
 
 Basic
          earnings (loss) per share is computed by dividing net income (loss) by
          the
          weighted average number of common shares outstanding, excluding shares
          of
          non-vested stock. Diluted earnings per share is calculated by dividing
          net
          income, plus interest and dividends on dilutive securities, by the weighted
          average number of common shares used in the basic earnings per share calculation
          plus the number of common shares that would be issued assuming exercise
          or
          conversion of all potentially dilutive common shares outstanding, including
          non-vested stock. Diluted loss per share is unchanged from basic loss per
          share
          for the three months and six months ended June 30, 2006 because the addition
          of
          common shares that would be issued assuming exercise or conversion would
          be
          anti-dilutive.
 
 Shares
          used in the diluted net income per share computation include the dilutive
          impact
          of the Company's stock options and warrants. The impact of the Company's
          stock
          options and warrants on shares used for the diluted earnings per share
          computation is calculated based on the average share price of the Company's
          common stock for each period using the treasury stock method. Under the
          treasury
          stock method, the tax-effected proceeds that would be hypothetically received
          from the exercise of all stock options and warrants with exercise prices
          below
          the average share price of the Company's common stock are assumed to be
          used to
          repurchase shares of the Company's common stock. Because the Company reported
          a
          net loss during the three months and six months ended June 30, 2006, the
          Company
          excluded the impact of all stock options and warrants in the computation
          of
          dilutive earnings per share, as their effect would be
          anti-dilutive.
 13
  **MCF
          CORPORATION**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**
 **(unaudited)**
  **6.
          Earnings (loss) per Share - continued**
 
 The
          Company excludes all potentially dilutive securities from its diluted net
          income
          (loss) per share computation when their effect would be anti-dilutive.
          The
          following common stock equivalents were excluded from the earnings per
          share
          computation, as their inclusion would have been anti-dilutive:
 **Three Months Ended June 30,**
                
                **Six
                    Months Ended June 30,****2007**
                
                **2006**
                
                **2007**
                
                **2006**Stock
                    options and warrants excluded due to the exercise price exceeding
                    the
                    average fair value of the Company's common stock during the
                    period
                
                
                1,682,257
                
                
                1,296,243
                
                
                1,637,949
                
                
                1,174,825Weighted
                    average non-vested stock, stock options and stock warrants, calculated
                    using the treasury stock method, that were excluded due to the
                    Company
                    reporting a net loss during the period
                
                
                ─
                
                
                2,170,446
                
                
                ─
                
                
                2,192,989Weighted
                    average shares issuable upon conversion of the convertible notes
                    payable
                
                
                ─
                
                
                902,736
                
                
                ─
                
                
                629,851Weighted
                    average shares contingently issuable
                
                
                ─
                
                
                52,876
                
                
                ─
                
                
                94,270Total
                    common stock equivalents excluded from diluted net income (loss)
                    per
                    share
                
                
                1,682,257
                
                
                4,422,301
                
                
                1,637,949
                
                
                4,091,935
 
 **7.
          Other Operating Expenses**
  The
          following expenses are included in other operating expenses for the three
          months
          and six months ended June 30, 2007:
 
 **Three
                    Months Ended June 30,**
                
                **Six
                    Months Ended June 30,****2007**
                
                **2006**
                
                **2007**
                
                **2006**Investor
                    conferences
                
                $
                259,982
                
                $
                226,517
                
                $
                388,371
                
                $
                280,908Recruiting
                
                
                227,053
                
                
                34,658
                
                
                370,061
                
                
                129,896Bad
                    debt expenses
                
                
                217,922
                
                
                (467,878
                )
                
                228,166
                
                
                (445,016
                )Public
                    and investor relations
                
                
                112,780
                
                
                79,325
                
                
                160,711
                
                
                174,001Supplies
                
                
                79,355
                
                
                85,293
                
                
                167,707
                
                
                154,563Insurance
                
                
                74,547
                
                
                65,759
                
                
                147,004
                
                
                130,869Other
                
                
                152,776
                
                
                129,987
                
                
                254,339
                
                
                110,065$
                1,124,415
                
                $
                153,661
                
                $
                1,716,359
                
                $
                535,286
 
 **8.
          Regulatory Requirements**
  Merriman
          Curhan Ford & Co. is a broker-dealer subject to Rule 15c3-1 of the
          Securities and Exchange Commission, which specifies uniform minimum net
          capital
          requirements, as defined, for their registrants. As of June 30, 2007, Merriman
          Curhan Ford & Co. had regulatory net capital, as defined, of $8,875,000,
          which exceeded the amount required by $7,875,000. Merriman Curhan Ford
& Co.
          is exempt from Rules 15c3-3 and 17a-13 under the Securities Exchange Act
          of 1934
          because it does not carry customer accounts, nor does it hold customer
          securities or cash.
 14
  **ITEM 2
           Management's Discussion and Analysis of Financial Condition and Results
          of
          Operations**
 
 This
          Quarterly Report on Form 10-Q, including this Management's Discussion and
          Analysis of Financial Condition and Results of Operations contains
          forward-looking statements regarding future events and our future results
          that
          are based on current expectations, estimates, forecasts, and projections
          about
          the industries in which we operate and the beliefs and assumptions of our
          management. Words such as “may,” “will,” “should,” “expects,” “anticipates,”
“targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” “predicts,” “potential” or “continue,” variations of such words,
          and similar expressions are intended to identify such forward-looking
          statements. In addition, any statements that refer to projections of our
          future
          financial performance, our anticipated growth and trends in our businesses,
          and
          other characterizations of future events or circumstances, are forward-looking
          statements. Readers are cautioned that these forward-looking statements
          are only
          predictions and are subject to risks, uncertainties, and assumptions that
          are
          difficult to predict. Therefore, actual results may differ materially and
          adversely from those expressed in any forward-looking statements. Readers
          are
          referred to risks and uncertainties identified under **“** Risk
          Factors” beginning on Page 24 and elsewhere herein. We undertake no obligation
          to revise or update publicly any forward-looking statements for any
          reason.
  **Overview**
  MCF
          Corporation (AMEX:MEM) is a financial services holding company that provides
          investment research, capital markets services, corporate and venture services,
          investment banking, asset management and primary research through its operating
          subsidiaries, Merriman Curhan Ford & Co., MCF Asset Management, LLC and
          Panel Intelligence, LLC.
  Merriman
          Curhan Ford & Co. is an investment bank and securities broker-dealer focused
          on fast growing companies and institutional investors. Our mission is to
          become
          a leader in the researching, advising, financing, trading and investing
          in fast growing companies under $2 billion in market capitalization. We
          provide equity research, brokerage and trading services primarily to
          institutions, as well as investment banking and advisory services to corporate
          clients. We are gaining market share by originating differentiated research
          for
          our institutional investor clients and providing specialized and integrated
          services for our fast-growing corporate clients.
  In
          April
          2007, we acquired MedPanel and began offering primary research services
          to top
          biotechnology, pharmaceutical, medical device, and financial services companies
          through our newly formed subsidiary, Panel Intelligence, LLC. Clients pay
          subscription fees for access to our online research platform, providing
          them
          with greater strategic direction for investment decisions, product development,
          and marketing.
 
 MCF
          Asset Management, LLC manages absolute return investment products for
          institutional and high-net worth clients. During 2006, we introduced the
          MCF
          Navigator fund and MCF Voyager fund. Additionally, we are the sub-advisor
          for
          the MCF Focus fund. As of June 30, 2007, assets under management across
          our
          three fund products exceeded $37 million.
  In
          February 2005, we acquired Catalyst Financial Planning & Investment
          Management, Inc. Catalyst, a Registered Investment Advisor, provides investment
          advice to clients that have invested approximately $130 million of assets.
          In
          January 2007, we sold Catalyst in order to focus on other recurring-revenue
          businesses, such as primary research and asset management, which we believe
          are
          faster growing and more profitable opportunities. While we currently do
          not have
          any specific plans, we do intend to pursue a wealth management strategy
          at some
          future date. The results from this segment have been treated as discontinued
          operations in the condensed consolidated financial statements.
  **Executive
          Summary**
  Revenue
          for the second quarter 2007 exceeded $20.3 million, which represents 42%
          sequential growth over first quarter 2007 and a 37% increase over the second
          quarter 2006. Revenue growth was led by principal transactions, which includes
          proprietary trading and market making, as well as primary research. We
          closed
          the acquisition of MedPanel on April 17, 2007 and began recognizing primary
          research revenue and related expenses since that date. We also experienced
          continued growth for each of our recurring revenue activities, including
          asset
          management and brokering institutional money funds by our Institutional
          Cash
          Distributors division. Net income for the second quarter 2007 was $2.3
          million,
          or $0.18 per diluted share, which represents the second consecutive quarter
          of
          profitability for our firm. Profitability during the latest quarter
          was partially attributable to net gains in our firm trading and market
          making accounts, including our proprietary trading activity which represents
          the
          company's highest margin business. Compensation and benefits expense as
          a
          percentage of revenue during the three months ended June 30, 2007 was 63%,
          which
          represents a significant improvement from second quarter 2006.
 15
 
 **Business
          Environment**
  Most
          U.S. stock indexes advanced in the second quarter, some setting records
          along
          the way. Stocks moved higher based on corporate earnings early in the quarter
          and later overcame short periods of increased volatility associated with
          investor concerns about soft retail sales, rising interest rates, inflation,
          the
          housing market and sub-prime mortgage woes. An active mergers-and-acquisitions
          market, fueled to a significant degree by buying from private equity funds,
          was
          one factor supporting the market. Conversely, the housing market remained
          depressed, and long-term interest rates moved decisively higher. Crude
          oil
          surged to close the period near $70 per barrel. Lastly, long-term interest
          rates
          continued to rise, indicating a deteriorating credit climate for U.S. businesses
          and consumers. Despite the increased volatility the market demonstrated
          in the
          second half of the quarter, most broad measures of stock performance managed
          to
          finish solidly in positive territory.
 
 For
          the quarter overall, the S&P 500 returned 6.27%. The technology-heavy Nasdaq
          Composite® Index reached a new six-year high and ended the quarter ahead by
          7.50%. In the small-cap arena, the Russell 2000® Growth Index posted a gain of
          6.69%. Among S&P 500 sectors, energy was the clear winner, reflecting high
          crude oil prices. Growth maintained a healthy lead over value in each primary
          capitalization groups.
 
 Our
          securities broker-dealer and investment banking activities are linked to
          the
          capital markets. In addition, our business activities are focused in the
          consumer growth, healthcare, specialty growth and technology sectors. By
          their
          nature, our business activities are highly competitive and are not only
          subject
          to general market conditions, volatile trading markets and fluctuations
          in the
          volume of market activity, but also to the conditions affecting the companies
          and markets in our areas of focus. Fluctuations in revenue also occur due
          to the
          overall level of market activity, which, among other things, affects the
          flow of
          investment dollars and the size, number and timing of investment banking
          transactions. In addition, a downturn in the level of market activity can
          lead
          to a decrease in brokerage commissions. Therefore, revenue in any particular
          period may vary significantly from year to year.
 
 **Results
          of Operations**
 
 The
          following table sets forth the results of operations for the three months
          and
          six months ended June 30, 2007 and 2006:
  **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**
                
                **June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**Revenue:Commissions
                
                $
                7,717,573
                
                $
                7,945,580
                
                $
                14,883,280
                
                $
                16,643,708Principal
                    transactions
                
                
                5,712,652
                
                
                (735,951
                )
                
                8,325,776
                
                
                (332,650
                )Investment
                    banking
                
                
                5,631,556
                
                
                7,485,108
                
                
                9,864,027
                
                
                9,910,888Primary
                    research
                
                
                951,062
                
                
                ─
                
                
                951,062
                
                
                ─Advisory
                    and other fees
                
                
                359,506
                
                
                170,129
                
                
                671,348
                
                
                203,222Total
                    revenue
                
                
                20,372,349
                
                
                14,864,866
                
                
                34,695,493
                
                
                26,425,168Operating
                    expenses:Compensation
                    and benefits
                
                
                12,767,087
                
                
                11,719,319
                
                
                23,577,374
                
                
                21,453,092Brokerage
                    and clearing fees
                
                
                662,056
                
                
                706,256
                
                
                1,294,697
                
                
                1,388,860Cost
                    of primary research services
                
                
                395,218
                
                
                ─
                
                
                395,218
                
                
                ─Professional
                    services
                
                
                703,640
                
                
                842,058
                
                
                1,085,118
                
                
                1,283,381Occupancy
                    and equipment
                
                
                453,061
                
                
                407,334
                
                
                895,589
                
                
                789,155Communications
                    and technology
                
                
                884,010
                
                
                717,969
                
                
                1,696,946
                
                
                1,323,902Depreciation
                    and amortization
                
                
                182,027
                
                
                159,161
                
                
                363,048
                
                
                311,110Amortization
                    of intangible assets
                
                
                220,643
                
                
                ─
                
                
                220,643
                
                
                ─Travel
                    and entertainment
                
                
                685,416
                
                
                830,076
                
                
                1,154,618
                
                
                1,348,592Other
                
                
                1,124,415
                
                
                153,661
                
                
                1,716,359
                
                
                535,286Total
                    operating expenses
                
                
                18,077,573
                
                
                15,535,834
                
                
                32,399,610
                
                
                28,433,378Operating
                    income (loss)
                
                
                2,294,776
                
                
                (670,968
                )
                
                2,295,883
                
                
                (2,008,210
                )Interest
                    income
                
                
                107,461
                
                
                139,101
                
                
                229,954
                
                
                249,766Interest
                    expense
                
                
                (26,864
                )
                
                (473,806
                )
                
                (81,208
                )
                
                (542,897
                )Income
                    (loss) from continuing operations before taxes
                
                
                2,375,373
                
                
                (1,005,673
                )
                
                2,444,629
                
                
                (2,301,341
                )Income
                    tax expense
                
                
                (55,000
                )
                
                ─
                
                
                (55,000
                )
                
                ─Income
                    (loss) from continuing operations
                
                
                2,320,373
                
                
                (1,005,673
                )
                
                2,389,629
                
                
                (2,301,341
                )Loss
                    from discontinued operations
                
                
                ─
                
                
                (54,262
                )
                
                ─
                
                
                (108,202
                )Net
                    income (loss)
                
                $
                2,320,373
                
                $
                (1,059,935
                )
                $
                2,389,629
                
                $
                (2,409,543
                )
 16
 
 Our
          net income (loss) for the three months and six months ended June 30, 2007
          and
          2006 included the following non-cash expenses:
 
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**
                
                **June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**Stock-based
                    compensation
                
                $
                714,159
                
                $
                1,047,908
                
                $
                1,451,862
                
                $
                1,982,049Depreciation
                    and amortization
                
                
                182,027
                
                
                173,084
                
                
                363,048
                
                
                336,935Amortization
                    of intangible assets
                
                
                220,643
                
                
                ─
                
                
                220,643
                
                
                ─Write-off
                    of uncollectible accounts receivable
                
                
                217,922
                
                
                ─
                
                
                228,167
                
                
                ─Amortization
                    of discounts on debt
                
                
                2,583
                
                
                126,797
                
                
                5,166
                
                
                150,840Total
                
                $
                1,337,334
                
                $
                1,347,789
                
                $
                2,268,886
                
                $
                2,469,824
  ***Investment
          Banking Revenue***
  Our
          investment banking activity includes the following:
 
 ·
                *Capital
                    Raising*- Capital raising includes private placements of equity and debt
                    instruments and underwritten public
                    offerings.
  ·
                *Financial
                    Advisory*- Financial advisory includes advisory assignments with respect
                    to mergers
                    and acquisitions, divestures, restructurings and
                    spin-offs.
  The
          following table sets forth our revenue and transaction volumes from our
          investment banking activities for the three months and six months ended
          June 30,
          2007 and 2006:
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**
                
                **June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006****Revenue:**Capital
                    raising
                
                $
                5,126,556
                
                $
                7,330,108
                
                $
                9,146,527
                
                $
                9,235,003Financial
                    advisory
                
                
                505,000
                
                
                155,000
                
                
                717,500
                
                
                675,885Total
                    investment banking revenue
                
                $
                5,631,556
                
                $
                7,485,108
                
                $
                9,864,027
                
                $
                9,910,888**Transaction
                    Volumes:**Public
                    offerings:Capital
                    underwritten participations
                
                $
                72,750,000
                
                $
                72,528,000
                
                $
                105,250,000
                
                $
                104,150,000Number
                    of transactions
                
                
                4
                
                
                8
                
                
                7
                
                
                10Private
                    placements:Capital
                    raised
                
                $
                22,985,000
                
                $
                84,000,000
                
                $
                86,585,000
                
                $
                88,000,000Number
                    of transactions
                
                
                3
                
                
                2
                
                
                6
                
                
                4
  Our
          investment banking revenue was $5,632,000, or 28% of our revenue during
          second
          quarter 2007, representing a 25% decrease from the similar quarter in 2006.
          Second quarter of 2006 represented our second largest quarter for investment
          banking revenue and included a $78 million private placement that resulted
          in a
          $3.9 million fee. Investment banking revenue for the three months ended
          June 30,
          2007 was in line with average revenue for the preceding four quarters.
          We led
          two secondary public offerings during the latest quarter and participated
          with
          two underwritten offerings as co-manager. Additionally, we were placement
          agent
          for four private placements during the three months ended June 30,
          2007.
  During
          the six months ended June 30, 2007, no single investment banking client
          accounted for more than 10% of our revenue, while one investment banking
          client
          accounted for 15% of our revenue during the first half of 2006.
 17
  ***Commissions
          and Principal Transactions Revenue***
  Our
          broker-dealer activity includes the following:
  ·
                *Commissions*- Commissions include revenue resulting from executing stock
                    trades for
                    exchange-listed securities, over-the-counter securities and other
                    transactions as agent.
  ·
                *Principal
                    Transactions*-**Principal
                    transactions consist of a portion of dealer spreads attributed
                    to our
                    securities trading activities as principal in NASDAQ-listed and
                    other
                    securities, and include transactions derived from our activities
                    as a
                    market-maker. Additionally, principal transactions include gains
                    and
                    losses resulting from market price fluctuations that occur while
                    holding
                    positions in our trading security
                    inventory.
  The
          following table sets forth our revenue and several operating metrics which
          we
          utilize in measuring and evaluating performance and the results of our
          trading
          activity operations:
 
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**
                
                **June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006****Revenue:**Commissions
                
                $
                7,717,573
                
                $
                7,945,580
                
                $
                14,883,280
                
                $
                16,643,708Principal
                    transactions:Customer
                    principal transactions, proprietary trading and market
                    making
                
                $
                4,669,144
                
                $
                (815,666
                )
                $
                7,354,753
                
                $
                (127,733
                )Investment
                    portfolio
                
                
                1,043,508
                
                
                79,715
                
                
                971,023
                
                
                (204,917
                )Total
                    principal transactions revenue
                
                $
                5,712,652
                
                $
                (735,951
                )
                $
                8,325,776
                
                $
                (332,650
                )**Transaction
                    Volumes:**Number
                    of shares traded
                
                
                247,476,532
                
                
                244,983,930
                
                
                477,147,878
                
                
                507,732,048Number
                    of active clients
                
                
                408
                
                
                383
                
                
                488
                
                
                469
 
 Commissions
          amounted to $7,718,000, or 38%, of our revenue during the second quarter
          2007,
          representing a 3% decrease from the similar period in 2006. Lower brokerage
          commissions were partially offset by higher revenue for brokering institutional
          money funds by our Institutional Cash Distributors division.
  Principal
          transactions revenue swung from a $736,000 loss during the second quarter
          2006
          to a $5,713,000 gain during the second quarter of 2007. The 2007 gain included
          increases in the mark-to-fair market value of positions in our proprietary
          trading account, increased profitability in our market making activities,
          as
          well as realized and unrealized gains in our investment portfolio. As of
          June
          30, 2007, we made markets in over 1,100 stocks, which has increased by
          nearly
          50% from June 30, 2006. We view “intelligent market making” as a key element to
          differentiating ourselves from our competition in small capitalization
          equities.
          Principal transactions revenue consists of four different activities -
          customer
          principal trades, market making, trading for our proprietary account, and
          realized and unrealized gains and losses in our investment portfolio. As
          a
          broker-dealer, we account for all of our marketable security positions
          on a
          trading basis and as a result, all security positions are marked to fair
          market
          value each day. Returns from market making and proprietary trading activities
          tend to be more volatile than acting as agent or principal for
          customers.
  During
          2007 and 2006, no single brokerage customer accounted for more than 10%
          of our
          revenue from continuing operations.
 
 ***Primary
          Research Revenue***
  Primary
          research revenue represents results of MedPanel's operations from the
          acquisition date, April 17, 2007, through June 30, 2007.  We are now
          offering independent market data and information to clients in the
          biotechnology, pharmaceutical, medical device, and financial industries
          by
          leveraging MedPanel’s proprietary methodology and vast network of medical
          experts.
 18
  ***Compensation
          and Benefits Expenses***
  Compensation
          and benefits expense represents the largest component of our operating
          expenses
          and includes incentive compensation paid to sales, trading, research and
          investment banking professionals, as well as discretionary bonuses, salaries
          and
          wages, and stock-based compensation. Incentive compensation varies primarily
          based on revenue production. Discretionary bonuses paid to research analysts
          also vary with commissions revenue production but includes other qualitative
          factors as well. Salaries, payroll taxes and employee benefits tend to
          vary
          based on overall headcount.
 
 The
          following table sets forth the major components of our compensation and
          benefits
          for the three months ended June 30, 2007 and 2006:
 
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**
                
                **June
                    30,**
                  **2007**
                
                **June
                    30,**
                  **2006**Incentive
                    compensation and discretionary bonuses
                
                $
                7,708,451
                
                $
                7,608,383
                
                $
                13,383,686
                
                $
                13,253,141Salaries
                    and wages
                
                
                3,559,646
                
                
                2,288,814
                
                
                6,599,791
                
                
                4,334,897Stock-based
                    compensation
                
                
                714,159
                
                
                1,047,908
                
                
                1,451,862
                
                
                1,982,049Payroll
                    taxes, benefits and other
                
                
                784,831
                
                
                774,214
                
                
                2,142,035
                
                
                1,883,005Total
                    compensation and benefits
                
                $
                12,767,087
                
                $
                11,719,319
                
                $
                23,577,374
                
                $
                21,453,092Total
                    compensation and benefits as a percentage of revenue
                
                
                63
                %
                
                79
                %
                
                68
                %
                
                81
                %Cash
                    compensation and benefits as a percentage of revenue
                
                
                59
                %
                
                72
                %
                
                64
                %
                
                74
                %
 
 The
          increase in compensation and benefits expense of $1,048,000 or 9%, from
          the
          second quarter 2006 to the second quarter 2007 was due primarily to higher
          incentive compensation which is directly correlated to revenue production.
          Cash
          compensation is equal to total compensation and benefits expense excluding
          stock-based compensation, which is a non-cash expense. Cash compensation
          and
          benefits expense as a percentage of revenue decreased to 59% during the
          three
          months ended June 30, 2007 as compared to 72% during the similar period
          in 2006.
          This improvement was largely attributed to our proprietary trading gains
          during
          2007 since the gains increased revenue but did not impact compensation
          and
          benefits expense.
  No
          single sales professional accounted for more than 10% of our revenue during
          the
          six months ended June 30, 2007 and 2006.
  Stock-based
          compensation expense decreased by $334,000 during the second quarter 2007,
          as
          compared to the similar quarter in 2006. The decline in stock-based compensation
          expense was due in part to fewer non-vested restricted shares outstanding
          in
          2007.
 
 ***Other
          Operating Expenses***
 
 Brokerage
          and clearing fees include trade processing expenses that we pay to our
          clearing
          broker and execution fees that we pay to floor brokers and electronic
          communication networks. Merriman Curhan Ford & Co. is a fully-disclosed
          broker-dealer, which has engaged a third party clearing broker to perform
          all of
          the clearance functions. The clearing broker-dealer processes and settles
          the
          customer transactions for Merriman Curhan Ford & Co. and maintains the
          detailed customer records. Additionally, security trades are executed by
          third-party broker-dealers and electronic trading systems. These expenses
          are
          almost entirely variable with commission revenue and the volume of brokerage
          transactions. Our brokerage and clearing fees decreased by $44,000, or
          6%,
          during the second quarter of 2007 as compared to the second quarter of
          2006 and
          decreased by $94,000, or 7%, during the six months ended June 30, 2007
          as
          compared to the similar period in 2006. This decrease reflected lower
          commissions revenue during 2007, partially offset by increased market making
          activity during first half of 2007 as compared to first half of
          2006.
 
 Costs
          of primary research revenue principally consist of panelist honorarium
          and
          recruitment costs. Medical experts receive cash honoraria for participating
          in
          qualitative panels and quantitative surveys. We pay the honoraria to the
          panelists when the panel or survey has been completed and record this expense
          as
          incurred. We closed the acquisition of MedPanel on April 17, 2007 and began
          recognizing primary research revenue and related expenses since that
          date.
 19
  Professional
          services expense includes legal fees, accounting fees, expenses related
          to
          investment banking transactions, consulting fees and recruiting fees. Many
          of
          these expenses, such as legal and accounting fees, are to a large extent
          fixed
          in nature. The decrease of $138,000, or 16%, during the second quarter
          of 2007
          as compared to the second quarter of 2006 and decrease of $198,000, or
          15%,
          during the six months ended June 30, 2007 as compared to the similar period
          in
          2006 was primarily attributed to lower attorney fees associated with business
          development activities and lower accounting and auditing expenses.
 
 Occupancy
          and equipment includes rental costs for our office facilities and equipment,
          as
          well as equipment, software and leasehold improvement expenses. These expenses
          are largely fixed in nature. The increase of $46,000, or 11%, during the
          second
          quarter of 2007 as compared to the second quarter of 2006 and increase
          of
          $106,000, or 14%, during the six months ended June 30, 2007 as compared
          to the
          similar period in 2006 resulted mostly from higher hardware and equipment
          expenses that were incurred in connection with various technology
          projects.
 
 Communications
          and technology expense includes market data and quote services, voice,
          data and
          Internet service fees, and data processing costs. Historically, these costs
          have
          increased as we hire additional employees. The increase of $166,000, or
          23%,
          during the second quarter of 2007 as compared to the second quarter of
          2006 and
          increase of $373,000, or 28% during the six months ended June 30, 2007
          as
          compared to the similar period in 2006 was primarily due to upgrading our
          trading order management system, as well as the increase in market data
          and
          quote services as we continue to expand our market maker
          activities.
  Depreciation
          and amortization expense primarily relate to the depreciation of our computer
          equipment and leasehold improvements. Depreciation and amortization is
          mostly
          fixed in nature. The increase of $23,000, or 14%, during the second quarter
          of
          2007 as compared to the second quarter of 2006 and increase of $52,000,
          or 17%
          during the six months ended June 30, 2007 as compared to the similar period
          in
          2006 was due to increased capital expenditures during 2006, including leasehold
          improvements to our San Francisco office, to facilitate our growth and
          expansion.
 
 Identifiable
          intangible assets capitalized in connection with the acquisition of MedPanel
          included customer relationships, customer backlog, technology platform
          and the
          database of registered panelists. The estimated fair market value of these
          amortizable intangible assets amounting to $1,990,000 will be amortized
          over
          periods ranging from 8 months to 56 months.
 
 Travel
          and entertainment expense results from business development activities
          across
          our various businesses. The decrease of $145,000, or 17%, during the second
          quarter of 2007 as compared to the second quarter of 2006 and decrease
          of
          $194,000, or 14% during the six months ended June 30, 2007 as compared
          to the
          similar period in 2006 was due mostly to our focus to minimize discretionary
          spending in an effort to improve profitability.
  The
          following expenses are included in other operating expenses for the three
          months
          and six months ended June 30, 2007:
 
 **Three
                    Months Ended June 30,**
                
                **Six
                    Months Ended June 30,****2007**
                
                **2006**
                
                **2007**
                
                **2006**Investor
                    conferences
                
                $
                259,982
                
                $
                226,517
                
                $
                388,371
                
                $
                280,908Recruiting
                
                
                227,053
                
                
                34,658
                
                
                370,061
                
                
                129,896Bad
                    debt expenses
                
                
                217,922
                
                
                (467,878
                )
                
                228,166
                
                
                (445,016
                )Public
                    and investor relations
                
                
                112,780
                
                
                79,325
                
                
                160,711
                
                
                174,001Supplies
                
                
                79,355
                
                
                85,293
                
                
                167,707
                
                
                154,563Insurance
                
                
                74,547
                
                
                65,759
                
                
                147,004
                
                
                130,869Other
                
                
                152,776
                
                
                129,987
                
                
                254,339
                
                
                110,065$
                1,124,415
                
                $
                153,661
                
                $
                1,716,359
                
                $
                535,286
 
 The
          increase in other operating expenses of 971,000 during the second quarer
          of 2007
          as compared to the second quarter of 2006 and $1,181,000 increase during
          the six
          months ended June 30, 2007 as compared to the similar period in 2006 was
          due to
          (i) the recovery in April 2006 of the $500,000 note receivable from Ascend
          that
          had been previously written-off in 2005, (ii) higher recruiting costs for
          some
          senior investment bankers and institutional sales professionals during
          the most
          recent quarter and (iii) the write-off of uncollectible receivables during
          the
          three months ended June 30, 2007.
 20
  ***Income
          Tax Expense***
 
 At
          the end of each interim reporting period we calculate an effective tax
          rate
          based on our best estimate of the tax provision (benefit) that will be
          provided
          for the full year, stated as a percentage of estimated annual pre-tax income
          (loss). The tax provision (benefit) for the interim period is determined
          using
          this estimated annual effective tax rate. For the six months ended June
          30, 2007
          and 2006, we recorded $55,000 and $0 as income tax expense.
 
 The
          effective tax rate differs from the statutory rate primarily due to the
          existence and utilization of net operating loss carryforwards which have
          been
          offset by a valuation allowance resulting in a tax provision equal to the
          companies expected current expense for the year. We historically have
          had current tax expense primarily related to alternative minimum,
          state and minimum tax liabilities.
 
 Historically
          and currently, we have recorded a valuation allowance on our deferred tax
          assets, the significant component of which relates to net operating loss
          tax
          carryforwards. Management continually evaluates the realizability of its
          deferred tax assets based upon negative and positive evidence available.
          Based on the evidence available at this time, we continue to conclude that
          it is
          not "more likely than not" that we will be able to realize the benefit of
          our deferred tax assets in the near future.
 
 We
          adopted Interpretation No. 48 on January 1, 2007. As a result of the
          implementation of FIN 48, we recognized no adjustment in the liability
          for
          unrecognized income tax benefits and no corresponding change in retained
          earnings. We do not have any material accrued interest or penalties associated
          with any unrecognized tax benefits. Other than as discussed below, we do
          not
          believe it is reasonably possible that our unrecognized tax benefits will
          significantly change within the next twelve months. There were no unrecognized
          tax benefits as of June 30, 2007. We are subject to taxation in the US
          and
          various state and foreign jurisdictions. The tax years 2002-2006 remain
          open to
          examination by the federal and most state tax authorities.
 
 ***Loss
          from Discontinued Operations***
  In
          December 2006, we decided to sell our Catalyst subsidiary and discontinue
          our
          wealth management activities. The sale of Catalyst closed in January 2007.
          As of
          December 31, 2006, Catalyst was accounted for as held for sale in accordance
          with SFAS 144. As a result, the revenue and expenses of Catalyst and MCF
          Wealth
          Management, LLC for 2006 have been reclassified and included in discontinued
          operations in the condensed consolidated statements of operations.
 
 ***Off-Balance
          Sheet Arrangements***
 
 We
          were not a party to any off-balance sheet arrangements during the six months
          ended June 30, 2007 and 2006. In particular, we do not have any interest
          in
          so-called limited purpose entities, which include special purpose entities
          and
          structured finance entities.
  ***Commitments***
 
 The
          following is a table summarizing our significant commitments as of June
          30,
          2007, consisting of debt payments related to convertible notes payable,
          non-convertible notes payable, capital leases and future minimum lease
          payments
          under all non-cancelable operating leases with initial or remaining terms
          in
          excess of one year.
  **Notes****Payable**
                
                **Operating**
                  **Leases**
                
                **Capital**
                  **Leases**Less
                    than one year
                
                $
                53,388
                
                
                1,011,684
                
                
                299,498One
                    year to three years
                
                
                243,990
                
                
                3,179,296
                
                
                769,607Three
                    years to five years
                
                
                --
                
                
                985,839
                
                
                --Total
                    commitments
                
                $
                297,378
                
                $
                5,176,819
                
                $
                1,069,105
  **Critical
          Accounting Policies and Estimates**
  The
          consolidated financial statements are prepared in accordance with accounting
          principles generally accepted in the United States, which require us to
          make
          estimates and judgments that affect the reported amounts of assets, liabilities,
          revenues and expenses, and related disclosure of contingent assets and
          liabilities. On an on-going basis, we evaluate our estimates, including
          those
          related to the valuation of securities owned and deferred tax assets. 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 could
          differ
          from those estimates. We believe the following critical accounting policies
          affect our more significant judgments and estimates used in the preparation
          of
          our consolidated financial statements.
 21
  *Revenue
          Recognition*
  Investment
          banking revenue includes underwriting and private placement agency fees
          earned
          through our participation in public offerings and private placements of
          equity
          and convertible debt securities and fees earned as financial advisor in
          mergers
          and acquisitions and similar transactions. Underwriting revenue is earned
          in
          securities offerings in which we act as an underwriter and includes management
          fees, selling concessions and underwriting fees. Fee revenue relating to
          underwriting commitments is recorded when all significant items relating
          to the
          underwriting cycle have been completed and the amount of the underwriting
          revenue has been determined. This generally is the point at which all of
          the
          following have occurred: (i) the issuer's registration statement has become
          effective with the SEC, or other offering documents are finalized, (ii)
          the
          Company has made a firm commitment for the purchase of the shares or debt
          from
          the issuer, and (iii) the Company has been informed of the exact number
          of
          shares or the principal amount of debt that it has been allotted. Syndicate
          expenses related to securities offerings in which we act as underwriter
          or agent
          are deferred until the related revenue is recognized or we determine that
          it is
          more likely than not that the securities offerings will not ultimately
          be
          completed. Merger and acquisition fees and other advisory service revenue
          are
          generally earned and recognized only upon successful completion of the
          engagement. Underwriting revenue is presented net of related expenses.
          Unreimbursed expenses associated with private placement and advisory
          transactions are recorded as expenses as incurred. As co-manager for registered
          equity underwriting transactions, management must estimate our share of
          transaction related expenses incurred by the lead manager in order to recognize
          revenue. Transaction related expenses are deducted from the underwriting
          fee and
          therefore reduces the revenue that is recognized as co-manager. Such amounts
          are
          adjusted to reflect actual expenses in the period in which we receive the
          final
          settlement, typically 90 days following the closing of the
          transaction.
 
 Commissions
          revenue and related clearing expenses are recorded on a trade-date basis
          as
          security transactions occur. Principal transactions in regular-way trades
          are
          recorded on the trade date, as if they had settled. Profit and loss arising
          from
          all securities and commodities transactions entered into for the account
          and
          risk of our company are recorded on a trade-date basis.
 
 Primary
          research revenue is recognized on a proportional performance basis as services
          are provided.
 
 *Valuation
          of Securities Owned*
  “Securities
          owned” and “Securities sold, but not yet purchased” in our consolidated
          statements of financial condition consist of financial instruments carried
          at
          fair value or amounts that approximate fair value, with related unrealized
          gains
          or losses recognized in our results of operations. The use of fair value
          to
          measure these financial instruments, with related unrealized gains and
          losses
          recognized immediately in our results of operations, is fundamental to
          our
          financial statements and is one of our most critical accounting policies.
          The
          fair value of a financial instrument is the amount at which the instrument
          could
          be exchanged in a current transaction between willing parties, other than
          in a
          forced or liquidation sale.
 
 Fair
          values of our financial instruments are generally obtained from quoted
          market
          prices in active markets, broker or dealer price quotations, or alternative
          pricing sources with reasonable levels of price transparency. To the extent
          certain financial instruments trade infrequently or are non-marketable
          securities and, therefore, have little or no price transparency, we value
          these
          instruments based on management's estimates. The fair value of these securities
          is subject to a high degree of volatility and may be susceptible to significant
          fluctuation in the near term. Securities that contain restrictions are
          stated at
          a discount to the value of readily marketable securities. Stock warrants
          are
          carried at a discount to fair value as determined by using the Black-Scholes
          Option Pricing model.
  *Stock-Based
          Compensation*
  On
          January 1, 2006, we adopted SFAS 123(R), “Share-Based Payment,” which
          requires the measurement and recognition of compensation expense, based
          on
          estimated fair values, for all share-based awards, made to employees and
          directors, including stock options, non-vested stock, and participation
          in our
          employee stock purchase plan. Share-based compensation expense recognized
          in our
          consolidated statement of operations for the three months and six months
          ended
          June 30, 2007 and 2006 includes compensation expense for share-based awards
          granted (i) prior to, but not yet vested as of December 31, 2005,
          based on the grant date fair value estimated in accordance with the provisions
          of SFAS 123, and (ii) subsequent to December 31, 2005, based on the
          grant date fair value estimated in accordance with the provisions of SFAS
          123(R).
 22
  We
          estimate the fair value of stock options granted using the Black-Scholes
          option
          pricing method. This option pricing model requires the input of highly
          subjective assumptions, including the option's expected life and the price
          volatility of the underlying stock. The expected life of employee stock
          options
          represents the weighted-average period the stock options are expected to
          remain
          outstanding. The Company calculated the expected term using the lattice
          model
          with specific assumptions about the suboptimal exercise behavior, post-vesting
          termination rates and other relevant factors. The expected stock price
          volatility was determined using the historical volatility of our common
          stock.
          The fair value is then amortized on a straight-line basis over the requisite
          service periods of the awards, which is generally the vesting
          period.
 
 Because
          share-based compensation expense is based on awards that are ultimately
          expected
          to vest, it has been reduced to account for estimated forfeitures. SFAS
          123(R)
          requires forfeitures to be estimated at the time of grant and revised,
          if
          necessary, in subsequent periods if actual forfeitures differ from those
          estimates. Changes in these inputs and assumptions can materially affect
          the
          measure of estimated fair value of our share-based compensation.
  *Deferred
          Tax Valuation Allowance*
  We
          account for income taxes in accordance with the provision of SFAS No.
          109, *Accounting for Income Taxes* ,
          which requires the recognition of deferred tax assets and liabilities at
          tax
          rates expected to be in effect when these balances reverse. Future tax
          benefits
          attributable to temporary differences are recognized to the extent that
          the
          realization of such benefits is more likely than not. We have concluded
          that it
          is more likely than not that our deferred tax assets as of June 30, 2007
          and
          2006 will not be realized based on the scheduling of deferred tax liabilities
          and projected taxable income. The amount of the deferred tax assets actually
          realized, however, could vary if there are differences in the timing or
          amount
          of future reversals of existing deferred tax liabilities or changes in
          the
          actual amounts of future taxable income. Should we determine that we will
          be
          able to realize all or part of the deferred tax asset in the future, an
          adjustment to the deferred tax asset will be recorded in the period such
          determination is made.
 
 **Liquidity
          and Capital Resources**
  Historically,
          we have satisfied our liquidity and regulatory capital needs through the
          issuance of equity and debt securities. As of June 30, 2007, liquid assets
          consisted primarily of cash and cash equivalents of $16,131,000 and marketable
          securities, net of securities sold not yet purchased, of $9,514,000, for
          a total
          of $25,645,000.
  Cash
          and cash equivalents increased by $2,384,000 during the six months ended
          June
          30, 2007. Cash provided by operating activities for 2007 was $2,510,000
          which
          consisted of our net income adjusted for non-cash expenses including stock-based
          compensation, depreciation and amortization, partially offset by unrealized
          gains related to securities owned and changes in operating asset and liability
          balances. Cash provided by investing activities amounted to $21,000 during
          2007
          which consisted of proceeds from the sale of Catalyst, partially offset
          by
          purchases of equipment and fixtures. Cash used in financing activities
          was
          $147,000. Our financing activities included debt service payments, partially
          offset by proceeds from the issuance of common stock in connection with
          our
          employee stock purchase plan and employee stock option exercises.
 
 Merriman
          Curhan Ford & Co., as a broker-dealer, is subject to Rule 15c3-1 of the
          Securities Exchange Act of 1934, which specifies uniform minimum net capital
          requirements, as defined, for their registrants. As of June 30, 2007, Merriman
          Curhan Ford & Co. had regulatory net capital of $8,875,000 which exceeded
          the required amount by $7,875,000.
  We
          believe that our existing cash balances and investments will be sufficient
          to
          meet our liquidity and capital spending requirements, both for the next
          twelve
          months as well as for the long-term. However, we may require additional
          capital
          investment to fund our working capital if we incur future operating losses.
          We
          cannot be certain that additional debt or equity financing will be available
          when required or, if available, that we can secure it on terms satisfactory
          to
          us.
 23
  **Item  3.  
          Quantitative and Qualitative Disclosures About Market Risk**
  The
          following discussion about market risk disclosures involves forward-looking
          statements. Actual results could differ materially from those projected
          in the
          forward-looking statements. We may be exposed to market risks related to
          changes
          in equity prices, interest rates and foreign currency exchange rates. We
          do not
          use derivative financial instruments for speculative, trading or any other
          purpose.
  *Equity
          Price Risk*
  The
          potential for changes in the market value of our trading positions is referred
          to as “market risk.” Our trading positions result from proprietary trading
          activities. These trading positions in individual equities and equity indices
          may be either long or short at any given time. Equity price risks result
          from
          exposures to changes in prices and volatilities of individual equities
          and
          equity indices. We seek to manage this risk exposure through diversification
          and
          limiting the size of individual positions within the portfolio. The effect
          on
          earnings and cash flows of an immediate 10% increase or decrease in equity
          prices generally is not ascertainable and could be positive or negative,
          depending on the positions we hold at the time. We do not establish hedges
          in
          related securities or derivatives. From time to time, we also hold equity
          securities received as compensation for our services in investment banking
          transactions. These equity positions are always long. However, as the prices
          of
          individual equity securities do not necessarily move in tandem with the
          direction of the general equity market, the effect on earnings and cash
          flows of
          an immediate 10% increase or decrease in equity prices generally is not
          ascertainable.
  *Interest
          Rate Risk*
  Our
          exposure to market risk resulting from changes in interest rates relates
          primarily to our investment portfolio and long term debt obligations. Our
          interest income and cash flows may be impacted by changes in the general
          level
          of U.S. interest rates. We do not hedge this exposure because we believe
          that we
          are not subject to any material market risk exposure due to the short-term
          nature of our investments. We would not expect an immediate 10% increase
          or
          decrease in current interest rates to have a material effect on the fair
          market
          value of our investment portfolio.
  Our
          long term debt obligations bear interest at a fixed rate. Accordingly,
          an
          immediate 10% increase or decrease in current interest rates would not
          have an
          impact on our interest expense or cash flows. The fair market value of
          our long
          term fixed interest rate debt is subject to interest rate risk. Generally,
          the
          fair market value of fixed interest rate debt will increase as interest
          rates
          fall and decrease as interest rates rise. We would not expect an immediate
          10%
          increase or decrease in current interest rates to have a material impact
          on the
          fair market value of our long term debt obligations.
  *Foreign
          Currency Risk*
  We
          do not have any foreign currency denominated assets or liabilities or purchase
          commitments and have not entered into any foreign currency contracts.
          Accordingly, we are not exposed to fluctuations in foreign currency exchange
          rates.
  **Item  4. 
          Controls and Procedures**
 
 **Evaluation
          of Disclosure Controls and Procedures** -
          We have established disclosure controls and procedures to ensure that material
          information relating to the Company, including its consolidated subsidiaries,
          is
          made known to the officers who certify the Company's financial reports
          and to
          other members of senior management and the Board of Directors.
 
 Based
          on their evaluation of the Company's disclosure controls and procedures
          (as
          defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
          of 1934), the Principal Executive Officer and Principal Financial Officer
          of the
          Company have concluded that the disclosure controls and procedures are
          effective
          as of June 30, 2007.
 
 **Changes
          in internal controls -** There
          was no change in the Company's internal control over financial reporting
          (as
          defined in Rules 13a-15(d) and 15d-15(d) of the Exchange Act) that occurred
          during the quarter ended June 30, 2007, that materially affected, or is
          reasonably likely to materially affect, the Company's internal control
          over
          financial reporting. 
 On
            April 17, 2007, we completed the acquisition of MedPanel. The operations
            and
            financial controls of MedPanel were integrated into the existing internal
            controls of the Company during the three months ended June 30, 2007.
            This
            integration did not result in any changes which materially affected or
            are
            reasonably likely to materially affect the Company’s internal controls over
            financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) of the
            Exchange
            Act) that occurred during the quarter ended June 30, 2007.
  24
  **PART
          II.   OTHER INFORMATION**
  **** **Item  1. Legal
          Proceedings**
  **Thomas
          O'Shea v. Merriman Curhan Ford & Co.**
  In
          June 2006, our broker-dealer subsidiary Merriman Curhan Ford & Co. was
          served with a claim in NASD Arbitration by Mr. O'Shea. Mr. O'Shea is a
          former at-will employee of Merriman Curhan Ford & Co. and worked in the
          investment banking department. Mr. O'Shea resigned from Merriman Curhan
          Ford & Co. in July 2005. Mr. O'Shea alleges breach of an implied
          employment contract, quantum meruit, and unjust enrichment based on his
          allegations that he was to be paid more for his work. The matter is in
          the
          discovery stage and an arbitration hearing scheduled for June 2007 is being
          rescheduled between the parties and the Arbitration Panel. We believe that
          we
          have meritorious defenses and intend to contest these claims vigorously.
          However, in the event that we did not prevail, based upon the facts as
          we know
          them to date, we do not believe that the outcome will have a material effect
          on
          our financial position, financial results or cash flows.
 
 Additionally,
          from time to time, we are involved in ordinary routine litigation incidental
          to
          our business.
  **Item
          1A. Risk Factors**
  Investing
          in our securities involves a high degree of risk. In addition to the other
          information contained in this quarterly report, including reports we
          incorporate by reference, you should consider the following factors before
          investing in our securities.
 
  ***We
          may not be able to maintain a positive cash flow and
          profitability.***
  Our
          ability to maintain a positive cash flow and profitability depends on our
          ability to generate and maintain greater revenue while incurring reasonable
          expenses. This, in turn, depends, among other things, on the development
          of our
          securities brokerage and investment banking business, and we may be unable
          to
          maintain profitability if we fail to do any of the following:
 ·
                  establish,
                      maintain and increase our client
                      base;
 ·
                  manage
                      the quality of our services;
 
 ·
                  compete
                      effectively with existing and potential
                      competitors;
 
 ·
                  further
                      develop our business activities;
 
 ·
                  manage
                      expanding operations; and
 
 ·
                  attract
                      and retain qualified
                      personnel.
 25
 
 We
          cannot be certain that we will be able to sustain or increase a positive
          cash
          flow and profitability on a quarterly or annual basis in the future. Our
          inability to maintain profitability or positive cash flow could result
          in
          disappointing financial results, impede implementation of our growth strategy
          or
          cause the market price of our common stock to decrease. Accordingly, we
          cannot
          assure you that we will be able to generate the cash flow and profits necessary
          to sustain our business expectations, which makes our ability to successfully
          implement our business plan uncertain.
  The
          factors upon which we are able to base our estimates as to the gross revenue
          and
          the number of participating clients that will be required for us to maintain
          a
          positive cash flow and any additional financing that may be needed for
          this
          purpose are unpredictable. For these and other reasons, we cannot assure
          you
          that we will not require higher gross revenue, and an increased number
          of
          clients, securities brokerage and investment banking transactions, and/or
          more
          time in order for us to complete the development of our business that we
          believe
          we need to be able to cover our operating expenses, or obtain the funds
          necessary to finance this development. It is more likely than not that
          our
          estimates will prove to be inaccurate because actual events more often
          than not
          differ from anticipated events. Furthermore, in the event that financing
          is
          needed in addition to the amount that is required for this development,
          we
          cannot assure you that such financing will be available on acceptable terms,
          if
          at all.
 
 ***The
          markets for securities brokerage and investment banking services are highly
          competitive. If we are not able to compete successfully against current
          and
          future competitors, our business and results of operations will be adversely
          affected.***
  We
          are engaged in the highly competitive financial services and investment
          industries. We compete with large Wall Street securities firms, securities
          subsidiaries of major commercial bank holding companies, U.S. subsidiaries
          of
          large foreign institutions, major regional firms, smaller niche players,
          and
          those offering competitive services via the Internet. Many competitors
          have
          greater personnel and financial resources than we do. Larger competitors
          are
          able to advertise their products and services on a national or regional
          basis
          and may have a greater number and variety of distribution outlets for their
          products, including retail distribution. Discount and Internet brokerage
          firms
          market their services through aggressive pricing and promotional efforts.
          In
          addition, some competitors have much more extensive investment banking
          activities than we do and therefore, may possess a relative advantage with
          regard to access to deal flow and capital.
  Increased
          pressure created by any current or future competitors, or by our competitors
          collectively, could materially and adversely affect our business and results
          of
          operations. Increased competition may result in reduced revenue and loss
          of
          market share. Further, as a strategic response to changes in the competitive
          environment, we may from time to time make certain pricing, service or
          marketing
          decisions or acquisitions that also could materially and adversely affect
          our
          business and results of operations. We cannot assure you that we will be
          able to
          compete successfully against current and future competitors. In addition,
          new
          technologies and the expansion of existing technologies may increase the
          competitive pressures on us.
  ***We
          may experience reduced revenue due to declining market volume, securities
          prices
          and liquidity, which can also cause counterparties to fail to
          perform.***
  Our
          revenue may decrease in the event of a decline in the market volume of
          securities transactions, prices or liquidity. Declines in the volume of
          securities transactions and in market liquidity generally result in lower
          revenue from trading activities and commissions. Lower price levels of
          securities may also result in a reduction in our revenue from corporate
          finance
          fees, as well as losses from declines in the market value of securities
          held by
          us in trading. Sudden sharp declines in market values of securities can
          result
          in illiquid markets and the failure of counterparties to perform their
          obligations, as well as increases in claims and litigation, including
          arbitration claims from customers. In such markets, we may incur reduced
          revenue
          or losses in our principal trading, market-making, investment banking,
          and
          advisory services activities.
  ***We
          may experience significant losses if the value of our marketable security
          positions deteriorates.***
  We
          conduct securities trading, market-making and investment activities for
          our own
          account, which subjects our capital to significant risks. These risks include
          market, credit, counterparty and liquidity risks, which could result in
          losses
          for us. These activities often involve the purchase, sale or short sale
          of
          securities as principal in markets that may be characterized as relatively
          illiquid or that may be particularly susceptible to rapid fluctuations
          in
          liquidity and price. Trading losses resulting from such trading could have
          a
          material adverse effect on our business and results of operations.
 26
 
 ***We
          may experience significant fluctuations in our quarterly operating results
          due
          to the nature of our business and therefore may fail to meet profitability
          expectations.***
  Our
          revenue and operating results may fluctuate from quarter to quarter and
          from
          year to year due to a combination of factors, including:
 ·
                  the
                      level of institutional brokerage transactions and the level
                      of commissions
                      we receive from those transactions;
 
 ·
                  the
                      valuations of our principal
                      investments;
 
 ·
                  the
                      number of capital markets transactions completed by our clients,
                      and the
                      level of fees we receive from those transactions;
                      and
 
 ·
                  variations
                      in expenditures for personnel, consulting and legal expenses,
                      and expenses
                      of establishing new business units, including marketing and
                      technology
                      expenses.
 We
          record revenue from a capital markets advisory transaction only when we
          have
          rendered the services, the client is contractually obligated to pay and
          collection is probable; generally, most of the fee is earned only upon
          the
          closing of a transaction. Accordingly, the timing of our recognition of
          revenue
          from a significant transaction can materially affect our quarterly operating
          results.
 
 ***We
          have registered one of our subsidiaries as a securities broker-dealer and,
          as
          such, are subject to substantial regulations. If we fail to comply with
          these
          regulations, our business will be adversely affected.***
  Because
          we have registered Merriman Curhan Ford & Co. with the Securities and
          Exchange Commission, or SEC, and the National Association of Securities
          Dealers,
          Inc., or NASD, as a securities broker-dealer, we are subject to extensive
          regulation under federal and state laws, as well as self-regulatory
          organizations. The principal purpose of regulation and discipline of
          broker-dealers is the protection of customers and the securities markets
          rather
          than protection of creditors and stockholders of broker-dealers. The Securities
          and Exchange Commission is the federal agency charged with administration
          of the
          federal securities laws. Much of the regulation of broker-dealers, however,
          has
          been delegated to self-regulatory organizations, such as the NASD and national
          securities exchanges. The NASD is our primary self-regulatory organization.
          These self-regulatory organizations adopt rules, which are subject to SEC
          approval, that govern the industry and conduct periodic examinations of
          member
          broker-dealers. Broker-dealers are also subject to regulation by state
          securities commissions in the states in which they are registered. The
          regulations to which broker-dealers are subject cover all aspects of the
          securities business, including net capital requirements, sales methods,
          trading
          practices among broker-dealers, capital structure of securities firms,
          record
          keeping and the conduct of directors, officers and employees. The SEC and
          the
          self-regulatory bodies may conduct administrative proceedings, which can
          result
          in censure, fine, suspension or expulsion of a broker-dealer, its officers
          or
          employees. If we fail to comply with these rules and regulations, our business
          may be materially and adversely affected.
  The
          regulatory environment in which we operate is also subject to change. Our
          business may be adversely affected as a result of new or revised legislation
          or
          regulations imposed by the SEC, other United States or foreign governmental
          regulatory authorities or the NASD. We also may be adversely affected by
          changes
          in the interpretation or enforcement of existing laws and rules by these
          governmental authorities and the NASD.
  ***Our
          business may suffer if we lose the services of our executive officers or
          operating personnel.***
  We
          depend on the continued services and performance of D. Jonathan Merriman,
          our
          Chairman and Chief Executive Officer, for our future success. In addition
          to
          Mr. Merriman, we are currently managed by a small number of key management
          and operating personnel. Our future success depends, in part, on the continued
          service of our key executive, management and technical personnel, and our
          ability to attract highly skilled employees. Our business could be harmed
          if any
          key officer or employee were unable or unwilling to continue in his or
          her
          current position. From time to time we have experienced, and we expect
          to
          continue to experience, difficulty in hiring and retaining highly skilled
          employees. Competition for employees in our industry is significant. If
          we are
          unable to retain our key employees or attract, integrate or retain other
          highly
          qualified employees in the future, such failure may have a material adverse
          effect on our business and results of operations.
 27
  ***Our
          business is dependent on the services of skilled professionals, and may
          suffer
          if we can not recruit or retain such skilled
          professionals.***
  We
          have a number of revenue producers employed by our securities brokerage
          and
          investment banking subsidiary. We do not have employment contracts with
          these
          employees. The loss of one or more of these employees could adversely affect
          our
          business and results of operations.
  ***Our
          compensation structure may negatively impact our financial condition if
          we are
          not able to effectively manage our expenses and cash
          flows.***
  We
          are able to recruit and retain investment banking, research and sales and
          trading professionals, in part because our business model provides that
          we pay
          our revenue producing employees a percentage of their earned revenue.
          Compensation and benefits is our largest expenditure and this variable
          compensation component represents a significant proportion of this expense.
          Compensation for our employees is derived as a percentage of our revenue
          regardless of our profitability. Therefore, we may continue to pay individual
          revenue producers a significant amount of cash compensation as the overall
          business experiences negative cash flows and/or net losses. We may not
          be able
          to recruit or retain revenue producing employees if we modify or eliminate
          the
          variable compensation component from our business model.
  ***We
          may be dependent on a limited number of customers for a significant portion
          of
          our revenue.***
  During
          the six months ended June 30, 2007 and 2006, no single customer accounted
          for
          more than 10% of our revenue. However, we have been dependent on one customer
          or
          on a small number of customers, for a large percentage of our revenue at
          some
          times in the past and we cannot assure you that we will not become so dependent
          again in the future. If we do become dependent on a single customer or
          small
          group of customers, the loss of one or more large customers could materially
          adversely affect our business and results of operations.
 
 ***We
          may suffer losses through our investments in securities purchased in secondary
          market transactions or private placements.***
  Occasionally,
          our company, its officers and/or employees may make principal investments
          in
          securities through secondary market transactions or through direct investment
          in
          companies through private placements. In many cases, employees and officers
          with
          investment discretion on behalf of our company decide whether to invest
          in our
          company's account or their personal account. It is possible that gains
          from
          investing will accrue to these individuals because investments were made
          in
          their personal accounts, and our company will not realize gains because
          it did
          not make an investment. Conversely, it is possible that losses from investing
          will accrue to our company, while these individuals do not experience losses
          in
          their personal accounts because the individuals did not make investments
          in
          their personal accounts.
  ***We
          may be unable to successfully integrate acquired businesses into our existing
          business and operations.***
  From
          time to time, we may buy one or more other businesses. If we are unable
          to
          successfully integrate such businesses into our existing business and operations
          in the future, our business and results of operations could be materially
          adversely affected.
  ***We
          may be unable to effectively manage rapid growth that we may experience,
          which
          could place a continuous strain on our resources and, accordingly, adversely
          affect our business.***
  We
          plan to expand our operations. Our growth, if it occurs, will impose significant
          demands on our management, financial, technical and other resources. We
          must
          adapt to changing business conditions and improve existing systems or implement
          new systems for our financial and management controls, reporting systems
          and
          procedures and expand, train and manage a growing employee base in order
          to
          manage our future growth. We may not be able to implement improvements
          to our
          internal reporting systems in an efficient and timely manner and may discover
          deficiencies in existing systems and controls. We believe that future growth
          will require implementation of new and enhanced communications and information
          systems and training of our personnel to operate such systems. Furthermore,
          we
          may acquire existing companies or enter into strategic alliances with third
          parties, in order to achieve rapid growth. For us to succeed, we must make
          our
          existing business and systems work effectively with those of any strategic
          partners without undue expense, management distraction or other disruptions
          to
          our business. We may be unable to implement our business plan if we fail
          to
          manage any of the above growth challenges successfully. Our financial results
          may suffer and we could be materially and adversely affected if that
          occurs.
 28
  ***Our
          business and operations would suffer in the event of system
          failures.***
  Our
          success, in particular our ability to successfully facilitate securities
          brokerage transactions and provide high-quality customer service, largely
          depends on the efficient and uninterrupted operation of our computer and
          communications systems. Our systems and operations are vulnerable to damage
          or
          interruption from fire, flood, power loss, telecommunication failures,
          break-ins, earthquake and similar events. Despite the implementation of
          network
          security measures, redundant network systems and a disaster recovery plan,
          our
          servers are vulnerable to computer viruses, physical or electronic break-ins
          and
          similar disruptions, which could lead to interruptions, delays, loss of
          data or
          the inability to accept and fulfill customer orders. Additionally, computer
          viruses may cause our systems to incur delays or other service interruptions,
          which may cause us to incur additional operating expenses to correct problems
          we
          may experience. Any of the foregoing problems could materially adversely
          affect
          our business or future results of operations.
  ***We
          are highly dependent on proprietary and third-party systems; therefore,
          system
          failures could significantly disrupt our business.***
  Our
          business is highly dependent on communications and information systems,
          including systems provided by our clearing brokers. Any failure or interruption
          of our systems, the systems of our clearing broker or third party trading
          systems could cause delays or other problems in our securities trading
          activities, which could have a material adverse effect on our operating
          results.
  In
          addition, our clearing brokers provide our principal disaster recovery
          system.
          We cannot assure you that we or our clearing brokers will not suffer any
          systems
          failure or interruption, including one caused by an earthquake, fire, other
          natural disaster, power or telecommunications failure, act of God, act
          of war or
          otherwise, or that our or our clearing brokers' back-up procedures and
          capabilities in the event of any such failure or interruption will be
          adequate.
 
 ***Our
          common stock price may be volatile, which could adversely affect the value
          of
          your shares.***
  The
          market price of our common stock has in the past been, and may in the future
          continue to be, volatile. A variety of events may cause the market price
          of our
          common stock to fluctuate significantly, including:
 ·
                  variations
                      in quarterly operating
                      results;
 ·
                  our
                      announcements of significant contracts, milestones,
                      acquisitions;
 
 ·
                  our
                      relationships with other companies;
 
 ·
                  our
                      ability to obtain needed capital
                      commitments;
 
 ·
                  additions
                      or departures of key personnel;
 
 ·
                  sales
                      of common stock, conversion of securities convertible into
                      common stock,
                      exercise of options and warrants to purchase common stock or
                      termination
                      of stock transfer restrictions;
 
 ·
                  general
                      economic conditions, including conditions in the securities
                      brokerage and
                      investment banking markets;
 
 ·
                  changes
                      in financial estimates by securities analysts;
                      and
 
 ·
                  fluctuation
                      in stock market price and
                      volume.
  Many
          of these factors are beyond our control. Any one of the factors noted herein
          could have an adverse effect on the value of our common stock.
  In
          addition, the stock market in recent years has experienced significant
          price and
          volume fluctuations that have particularly affected the market prices of
          equity
          securities of many companies and that often have been unrelated to the
          operating
          performance of such companies. These market fluctuations have adversely
          impacted
          the price of our common stock in the past and may do so in the
          future.
 29
  ***Our
          risk management policies and procedures may leave us exposed to unidentified
          or
          unanticipated risk.***
  Our
          risk management strategies and techniques may not be fully effective in
          mitigating our risk exposure in all market environments or against all
          types of
          risk.
  We
          are exposed to the risk that third parties that owe us money, securities
          or
          other assets will not perform their obligations. These parties may default
          on
          their obligations to us due to bankruptcy, lack of liquidity, operational
          failure, and breach of contract or other reasons. We are also subject to
          the
          risk that our rights against third parties may not be enforceable in all
          circumstances. As a clearing member firm, we finance our customer positions
          and
          could be held responsible for the defaults or misconduct of our customers.
          Although we regularly review credit exposures to specific clients and
          counterparties and to specific industries and regions that we believe may
          present credit concerns, default risk may arise from events or circumstances
          that are difficult to detect or foresee. In addition, concerns about, or
          a
          default by, one institution could lead to significant liquidity problems,
          losses
          or defaults by other institutions, which in turn could adversely affect
          us. If
          any of the variety of instruments, processes and strategies we utilize
          to manage
          our exposure to various types of risk are not effective, we may incur
          losses.
  ***We
          could be sued in a securities class action lawsuit.***
  In
          the past, following periods of volatility in the market price of a company's
          securities, securities class action litigation often has been instituted
          against
          that company. Such litigation is expensive and diverts management's attention
          and resources. We can not assure you that we will not be subject to such
          litigation. If we are subject to such litigation, even if we ultimately
          prevail,
          our business and financial condition may be adversely affected.
  ***Your
          ability to sell your shares may be restricted because there is a limited
          trading
          market for our common stock.***
  Although
          our common stock is currently traded on the American Stock Exchange, an
          active
          trading market in our stock has been limited. Accordingly, you may not
          be able
          to sell your shares when you want or at the price you want.
 
 ***Anti-takeover
          provisions of the Delaware General Corporation Law could discourage a merger
          or
          other type of corporate reorganization or a change in control even if it
          could
          be favorable to the interests of our stockholders.***
  The
          Delaware General Corporation Law contains provisions that may enable our
          management to retain control and resist our takeover. These provisions
          generally
          prevent us from engaging in a broad range of business combinations with
          an owner
          of 15% or more of our outstanding voting stock for a period of three years
          from
          the date that such person acquires his or her stock. Accordingly, these
          provisions could discourage or make more difficult a change in control
          or a
          merger or other type of corporate reorganization even if it could be favorable
          to the interests of our stockholders.
  ***Because
          our Board of Directors can issue common stock without stockholder approval,
          you
          could experience substantial dilution.***
  Our
          Board of Directors has the authority to issue up to 300,000,000 shares
          of common
          stock and to issue options and warrants to purchase shares of our common
          stock
          without stockholder approval in certain circumstances. Future issuance
          of
          additional shares of our common stock could be at values substantially
          below the
          price at which you may purchase our stock and, therefore, could represent
          substantial dilution. In addition, our Board of Directors could issue large
          blocks of our common stock to fend off unwanted tender offers or hostile
          takeovers without further stockholder approval.
  ***Our
          ability to issue additional preferred stock may adversely affect your rights
          as
          a common stockholder and could be used as an anti take-over
          device.***
  Our
          Articles of Incorporation authorize our Board of Directors to issue up
          to an
          additional 27,450,000 shares of preferred stock, without approval from
          our
          stockholders. If you hold our common stock, this means that our Board of
          Directors has the right, without your approval as a common stockholder,
          to fix
          the relative rights and preferences of the preferred stock. This would
          affect
          your rights as a common stockholder regarding, among other things, dividends
          and
          liquidation. We could also use the preferred stock to deter or delay a
          change in
          control of our company that may be opposed by our management even if the
          transaction might be favorable to you as a common stockholder.
 30
  ***Our
          officers and directors exercise significant control over our affairs, which
          could result in their taking actions of which other stockholders do not
          approve.***
  Our
          executive officers and directors, and entities affiliated with them, currently
          control approximately 29% of our outstanding common stock including exercise
          of
          their options and warrants. These stockholders, if they act together, will
          be
          able to exercise substantial influence over all matters requiring approval
          by
          our stockholders, including the election of directors and approval of
          significant corporate transactions. This concentration of ownership may
          also
          have the effect of delaying or preventing a change in control of us and
          might
          affect the market price of our common stock.
  ***Any
          exercise of outstanding stock options and warrants will dilute then-existing
          stockholders' percentage of ownership of our common
          stock.***
  We
          have a significant number of outstanding stock options and warrants. As
          of June
          30, 2007, shares issuable upon the exercise of these options and warrants,
          at
          prices ranging currently from approximately $1.26 to $49.00 per share,
          represent
          approximately 7% of our total outstanding stock on a fully diluted basis
          using
          the treasury stock method.
  The
          exercise of the outstanding options and warrants would dilute the then-existing
          stockholders' percentage ownership of our common stock. Any sales resulting
          from
          the exercise of options and warrants in the public market could adversely
          affect
          prevailing market prices for our common stock. Moreover, our ability to
          obtain
          additional equity capital could be adversely affected since the holders
          of
          outstanding options and warrants may exercise them at a time when we would
          also
          wish to enter the market to obtain capital on terms more favorable than
          those
          provided by such options and warrants. We lack control over the timing
          of any
          exercise or the number of shares issued or sold if exercises occur.
 
 **Item
          4.** **Submission of Matters to a Vote of Security Holders**
  The
          annual meeting of our stockholders was held on June 8, 2007. At the annual
          meeting, our stockholders voted on the matters shown in the table below.
          Each
          director was elected, and each proposal adopted, by the votes
          shown.
  **Votes**
                  **For**
                
                **Votes**
                  **Against**
                
                **Votes**
                  **Abstained**
                
                
                **Broker**
                  **Non-Votes**1.
                Election
                    of Directors:D.
                    Jonathan Merriman
                7,779,245
                
                --
                
                142,093
                
                
                Not
                    applicablePatrick
                    H. Arbor
                7,777,888
                
                --
                
                143,450
                
                
                Not
                    applicableRonald
                    E. Spears
                7,777,974
                
                --
                
                143,364
                
                
                Not
                    applicableSteven
                    W. Town
                7,628,549
                
                --
                
                292,789
                
                
                Not
                    applicableRaymond
                    J. Minehan
                7,622,878
                
                --
                
                298,460
                
                
                Not
                    applicableDennis
                    G. Schmal
                7,618,035
                
                --
                
                303,303
                
                
                Not
                    applicableAnthony
                    B. Helfet
                7,760,028
                
                --
                
                161,310
                
                
                Not
                    applicableScott
                    Potter
                7,770,245
                
                --
                
                151,093
                
                
                Not
                    applicableWilliam
                    J. Febbo
                7,779,245
                
                --
                
                142,093
                
                
                Not
                    applicable2.
                Approval
                    of amendments to the Company's 2003 Stock Option and Incentive
                    Plan to
                    increase by 600,000 the number of shares of Common Stock available
                    for
                    issuance pursuant to awards granted under the Stock Option and
                    Incentive
                    Plan and to extend the term of the Stock Option and Incentive
                    Plan for an
                    additional one-year period, until March 7, 2017.
                2,373,618
                
                251,648
                
                29,515
                
                
                6,101,376
 31
 **Item
          6. Exhibits**
  31.1
                
                Certification
                    of Principal Executive Officer Pursuant To Section 302 of the
                    Sarbanes-Oxley Act of 2002.31.2
                
                Certification
                    of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley
                    Act of 2002.32.1
                
                Certification
                    of Chief Executive Officer and Chief Financial Officer Pursuant
                    to 18
                    U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.
  32
 
 
 **SIGNATURES**
  Pursuant
          to the requirements of Section 13 or 15(d) of the Securities Exchange Act
          of
          1934, the registrant has duly caused this report to be signed on its behalf
          by
          the undersigned, thereunto duly authorized.
  MCF
                    CORPORATIONAugust
                    7, 2007
                By:
                /s/ D.
                  JONATHAN MERRIMAND.
                  Jonathan Merriman,Chairman
                    of the Board and Chief Executive Officer
                  (Principal
                    Executive Officer)
     August
                    7, 2007
                By:
                /s/ JOHN
                  D.
                  HIESTANDJohn
                  D. HiestandChief
                    Financial Officer
                  (Principal
                    Financial Officer)
    33