**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-Q**




**QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934.**





**For
      the quarterly period ended September 30, 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 November 5,
      2007
      was 12,234,448.










**Form
      10-Q**


**For
      the Three Months Ended September 30, 200**  **7**





**Page
                No.**PART
                I FINANCIAL INFORMATIONITEM
                1. Financial Statements (unaudited)Condensed
                Consolidated Statements of Operations For the Three Months and Nine
                Months
                Ended September 30, 2007 and 2006
            
            2Condensed
                Consolidated Statements of Financial Condition as of September 30,
                2007
                and December 31, 2006
            
            3Condensed
                Consolidated Statements of Cash Flows For the Nine Months Ended September
                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
                2. Unregistered Sales of Equity Securities
            
            31ITEM
                6. Exhibits
            
            32Signatures
            
            33Certifications









**PART
      I.  FINANCIAL INFORMATION**





**Item
      1.   Financial Statements (unaudited)**




**MCF
      CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(unaudited)**




**Three
                Months Ended**
            
            **Nine
                Months Ended****September
                30,****2007**
            
            **September
                30,****2006**
            
            **September
                30,****2007**
            
            **September
                30,****2006**Revenue:Commissions
            
            $
            7,923,963
            
            $
            6,700,416
            
            $
            22,807,243
            
            $
            23,344,124Principal
                transactions
            
            
            2,478,297
            
            
            (1,148,313
            )
            
            10,804,073
            
            
            (1,480,963
            )Investment
                banking
            
            
            5,616,491
            
            
            1,839,288
            
            
            15,480,518
            
            
            11,750,176Primary
                research
            
            
            1,165,428
            
            
            ─
            
            
            2,116,490
            
            
            ─Advisory
                and other fees
            
            
            476,015
            
            
            35,099
            
            
            1,147,363
            
            
            238,321Total
                revenue
            
            
            17,660,194
            
            
            7,426,490
            
            
            52,355,687
            
            
            33,851,658Operating
                expenses:Compensation
                and benefits
            
            
            12,096,131
            
            
            8,534,218
            
            
            35,673,505
            
            
            29,987,310Brokerage
                and clearing fees
            
            
            627,223
            
            
            598,644
            
            
            1,921,920
            
            
            1,987,504Cost
                of primary research services
            
            
            555,185
            
            
            ─
            
            
            950,403
            
            
            ─Professional
                services
            
            
            518,045
            
            
            567,535
            
            
            1,603,163
            
            
            1,850,916Occupancy
                and equipment
            
            
            499,459
            
            
            406,047
            
            
            1,395,048
            
            
            1,195,202Communications
                and technology
            
            
            921,853
            
            
            800,061
            
            
            2,618,799
            
            
            2,123,963Depreciation
                and amortization
            
            
            193,284
            
            
            156,760
            
            
            556,332
            
            
            467,870Amortization
                of intangible assets
            
            
            264,771
            
            
            ─
            
            
            485,414
            
            
            ─Travel
                and entertainment
            
            
            635,353
            
            
            611,712
            
            
            1,789,971
            
            
            1,960,304Other
            
            
            1,277,519
            
            
            1,042,738
            
            
            2,993,878
            
            
            1,578,024Total
                operating expenses
            
            
            17,588,823
            
            
            12,717,715
            
            
            49,988,433
            
            
            41,151,093Operating
                income (loss)
            
            
            71,371
            
            
            (5,291,225
            )
            
            2,367,254
            
            
            (7,299,435
            )Interest
                income
            
            
            132,965
            
            
            117,945
            
            
            362,919
            
            
            367,711Interest
                expense
            
            
            (15,876
            )
            
            134,895
            
            
            (97,087
            )
            
            (408,002
            )Income
                (loss) from continuing operations before taxes
            
            
            188,460
            
            
            (5,038,385
            )
            
            2,633,089
            
            
            (7,339,726
            )Income
                tax expense
            
            
            ─
            
            
            ─
            
            
            (55,000
            )
            
            ─Income
                (loss) from continuing operations
            
            
            188,460
            
            
            (5,038,385
            )
            
            2,578,089
            
            
            (7,339,726
            )Loss
                from discontinued operations
            
            
            ─
            
            
            (70,666
            )
            
            ─
            
            
            (178,868
            )Net
                income (loss)
            
            $
            188,460
            
            $
            (5,109,051
            )
            $
            2,578,089
            
            $
            (7,518,594
            )Basic
                net income (loss) per share:Income
                (loss) from continuing operations
            
            $
            0.02
            
            $
            (0.50
            )
            $
            0.23
            
            $
            (0.74
            )Loss
                from discontinued operations
            
            $
            ─
            
            $
            (0.01
            )
            $
            ─
            
            $
            (0.02
            )Net
                income (loss)
            
            $
            0.02
            
            $
            (0.51
            )
            $
            0.23
            
            $
            (0.76
            )Diluted
                net income (loss) per share:Income
                (loss) from continuing operations
            
            $
            0.01
            
            $
            (0.05
            )
            $
            0.21
            
            $
            (0.74
            )Loss
                from discontinued operations
            
            $
            ─
            
            $
            (0.01
            )
            $
            ─
            
            $
            (0.02
            )Net
                income (loss)
            
            $
            0.01
            
            $
            (0.51
            )
            $
            0.21
            
            $
            (0.76
            )Weighted
                average common shares outstanding:Basic
            
            
            11,999,656
            
            
            10,151,922
            
            
            11,337,346
            
            
            9,906,672Diluted
            
            
            13,139,384
            
            
            10,151,922
            
            
            12,499,544
            
            
            9,906,672




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




2




**MCF
      CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**


**(unaudited)**




**September
                30,****2007**
            
            **December
                31,****2006**ASSETSCash
                and cash equivalents
            
            $
            12,470,717
            
            $
            13,746,590Securities
                owned:Marketable,
                at fair value
            
            
            14,661,068
            
            
            7,492,914Not
                readily marketable, at estimated fair value
            
            
            4,040,665
            
            
            1,489,142Restricted
                cash
            
            
            688,011
            
            
            629,427Due
                from clearing broker
            
            
            1,134,440
            
            
            551,831Accounts
                receivable, net
            
            
            2,421,026
            
            
            2,715,271Equipment
                and fixtures, net
            
            
            1,368,286
            
            
            1,586,630Intangible
                assets
            
            
            2,214,586
            
            
            314,963Goodwill
            
            
            3,153,219
            
            
            ─Prepaid
                expenses and other assets
            
            
            2,022,405
            
            
            1,971,445Total
                assets
            
            $
            44,174,423
            
            $
            30,498,213LIABILITIES
                AND STOCKHOLDERS' EQUITYAccounts
                payable
            
            $
            1,871,033
            
            $
            1,121,623Commissions
                and bonus payable
            
            
            7,900,581
            
            
            7,711,805Accrued
                expenses
            
            
            3,469,821
            
            
            2,285,670Due
                to clearing and other brokers
            
            
            16,733
            
            
            11,114Securities
                sold, not yet purchased
            
            
            2,476,071
            
            
            1,534,953Capital
                lease obligation
            
            
            850,034
            
            
            1,292,378Convertible
                notes payable, net
            
            
            194,831
            
            
            187,079Notes
                payable
            
            
            66,187
            
            
            138,571Total
                liabilities
            
            
            16,845,291
            
            
            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 September 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 September
                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 September
                30, 2007
                and December 31, 2006; aggregate liquidation preference of
                $0
            
            
            ─
            
            
            ─Common
                stock, $0.0001 par value; 300,000,000 shares authorized; 12,249,520
                and
                10,602,720 shares issued and 12,223,082 and 10,602,720 shares outstanding
                as of September 30, 2007 and December 31, 2006,
                respectively
            
            
            1,226
            
            
            1,061Additional
                paid-in capital
            
            
            123,278,319
            
            
            114,616,848Treasury
                stock
            
            
            (125,613
            )
            
            --Accumulated
                deficit
            
            
            (95,824,800
            )
            
            (98,402,889
            )Total
                stockholders' equity
            
            
            27,329,132
            
            
            16,215,020Total
                liabilities and stockholders' equity
            
            $
            44,174,423
            
            $
            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)**




**Nine
                  Months Ended**
                **September
                  30,****2007**
            
            **2006**Cash
                flows from operating activities:Net
                income (loss)
            
            $
            2,578,089
            
            $
            (7,518,594
            )Adjustments
                to reconcile net income (loss) to cash used in operating
                activities:Depreciation
                and amortization
            
            
            556,332
            
            
            474,637Amortization
                of intangible assets
            
            
            485,414
            
            
            34,214Stock-based
                compensation
            
            
            2,146,436
            
            
            3,179,305Amortization
                of discounts on convertible notes payable
            
            
            7,749
            
            
            326,383Amortization
                of debt issuance costs
            
            
            ─
            
            
            26,783Unrealized
                (gain) loss on securities owned
            
            
            (4,807,990
            )
            
            2,810,298Bad
                debt write-off
            
            
            368,272
            
            
            ─Other
            
            
            72,229
            
            
            13,055Changes
                in operating assets and liabilities:Securities
                owned
            
            
            (3,970,569
            )
            
            (3,421,329
            )Restricted
                cash
            
            
            (58,584
            )
            
            (575
            )Due
                from clearing broker
            
            
            (582,609
            )
            
            386,205Accounts
                receivable
            
            
            938,143
            
            
            1,345,785Prepaid
                expenses and other assets
            
            
            99,178
            
            
            (542,545
            )Accounts
                payable
            
            
            172,239
            
            
            279,879Commissions
                and bonus payable
            
            
            1,053
            
            
            (1,714,895
            )Accrued
                expenses
            
            
            1,022,867
            
            
            (122,981
            )Due
                to clearing and other brokers
            
            
            5,619
            
            
            (99,530
            )Net
                cash used in operating activities
            
            
            (966,132
            )
            
            (4,543,905
            )Cash
                flows from investing activities:Cash
                restricted for fund investment
            
            
            ─
            
            
            (6,300,944
            )Purchase
                of equipment and fixtures
            
            
            (291,687
            )
            
            (353,623
            )MedPanel
                acquisition costs
            
            
            (24,585
            )
            
            ─Catalyst
                acquisition costs
            
            
            ─
            
            
            (58,558
            )Proceeds
                from the sale of Catalyst
            
            
            163,219
            
            
            ─Net
                cash used in investing activities
            
            
            (153,053
            )
            
            (6,713,125
            )Cash
                flows from financing activities:Proceeds
                from the exercise of stock options and warrants
            
            
            172,996
            
            
            301,799Proceeds
                from the issuance of common stock
            
            
            185,041
            
            
            603,070Proceeds
                from the issuance of note payable ($6,112,171) and stock warrant
                ($1,387,829)
            
            
            ─
            
            
            7,500,000Minority
                interest in fund
            
            
            ─
            
            
            2,188,050Debt
                service principal payments
            
            
            (514,725
            )
            
            (345,271
            )Net
                cash provided by (used in) financing activities
            
            
            (156,688
            )
            
            10,247,648Decrease
                in cash and cash equivalents
            
            
            (1,275,873
            )
            
            (1,009,382
            )Cash
                and cash equivalents at beginning of period
            
            
            13,746,590
            
            
            11,138,923Cash
                and cash equivalents at end of period
            
            $
            12,470,717
            
            $
            10,129,541Supplementary
                disclosure of cash flow information:Cash
                paid during the period:Interest
            
            $
            73,023
            
            $
            55,624Income
                taxes
            
            $
            38,400
            
            $
            18,800





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 nine months ended
      September 30, 2007. Total assets for Panel Intelligence were $7,093,000 as
      of
      September 30, 2007. Total assets for MCF Asset Management were $3,187,000 as
      of
      September 30, 2007. The
      MCF
      Asset Management segment had an operating loss for the three months and nine
      months ended September 30, 2007 in the amount of $253,000 and $302,000,
      respectively.The results of operations for the Company's Wealth
      Management segment for the three months and nine months ended September 30,
      2006
      have been treated as discontinued operations since this business was sold in
      January 2007 (see Note No. 4).





*Concentrations*





As
      of
      September 30, 2007, the Company owned 4,808,000 shares of Points International
      in its proprietary trading account with a fair market value of $8,711,000 or
      approximately 20% of total assets.





*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. 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. In October 2007, the FASB indefinitely deferred
      the effective date for 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
      September 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 September 30, 2007, 374,618 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 nine months ended September 30, 2007 was
      $368,000 and $1,017,000, respectively. Compensation expense for stock options
      during the three months and nine months ended September 30, 2006 was $363,000
      and $1,004,000, respectively.





The
      following table is a summary of the Company's stock option activity for the
      nine
      months ended September 30, 2007:




**Options**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Exercise Price**Balance
                as of December 31, 2006
            
            
            3,570,370
            
            $
            6.19Granted
            
            
            644,620
            
            
            4.72Exercised
            
            
            (83,939
            )
            
            (2.06
            )Canceled
            
            
            (107,994
            )
            
            (6.89
            )Balance
                as of September 30, 2007
            
            
            4,023,057
            
            $
            6.02Exercisable
                as of September 30, 2007
            
            
            3,029,242
            
            $
            6.13





The
      following table summarizes information with respect to stock options outstanding
      at September 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
            
            
            1,993,849
            
            
            5.28
            
            $
            2.99
            
            $
            2,142,790
            
            
            1,993,849
            
            $
            2.99
            
            $
            2,142,790$
                3.51 -- $ 7.00
            
            
            1,107,181
            
            
            8.29
            
            $
            4.62
            
            
            ─
            
            
            351,061
            
            
            4.17
            
            
            ─$
                7.01 -- $14.00
            
            
            626,359
            
            
            6.95
            
            $
            8.88
            
            
            ─
            
            
            388,664
            
            
            9.21
            
            
            ─$14.01
                -- $28.00
            
            
            256,381
            
            
            3.10
            
            $
            22.04
            
            
            ─
            
            
            256,381
            
            
            22.04
            
            
            ─$28.01
                -- $49.00
            
            
            39,287
            
            
            2.41
            
            $
            49.00
            
            
            ─
            
            
            39,287
            
            
            49.00
            
            
            ─4,023,057
            
            
            6.20
            
            $
            6.02
            
            $
            2,142,790
            
            
            3,029,242
            
            $
            6.13
            
            $
            2,142,790




8




**MCF
      CORPORATION**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED**


**(unaudited)**




**2.
      Share-Based Compensation Expense - continued**





As
      of
      September 30, 2007, total unrecognized compensation expense related to unvested
      stock options was $3,221,000. This amount is expected to be recognized as
      expense over a weighted-average period of 1.45 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 nine months ended September 30,
      2007 was $298,000 and $986,000, respectively. Compensation expense for
      non-vested stock during the three months and nine months ended September 30,
      2006 was $463,000 and $1,481,000, respectively.





The
      following table is a summary of the Company's non-vested stock activity for
      the
      nine months ended September 30, 2007:




**Non-Vested**
              **Stock**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Grant
                Date**
              **Fair
                Value**
            
            **Intrinsic**
              **Value
                at**
              **September
                30, 2007**Balance
                as of December 31, 2006
            
            
            306,009
            
            $
            10.04Granted
            
            
            92,462
            
            
            4.66Vested
            
            
            (231,933
            )
            
            (8.72
            )Canceled
            
            
            (21,702
            )
            
            (9.49
            )Balance
                as of September 30, 2007
            
            
            144,836
            
            $
            8.78
            
            $
            588,034




As
      of
      September 30, 2007, total unrecognized compensation expense related to
      non-vested stock was $933,000. This expense is expected to be recognized over
      a
      weighted-average period of 0.92 year.




*2002
      Employee Stock Purchase Plan*





The
      Company issued all shares previously available under the Employee Stock Purchase
      Plan, or ESPP, to its employees through August 15, 2007. As of September 30,
      2007, there are no shares available under the ESPP plan and the Company has
      no
      plan to request additional shares from the stockholders for this program.
      Compensation expense for ESPP during the three months and nine months ended
      September 30, 2007 was $28,000 and $143,000, respectively. Compensation expense
      for ESPP during the three months and nine months ended September 30, 2006 was
      $301,000 and $483,000, respectively.





*Fair
      Value and Assumptions Used to Calculate Fair Value*




The
      weighted average fair value of each stock option granted for the three months
      and nine months ended September 30, 2007 was $2.84 and $2.67,
      respectively. The weighted average fair value of each stock option granted
      for the three months and nine months ended September 30, 2006 was $3.33 and
      $3.72, 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 nine months ended September 30, 2007 and
      2006:




**Nine
                months Ended**
              **September
                30,****2007**
            
            **2006**Expected
                volatility
            
            
            63.81
            %
            
            82.71
            %Expected
                life (years)
            
            
            4.20
            
            
            4.50Risk-free
                interest rate
            
            
            4.66
            %
            
            4.79
            %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 nine months ended September 30,
      2007
      was $4.32 and $4.66 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 nine months ended September 30, 2006 was $5.25 and $7.56 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
            
            
            3,153,219Total
                assets acquired
            
            
            7,806,822Accounts
                payable
            
            
            (577,171
            )Accrued
                expenses
            
            
            (463,300
            )Total
                liabilities assumed
            
            
            (1,040,471
            )Net
                assets acquired
            
            $
            6,766,351





The
      $3,153,000 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
      nine months ended September 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**
            
            **Nine
                Months Ended****September**
              **30,****2007**
            
            **September**
              **30,****2006**
            
            **September**
              **30,****2007**
            
            **September**
              **30,****2006**Total
                revenue
            
            $
            17,660,194
            
            $
            8,671,790
            
            $
            54,484,089
            
            $
            37,864,977Total
                operating expenses
            
            
            17,588,823
            
            
            14,283,459
            
            
            52,525,765
            
            
            45,710,959Operating
                income (loss)
            
            
            71,371
            
            
            (5,611,669
            )
            
            1,958,324
            
            
            (7,845,982
            )Net
                income (loss)
            
            $
            188,460
            
            $
            (5,434,415
            )
            $
            2,171,308
            
            $
            (8,076,246
            )Basic
                net income (loss) per share
            
            $
            0.02
            
            $
            (0.47
            )
            $
            0.18
            
            $
            (0.71
            )Diluted
                net income (loss) per share
            
            $
            0.01
            
            $
            (0.47
            )
            $
            0.17
            
            $
            (0.71
            )Weighted
                average common shares outstanding:Basic
            
            
            11,999,656
            
            
            11,652,042
            
            
            11,919,810
            
            
            11,406,792Diluted
            
            
            12,996,526
            
            
            11,652,042
            
            
            13,114,384
            
            
            11,406,792




**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 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 consolidated statements of
      operations.





The
      following revenue and expenses have been reclassified as discontinued operations
      for the three months and nine months ended September 30,
      2006:




**Three
                Months**
            
            **Nine
                Months**Revenue
            
            $
            206,911
            
            $
            635,103Operating
                expenses:Compensation
                and benefits
            
            
            182,615
            
            
            555,677Professional
                services
            
            
            8,525
            
            
            33,429Occupancy
                and equipment
            
            
            30,722
            
            
            73,715Communications
                and technology
            
            
            2,716
            
            
            13,929Depreciation
                and amortization
            
            
            15,156
            
            
            40,981Travel
                and entertainment
            
            
            11,875
            
            
            44,938Other
                expenses
            
            
            26,863
            
            
            54,241278,472
            
            
            816,910Operating
                loss
            
            
            (71,561
            )
            
            (181,807
            )Interest
                income, net
            
            
            895
            
            
            2,939Net
                loss
            
            $
            (70,666
            )
            $
            (178,868
            )




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 nine months ended
      September 30, 2007 and 2006, the Company recorded $55,000 and $0 as income
      tax
      expense, respectively.





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 it 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. 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 September 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**
                **September
                  30,**
              
              
              **Nine
                  Months Ended**
                **September
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Net
                  income (loss) available to stockholders - basic
              
              $
              188,460
              
              $
              (5,109,051
              )
              $
              2,578,089
              
              $
              (7,518,594
              )Interest
                  on dilutive securities
              
              
              4,084
              
              
              ─
              
              
              12,252
              
              
              ─Net
                  income (loss) available to stockholders - diluted
              
              $
              192,544
              
              $
              (5,109,051
              )
              $
              2,590,341
              
              $
              (7,518,594
              )Weighted-average
                  number of common shares - basic
              
              
              11,999,656
              
              
              10,151,922
              
              
              11,337,346
              
              
              9,906,672Exercise
                  or conversion of all potentially dilutive common shares
                  outstanding
              
              
              1,139,728
              
              
              ─
              
              
              1,162,198
              
              
              ─Weighted-average
                  number of common shares - diluted
              
              
              13,139,384
              
              
              10,151,922
              
              
              12,499,544
              
              
              9,906,672Basic
                  net income (loss) per common share:Income
                  (loss) from continuing operations
              
              $
              0.02
              
              $
              (0.50
              )
              $
              0.23
              
              $
              (0.74
              )Loss
                  from discontinued operations
              
              $
              ─
              
              $
              (0.01
              )
              $
              ─
              
              $
              (0.02
              )Net
                  income (loss)
              
              $
              0.02
              
              $
              (0.51
              )
              $
              0.23
              
              $
              (0.76
              )Diluted
                  net loss per common share:Income
                  (loss) from continuing operations
              
              $
              0.01
              
              $
              (0.50
              )
              
              (0.21
              )
              
              (0.74
              )Loss
                  from discontinued operations
              
              $
              ─
              
              $
              (0.01
              )
              $
              ─
              
              $
              (0.02
              )Net
                  income (loss)
              
              $
              0.01
              
              $
              (0.51
              )
              $
              0.21
              
              $
              (0.76
              )




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 nine months ended September 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 nine months ended September 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**
              **September 30,**
            
            **Nine
              Months Ended**
              **September
                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
            
            
            2,093,089
            
            
            1,519,107
            
            
            1,756,224
            
            
            1,335,327Weighted
                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
            
            
            ─
            
            
            1,568,682
            
            
            ─
            
            
            2,018,006Weighted
                average shares issuable upon conversion of the convertible notes
                payable
            
            
            ─
            
            
            902,736
            
            
            ─
            
            
            721,812Weighted
                average shares contingently issuable
            
            
            ─
            
            
            52,876
            
            
            ─
            
            
            80,320Total
                common stock equivalents excluded from diluted net income (loss)
                per
                share
            
            
            2,093,089
            
            
            4,043,401
            
            
            1,756,224
            
            
            4,155,465





**7.
      Other Operating Expenses**




The
      following expenses are included in other operating expenses for the three months
      and nine months ended September 30, 2007:




**Three
                Months Ended**
              **September
                30,**
            
            
            **Nine
                Months Ended**
              **September
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Investor
                conferences
            
            $
            521,759
            
            $
            593,580
            
            $
            910,130
            
            $
            874,487Recruiting
            
            
            116,778
            
            
            134,452
            
            
            486,839
            
            
            264,349Bad
                debt expenses
            
            
            140,105
            
            
            ─
            
            
            368,271
            
            
            (445,016
            )Public
                and investor relations
            
            
            208,058
            
            
            73,165
            
            
            368,769
            
            
            247,166Supplies
            
            
            65,954
            
            
            58,887
            
            
            233,661
            
            
            213,450Insurance
            
            
            73,659
            
            
            66,997
            
            
            220,663
            
            
            197,867Other
            
            
            151,206
            
            
            115,657
            
            
            405,545
            
            
            225,721$
            1,277,519
            
            $
            1,042,738
            
            $
            2,993,878
            
            $
            1,578,024





**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 September 30, 2007,
      Merriman Curhan Ford & Co. had regulatory net capital, as defined, of
      $5,789,000, which exceeded the amount required by $4,789,000. 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, Inc. 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 September 30, 2007, assets under management across our three fund
      products exceeded $50 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 third quarter 2007 exceeded $17.6 million, which represented an increase
      of more than $10 million, or 138%, over the third quarter 2006. Revenue growth
      during the latest quarter was led by investment banking and principal
      transactions, which were $3.7 million and $3.6 million higher in 2007 as
      compared to 2006, respectively. Commissions revenue was up $1.2 million, or
      18%,
      from third quarter 2006 and we experienced continued growth for each of our
      recurring revenue activities, including asset management and primary research.
      Net income for the third quarter 2007 was $188,000, or $0.01 per diluted share,
      which represents the third 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 September 30, 2007 was 68%, which represents a
      significant improvement from third quarter 2006.





For
      the
      first three quarters of 2007, revenue was $18.5 million, or 55%, higher than
      the
      similar period in 2006. Net income for the nine months ended September 30,
      2007
      exceeded $2.5 million, or $0.21 per diluted share, as compared to a net loss
      of
      $7.5 million, or $0.76 per diluted share, for the nine months ended September
      30, 2006.




15




**Business
      Environment**




Most
      categories of U.S. stocks finished the third quarter higher. The final results
      masked a significant spike in market volatility from mid-July through
      mid-August, however, as concerns about the subprime mortgage market intensified
      and evidence mounted that the damage could spread beyond subprime borrowers
      and
      lenders. The Federal Reserve took action in both July and August, cutting both
      the federal funds rate and discount rate. Investors welcomed these rate
      reductions, and most broad-based stock indexes were trading near their all-time
      highs at the end of the quarter.





Small-cap
      stocks struggled in this environment, with the Russell 2000® Index down 3.09%
      for the quarter. Growth topped value across all capitalization groups, with
      large caps leading the way. Among S&P 500 sectors, energy and information
      technology delivered strong gains, while consumer discretionary and financials
      ended the quarter with losses.





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
      nine months ended September 30, 2007 and 2006:




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September**
              **30,****2007**
            
            
            **September**
              **30,****2006**
            
            
            **September**
              **30,****2007**
            
            
            **September**
              **30,****2006**Revenue:Commissions
            
            $
            7,923,963
            
            $
            6,700,416
            
            $
            22,807,243
            
            $
            23,344,124Principal
                transactions
            
            
            2,478,297
            
            
            (1,148,313
            )
            
            10,804,073
            
            
            (1,480,963
            )Investment
                banking
            
            
            5,616,491
            
            
            1,839,288
            
            
            15,480,518
            
            
            11,750,176Primary
                research
            
            
            1,165,428
            
            
            ─
            
            
            2,116,490
            
            
            ─Advisory
                and other fees
            
            
            476,015
            
            
            35,099
            
            
            1,147,363
            
            
            238,321Total
                revenue
            
            
            17,660,194
            
            
            7,426,490
            
            
            52,355,687
            
            
            33,851,658Operating
                expenses:Compensation
                and benefits
            
            
            12,096,131
            
            
            8,534,218
            
            
            35,673,505
            
            
            29,987,310Brokerage
                and clearing fees
            
            
            627,223
            
            
            598,644
            
            
            1,921,920
            
            
            1,987,504Cost
                of primary research services
            
            
            555,185
            
            
            ─
            
            
            950,403
            
            
            ─Professional
                services
            
            
            518,045
            
            
            567,535
            
            
            1,603,163
            
            
            1,850,916Occupancy
                and equipment
            
            
            499,459
            
            
            406,047
            
            
            1,395,048
            
            
            1,195,202Communications
                and technology
            
            
            921,853
            
            
            800,061
            
            
            2,618,799
            
            
            2,123,963Depreciation
                and amortization
            
            
            193,284
            
            
            156,760
            
            
            556,332
            
            
            467,870Amortization
                of intangible assets
            
            
            264,771
            
            
            ─
            
            
            485,414
            
            
            ─Travel
                and entertainment
            
            
            635,353
            
            
            611,712
            
            
            1,789,971
            
            
            1,960,304Other
            
            
            1,277,519
            
            
            1,042,738
            
            
            2,993,878
            
            
            1,578,024Total
                operating expenses
            
            
            17,588,823
            
            
            12,717,715
            
            
            49,988,433
            
            
            41,151,093Operating
                income (loss)
            
            
            71,371
            
            
            (5,291,225
            )
            
            2,367,254
            
            
            (7,299,435
            )Interest
                income
            
            
            132,965
            
            
            117,945
            
            
            362,919
            
            
            367,711Interest
                expense
            
            
            (15,876
            )
            
            134,895
            
            
            (97,087
            )
            
            (408,002
            )Income
                (loss) from continuing operations before taxes
            
            
            188,460
            
            
            (5,038,385
            )
            
            2,633,087
            
            
            (7,339,726
            )Income
                tax expense
            
            
            ─
            
            
            ─
            
            
            (55,000
            )
            
            ─Income
                (loss) from continuing operations
            
            
            188,460
            
            
            (5,038,385
            )
            
            2,578,089
            
            
            (7,339,726
            )Loss
                from discontinued operations
            
            
            ─
            
            
            (70,666
            )
            
            ─
            
            
            (178,868
            )Net
                income (loss)
            
            $
            188,460
            
            $
            (5,109,051
            )
            $
            2,578,089
            
            $
            (7,518,594
            )




16




Our
      net
      income (loss) for the three months and nine months ended September 30, 2007
      and
      2006 included the following non-cash expenses:




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September**
              **30,****2007**
            
            
            **September**
              **30,****2006**
            
            
            **September**
              **30,****2007**
            
            
            **September**
              **30,****2006**Stock-based
                compensation
            
            $
            694,574
            
            $
            1,197,256
            
            $
            2,146,436
            
            $
            3,179,305Depreciation
                and amortization
            
            
            193,284
            
            
            137,702
            
            
            556,332
            
            
            474,637Amortization
                of intangible assets
            
            
            264,771
            
            
            34,214
            
            
            485,414
            
            
            34,214Write-off
                of uncollectible accounts receivable
            
            
            140,105
            
            
            ─
            
            
            368,272
            
            
            ─Amortization
                of discounts on debt
            
            
            2,583
            
            
            175,543
            
            
            7,749
            
            
            326,383Total
            
            $
            1,295,317
            
            $
            1,544,715
            
            $
            3,564,203
            
            $
            4,014,539




***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 nine months ended
      September 30, 2007 and 2006:




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September**
              **30,****2007**
            
            
            **September**
              **30,****2006**
            
            
            **September**
              **30,****2007**
            
            
            **September**
              **30,****2006****Revenue:**Capital
                raising
            
            $
            3,881,491
            
            $
            1,194,288
            
            $
            13,028,018
            
            $
            10,429,291Financial
                advisory
            
            
            1,735,000
            
            
            645,000
            
            
            2,452,500
            
            
            1,320,885Total
                investment banking revenue
            
            $
            5,616,491
            
            $
            1,839,288
            
            $
            15,480,518
            
            $
            11,750,176**Transaction
                Volumes:**Public
                offerings:Capital
                underwritten participations
            
            $
            8,505,000
            
            $
            ─
            
            $
            113,744,000
            
            $
            104,151,000Number
                of transactions
            
            
            1
            
            
            ─
            
            
            7
            
            
            10Private
                placements:Capital
                raised
            
            $
            101,210,000
            
            $
            19,385,000
            
            $
            187,795,000
            
            $
            107,385,000Number
                of transactions
            
            
            8
            
            
            4
            
            
            15
            
            
            8




Our
      investment banking revenue was $5,616,000, or 32% of our revenue during third
      quarter 2007, representing a 205% increase from the similar quarter in 2006.
      We
      were placement agent for eight private transactions and a co-manager for one
      public offering during the three months ended September 30, 2007.




During
      the nine months ended September 30, 2007, no single investment banking client
      accounted for more than 10% of our revenue, while one investment banking client
      accounted for 11% of our revenue during the first nine months 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**
            
            
            **Nine
                Months Ended****September**
              **30,****2007**
            
            
            **September**
              **30,****2006**
            
            
            **September**
              **30,****2007**
            
            
            **September**
              **30,****2006****Revenue:**Commissions
            
            $
            7,923,963
            
            $
            6,700,416
            
            $
            22,807,243
            
            $
            23,344,124Principal
                transactions:Customer
                principal transactions, proprietary trading and market
                making
            
            $
            1,888,770
            
            $
            (1,135,723
            )
            $
            9,243,523
            
            $
            (1,263,456
            )Investment
                portfolio
            
            
            589,527
            
            
            (12,590
            )
            
            1,560,550
            
            
            (217,507
            )Total
                principal transactions revenue
            
            $
            2,478,297
            
            $
            (1,148,313
            )
            $
            10,804,073
            
            $
            (1,480,963
            )**Transaction
                Volumes:**Number
                of shares traded
            
            
            315,936,384
            
            
            193,666,883
            
            
            793,084,262
            
            
            701,398,931Number
                of active clients
            
            
            374
            
            
            362
            
            
            537
            
            
            510





Commissions
      amounted to $7,924,000, or 45%, of our revenue during the third quarter 2007,
      representing a 18% increase from the similar period in 2006. Higher revenue
      for
      brokering institutional money funds by our Institutional Cash Distributors
      division was partially offset by lower brokerage commissions.




Principal
      transactions revenue swung from a $1,148,000 loss during the third quarter
      2006
      to a $2,478,000 gain during the third quarter of 2007. The 2007 gain included
      increases in the mark-to-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 September
      30,
      2007, we made markets in over 1,100 stocks, which has increased by more
      than 30% from September 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 the operating results of Panel Intelligence from
      the
      date of the MedPanel acquisition, April 17, 2007, through September 30,
      2007.  We are now offering independent market data and information to
      clients in the biotechnology, pharmaceutical, medical device, clean tech and
      financial industries.




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 and nine months ended September 30, 2007 and
      2006:




**Three
                Months Ended**
            
            
            **Nine
                Months Ended****September**
              **30,****2007**
            
            
            **September**
              **30,****2006**
            
            
            **September**
              **30,****2007**
            
            
            **September**
              **30,****2006**Incentive
                compensation and discretionary bonuses
            
            $
            6,566,759
            
            $
            4,169,791
            
            $
            19,950,445
            
            $
            17,422,932Salaries
                and wages
            
            
            3,928,087
            
            
            2,402,530
            
            
            10,527,878
            
            
            6,737,427Stock-based
                compensation
            
            
            694,574
            
            
            1,197,256
            
            
            2,146,436
            
            
            3,179,305Payroll
                taxes, benefits and other
            
            
            906,711
            
            
            764,641
            
            
            3,048,746
            
            
            2,647,646Total
                compensation and benefits
            
            $
            12,096,131
            
            $
            8,534,218
            
            $
            35,673,505
            
            $
            29,987,310Total
                compensation and benefits expense as a percentage of
                revenue
            
            
            68
            %
            
            115
            %
            
            68
            %
            
            89
            %Cash
                compensation and benefits expense as a percentage of
                revenue
            
            
            65
            %
            
            99
            %
            
            64
            %
            
            79
            %





The
      increase in compensation and benefits expense of $3,562,000, or 42%, from the
      third quarter 2006 to the third 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 65% during the three
      months ended September 30, 2007 as compared to 99% during the similar period
      in
      2006. This improvement was largely attributed to higher investment banking
      and
      principal transactions revenue during 2007 as these activities represent our
      highest margin businesses.




During
      the three months ended September 30, 2007, one sales professional accounting
      for
      12% of our revenue. No single sales professional accounted for more than 10%
      of
      our revenue during the three months ended September 30, 2006, and nine months
      ended September 30, 2007 and 2006.




Stock-based
      compensation expense decreased by $503,000, or 42%, during the third quarter
      2007 as compared to the similar quarter in 2006. The decline in stock-based
      compensation expense was due mostly 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 increased by $29,000, or 5%,
      during the third quarter of 2007 as compared to the third quarter of 2006 and
      decreased by $66,000, or 3%, during the nine months ended September 30, 2007
      as
      compared to the similar period in 2006. The third quarter increase reflected
      higher market making activities while the slight decrease for the first three
      quarters of 2007 resulted from lower overall commissions revenue during 2007,
      partially offset by increased market making activity as compared to
      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 $49,000, or 9%, during the third quarter of 2007
      as
      compared to the third quarter of 2006 and decrease of $248,000, or 13%, during
      the nine months ended September 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 $93,000, or 23%, during the third
      quarter of 2007 as compared to the third quarter of 2006 and increase of
      $200,000, or 17%, during the nine months ended September 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 $122,000, or 15%,
      during the third quarter of 2007 as compared to the third quarter of 2006 and
      increase of $495,000, or 23% during the nine months ended September 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 $37,000, or 23%, during the third quarter
      of
      2007 as compared to the third quarter of 2006 and increase of $88,000, or 19%
      during the nine months ended September 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 increase of $24,000, or 4%, during the third quarter
      of 2007 as compared to the third quarter of 2006 was attributed to higher
      investment banking business development spending while the decrease of $170,000,
      or 9% during the nine months ended September 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 nine months ended September 30, 2007:





**Three
                Months Ended**
              **September
                30,**
            
            **Nine
                Months Ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Investor
                conferences
            
            $
            521,759
            
            $
            593,580
            
            $
            910,130
            
            $
            874,487Recruiting
            
            
            116,778
            
            
            134,452
            
            
            486,839
            
            
            264,349Bad
                debt expenses
            
            
            140,105
            
            
            ─
            
            
            368,271
            
            
            (445,016
            )Public
                and investor relations
            
            
            208,058
            
            
            73,165
            
            
            368,769
            
            
            247,166Supplies
            
            
            65,954
            
            
            58,887
            
            
            233,661
            
            
            213,450Insurance
            
            
            73,659
            
            
            66,997
            
            
            220,663
            
            
            197,867Other
            
            
            151,206
            
            
            115,657
            
            
            405,545
            
            
            225,721$
            1,277,519
            
            $
            1,042,738
            
            $
            2,993,878
            
            $
            1,578,024





The
      increase in other operating expenses of $235,000, or 23%, during the third
      quarter of 2007 as compared to the third quarter of 2006 was primarily due
      to
      the write-off of $140,000 in uncollectible receivables related to investment
      banking transactions that will not be completed and $135,000 for services
      provided by an investor relations consulting firm. The increase of $1,416,000,
      or 90%, during the nine months ended September 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 and (iii) the write-off of uncollectible receivables related
      to investment banking activities.




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 nine months ended September 30,
      2007 and 2006, we recorded $55,000 and $0 as income tax expense,
      respectively.





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. 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 September 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 nine months ended
      September 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 September
      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
            
            $
            26,694
            
            $
            545,011
            
            $
            149,307One
                year to three years
            
            
            243,990
            
            
            3,179,296
            
            
            769,607Three
                years to five years
            
            
            ─
            
            
            985,839
            
            
            ─Total
                commitments
            
            $
            270,684
            
            $
            4,710,146
            
            $
            918,914




**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 nine months ended
      September 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 September 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 September 30, 2007, liquid assets
      consisted primarily of cash and cash equivalents of $12,471,000 and marketable
      securities, net of securities sold not yet purchased, of $12,185,000, for a
      total of $24,656,000.




Cash
      and
      cash equivalents decreased by $1,276,000 during the nine months ended September
      30, 2007. Cash used in operating activities for 2007 was $966,000 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 used in investing activities amounted to $153,000 during 2007
      which consisted of purchases of equipment and fixtures, partially offset by
      proceeds from the sale of Catalyst. Cash used in financing activities was
      $157,000. 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 September 30, 2007,
      Merriman Curhan Ford & Co. had regulatory net capital of $5,789,000 which
      exceeded the required amount by $4,789,000.




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 September 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 September 30, 2007, that materially affected, or is reasonably
      likely to materially affect, the Company's internal control over financial
      reporting.




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.





**S3
      Investment Company, Inc. v. Merriman Curhan Ford & Co. and Qualico Capital,
      Inc.**





In
      September 2007, Merriman Curhan Ford & Co. was served with a complaint filed
      by a former client S3 Investment Company, Inc. (“S3i”).The matter is pending
      before the Superior Count in the City and County of San Francisco. The plaintiff
      alleges theories of breach of contract, fraud, negligent misrepresentation,
      intentional and negligent interference with prospective economic relations.
      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 nine months ended September 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 September
      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  2. 
      Unregistered Sales of Equity Securities**





On
      July
      15, 2007, we issued 12,000 shares of our Common Stock to Barretto Pacific Group
      (“BPG”), a contractor who performed services for the Company. Such shares were
      placed in escrow pending vesting per the Company’s written agreement with BPG.
      Vesting was contingent on the provision of services by BPG, which conditions
      were satisfied and the shares released from escrow fully vested in October
      2007.
      These shares were issued in consideration for services rendered to the Company.
      These shares were issued in reliance upon the exemption from the registration
      requirements of the Securities Act of 1933, as amended (the “Securities Act”)
      contained in Section 4.2 of the Securities Act due to the fact that they were
      issued in a transaction not involving a public offering.




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
                CORPORATIONNovember
                6, 2007
            By:
            /s/ D.
                JONATHAN MERRIMAND.
                Jonathan Merriman,Chairman
                of the Board and Chief Executive Officer
              (Principal
                Executive Officer)




November
                  6, 2007
              By:
              /s/ JOHN
                  D. HIESTANDJohn D. HiestandChief
                    Financial Officer
                  (Principal
                    Financial Officer)
  33