UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB
(Mark One)

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

For the quarterly period ended September 30, 2007

|_| TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT

For the transition period from ___________ to _____________

Commission file number: 333-121070

ABC FUNDING, INC.

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

 Nevada 56-2458730
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

Steven Barrenechea, Chief Executive Officer
c/o Eaton & Van Winkle LLP,
3 Park Avenue,
New York, New York 10016
(Address of principal executive offices)

(212) 561-3626
(Issuer's telephone number)

(Former name, former address and former fiscal year,
if changed since last report)

Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes |X| No |_|

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) (check one):


Yes |X| No |_|

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 22,722,248 shares of Common Stock, as of November 5, 2007.

Transitional Small Business Disclosure Format (check one):


Yes |_| No |X|

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ABC FUNDING, INC.

 Page No.

PART I - Financial Information

Item 1. Financial Statements

 Balance Sheets as of September 30, 2007 and June 30, 2007 3
 (unaudited)

 Unaudited Statements of Expenses for the Three Month Periods 4
 Ended September 30, 2007 and September 30, 2006 and for the
 Period from February 21, 2006 (Inception) Through September
 30, 2007

 Unaudited Statements of Cash Flows for the Three Month 5
 Periods Ended September 30, 2007 and September 30, 2006 and
 for the Period from February 21, 2006 (Inception) Through
 September 30, 2007

Notes to Unaudited Financial Statements 6

Item 2. Management's Discussion and Analysis or Plan of Operation 9

Item 3. Controls and Procedures 17

PART II. Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19

Item 6. Exhibits 19

Signature Page 20

2

 ABC Funding, Inc.
(A Development Stage Company)
 BALANCE SHEETS
 (unaudited)

 September 30, June 30,
 2007 2007
 ------------- -------------
ASSETS
Cash and cash equivalents $ 82,193 $ 550,394
Prepaid and other current assets 29,177 30,428
 ------------- -------------
Total current assets 111,370 580,822
 ------------- -------------

Total assets $ 111,370 $ 580,822
 ============= =============

LIABILITIES & STOCKHOLDERS' DEFICIT
Accounts payable $ 20,742 $ 7,180
Accrued liabilities 165,966 188,996
Convertible debt, net of unamortized discount
of $0 and $36,973, respectively 1,090,000 1,463,027
 ------------- -------------
Total current liabilities 1,276,708 1,659,203
 ------------- -------------

Commitments and contingencies -- --

STOCKHOLDERS' DEFICIT

Preferred stock, $0.001 par value; 1,000,000 shares
authorized; none outstanding -- --

Common stock, $0.001 par value; 30,000,000 shares
authorized; 22,722,248 and 22,065,000 shares issued
and outstanding, respectively 22,722 22,065

Additional paid-in-capital 1,532,332 1,244,766

Deficit accumulated in the development stage (2,720,392) (2,345,211)
 ------------- -------------

Total stockholders' deficit (1,165,338) (1,078,381)
 ------------- -------------

Total liabilities & stockholders' deficit $ 111,370 $ 580,822
 ------------- -------------

See accompanying notes to financial statements.

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ABC Funding, Inc.
(A Development Stage Company)

STATEMENTS OF EXPENSES

Three Month Periods Ended September 30, 2007 and September 30, 2006 and the Period from February 21, 2006 (Inception) Through September 30, 2007


(unaudited)

 February 21,
 2006
 Three Months Three Months (Inception)
 Ended Ended Through
 September 30, September 30, September 30,
 2007 2006 2007
 ------------- ------------- -------------
Selling, general and
administrative expenses $ 208,711 $ 77,090 $ 2,188,248
 ------------- ------------- -------------

Operating loss 208,711 77,090 2,188,248

Other (income) expenses
Interest income (4,833) (8,750) (41,182)
Interest expense 171,303 77,449 573,326

Total other (income) expenses 166,470 68,699 532,144

Total expenses 375,181 145,789 2,720,392
 ------------- ------------- -------------

Net loss $ (375,181) $ (145,789) $ (2,720,392)
 ============= ============= =============

Basic and diluted net loss
per common share $ (0.02) $ (0.01)

Weighted average common
shares outstanding 22,227,374 22,065,000

See accompanying notes to financial statements.

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ABC Funding, Inc.
(A Development Stage Company)

STATEMENTS OF CASH FLOWS

Three Month Periods Ended September 30, 2007 and September 30, 2006 and the Period from February 21, 2006 (Inception) Through September 30, 2007


(unaudited)

 February 21,
 2006
 Three Months Three Months (Inception)
 Ended Ended Through
 September 30, September 30, September 30,
 2007 2006 2007
 ------------- ------------- -------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (375,181) $ (145,789) $ (2,720,392)
Adjustments to reconcile net loss to cash
used in operating activities:
Share-based compensation 145,500 -- 1,160,363
Stock issued as consideration for note extension 98,100 -- 98,100
Stock issued for interest 5,266 -- 5,266
Amortization of debt discount 36,973 39,794 250,000

Changes in:
Prepaid and other current assets 1,251 20,253 (29,177)
Accounts payables and accrued liabilities 29,890 (40,975) 226,066
 ------------- ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (58,201) (126,717) (1,009,774)
 ------------- ------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock -- -- 251,967
Principal payments on convertible notes (410,000) -- (410,000)
Proceeds from convertible notes -- 15,000 1,250,000
 ------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (410,000) 15,000 1,091,967
 ------------- ------------- -------------

NET CHANGE IN CASH (468,201) (111,717) 82,193
Cash and cash equivalents, beginning of period 550,394 894,516 --
 ------------- ------------- -------------
Cash and cash equivalents, end of period 82,193 782,799 82,193

SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 14,637 $ -- $ 14,637
Cash paid for income taxes -- -- --

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common shares issued in payment of interest $ 39,358 $ -- $ 39,358

See accompanying notes to financial statements.

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ABC Funding, Inc.
(A Development Stage Company)

Notes To Financial Statements
(unaudited)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business. ABC Funding, Inc. ("ABC" or "Company") was incorporated in Nevada on May 13, 2004. ABC merged with Energy Venture, Inc. ("Energy Venture") in May of 2006. The merger transaction was accounted for as a reverse merger with Energy Venture being deemed the acquiring entity for financial accounting purposes. Thus, the historical financial statements of the Company prior to the effective date of the Energy Venture merger have been restated to be those of Energy Venture. ABC, formerly Energy Venture, since inception, has primarily been involved in conducting business planning and capital-raising activities. ABC intends to engage in the oil and natural gas industry either by making acquisitions or by participating in strategic joint ventures.

Basis of Presentation. The accompanying unaudited interim financial statements of ABC have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with ABC's audited June 30, 2007 annual financial statements and notes thereto. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the result of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure required in ABC's June 30, 2007 annual financial statements have been omitted.

Use of Estimates. In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenue and expenses in the statement of expenses. Actual results could differ from those estimates.

NOTE 2 GOING CONCERN

ABC has been in the development stage since its formation in February 2006 and has not yet realized any revenues from its planned operations. The ability of ABC to emerge from the development stage with respect to its principal business activity is dependent upon its successful efforts to raise additional equity or debt financing, to acquire or participate in oil and natural gas operations and to generate significant revenue and operating cash flow. As of September 30, 2007, ABC has a working capital deficit of $1,165,338 and since inception, has incurred losses of $2,720,392. As discussed below in Note 4, the Company has extended the maturity date of $1,090,000 of the Notes through February 28, 2008; however, without significant new sources of liquidity, the factors discussed above raise substantial doubt regarding ABC's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if ABC is unable to continue as a going concern.

NOTE 3 ISSUANCE OF COMMON STOCK

On August 21, 2007, the Company issued 100,000 shares of common stock with a value of $45,000 to a non-employee as compensation for services rendered.

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On September 4, 2007, the Company issued 89,248 shares of common stock in lieu of cash in payment of $44,624 of accrued and current period interest to noteholders who chose to redeem their notes. See Note 4 below.

On September 4, 2007, the Company issued 218,000 shares of common stock with a value of $98,100 to those noteholders who chose to extend the maturity date of the Notes as consideration for extending the Note's maturity date to February 28, 2008. See Note 4 below.

On September 17, 2007, the Company issued 100,000 shares of common stock with a value of $45,000 to a non-employee as compensation for services rendered.

On September 19, 2007, the Board of Directors of the Company approved the issuance of 150,000 shares of common stock with a value of $55,500 to a member of the Board of Directors as compensation for assuming the role of Chief Executive Officer of the Company.

NOTE 4 PROCEEDS FROM CONVERTIBLE NOTE SUBSCRIPTION

Between February 21, 2006 and April 30, 2006, ABC circulated a Private Placement Memorandum ("PPM") offering convertible notes on the following terms: each note matures August 31, 2007, a 10% interest rate payable in either cash or shares and a conversion rate of $0.50 per share exercisable at the option of the investor, and each investor would be issued upon subscription, as an inducement to participate in the offering, a number of shares of Common Stock equal to 20% of his or her investment divided by $0.50. The original PPM offered up to $1,500,000 in notes. Actual subscriptions received and accepted were for $1,500,000, $15,000 of which was received in the nine month period ended March 31, 2007. If all $1,500,000 of notes are converted at maturity, then, including interest and the additional shares issued upon subscription, 4,009,139 shares will be issued.

Such additional shares of common stock issued to the investors upon their subscription for convertible notes amounted to 600,000 shares. The relative fair value of these shares was $250,000 and was recorded as a debt discount and as additional paid in capital. The debt discount was amortized over the term of the notes payable using the effective interest method. The original issue discount rate was 23.44%. During the period from February 21, 2006 (inception) to September 30, 2007, the entire discount of $250,000 was amortized and recorded as interest expense.

ABC evaluated the application of Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities" and Emerging Issues Task Force 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock" for the 10% convertible promissory notes. Based on the guidance of SFAS No. 133 and EITF 00-19, ABC concluded that these instruments were not required to be accounted for as derivatives.

The Company repaid in cash, on the Maturity Date, six (6) of the holders of the Notes an aggregate amount of $424,637, of which $410,000 represented principal and $14,637 represented accrued interest. An additional $44,624 of accrued and current period interest was repaid through the issuance of 89,248 shares of common stock of the Company. The remaining holders of the Notes have entered into an agreement with the Company whereby the Maturity Date of the Notes was extended to February 28, 2008 and, beginning September 1, 2007 until the Notes are paid in full, the interest rate on the outstanding principal increased to 12% per annum. In addition, the Company agreed to issue to the remaining holders of the Notes 218,000 shares of the Company's common stock with a value of $98,100 as consideration for extending the Note's maturity date, which has been treated as interest expense in the accompanying income statement.

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NOTE 5 SUBSEQUENT EVENTS

On October 26, 2007, ABC granted three non-employees warrants to purchase up to an aggregate of 1,250,000 shares of ABC common stock at an exercise price of $0.35 per share for services rendered. The warrants vested immediately and terminate on October 26, 2012. The fair value of the warrants of $362,822 was determined utilizing the Black-Scholes stock option valuation model. The significant assumptions used in the valuation were: the exercise price as noted above; the market value of ABC's common stock on October 26, 2007, $0.35; expected volatility of 170%; risk free interest rate of 4.04%; and a term of 2.5 years. Due to the limited trading history of the Company's stock, the volatility assumption was estimated by averaging the volatility of two active companies that have operations similar to ABC. The warrants qualify as 'plain vanilla' warrants under the provisions of Staff Accounting Bulletin No. 107 ("SAB 107") and, due to limited warrant exercise data available to the Company, the term was estimated pursuant to the provisions of SAB 107.

On November 1, 2007, ABC sold $350,000 in convertible notes ("2007 Notes") on the following terms: each note matures October 31, 2008, a 10% interest rate payable in shares and a conversion rate of $ 0.35 per share. If all $350,000 of notes are converted at maturity, then including interest and the additional shares issued upon subscription, 1,300,004 shares will have been issued.

The investors in the 2007 Notes also received 200,000 shares of common stock. The total proceeds from the sale of the 2007 Notes were allocated between the 2007 Notes and the related common stock based upon relative fair value, which resulted in the allocation of $58,333 to the common stock and $291,667 to the 2007 Notes. The $58,333 was recorded as a discount to the 2007 Notes and as additional paid in capital. The debt discount is being amortized over the term of the notes payable using the effective interest method.

ABC evaluated the application of SFAS 133 and EITF 00-19 for the convertible notes and concluded the conversion option was a beneficial conversion feature with intrinsic value. After allocation of the proceeds between the notes payable and the common stock, the conversion option had intrinsic value of $58,333. This resulted in an additional discount to the notes payable to be amortized over the term of the 2007 Notes as additional interest expense using the effective interest method.

The original issue discount rate was 53.83%.

Item 2. Management's Discussion and Analysis or Plan of Operation

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Information set forth herein contains "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "intends," "may," "should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. No assurance can be given that the future results covered by the forward-looking statements will be achieved. We caution readers that important factors may affect our Company's actual results and could cause such results to differ materially from forward-looking statements made by or on behalf of the Company. These include our Company's lack of historically profitable operations, dependence on key personnel, ability to implement business plan, ability to market our services, and other factors identified in our filings with the Securities and Exchange Commission, press releases and other public communications.

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Plan of Operation. The Company has not had any revenues from operations since we commenced business in February 2006. See Item 1 "Financial Statements." Accordingly, the information provided in this Item 2 is a plan of operation pursuant to Regulation S-B Item 303(a) promulgated by the SEC.

The merger transaction with Energy Venture in May 2006 resulted in the Energy Venture stockholders controlling approximately 92% of our issued and outstanding shares of Common Stock immediately following its completion. Consequently, the transaction was accounted for as a reverse merger with Energy Venture being deemed the acquiring entity for financial accounting purposes. Since the transaction involved the merger of a private company (Energy Venture) into a public shell company, it was considered to be a capital transaction rather than a business combination for financial accounting purposes. Thus, for financial accounting and reporting purposes, the historical financial statements of the Company prior to the effective date of the Energy Venture merger have been restated to be those of Energy Venture.

Since the merger with Energy Venture, the Company has primarily been involved in conducting business planning and capital-raising activities. The Company intends to engage in the oil and natural gas industry either by making acquisitions or by participating in strategic joint ventures. To date no acquisitions have been made nor has the Company entered into any joint ventures.

Capital Resources. During 2006, we raised funds by issuances of our debt and equity securities to pay current expenses and funds for our proposed operations. From March through July 2006, the Company conducted a private placement offering, pursuant to a Private Placement Memorandum, of the Notes (the "Private Placement"). As a result of the Merger we were provided with needed working capital in the form of a capital infusion of approximately $1,500,000 from the Private Placement.

The Company repaid, on the Maturity Date, six (6) of the holders of the Notes in the aggregate $424,637, of which $410,000 represented principal and $14,637 represented accrued interest, with an additional $44,624 of interest to be repaid as shares of common stock of the Company, which is in the aggregate 89,248 shares of the Company's common stock. The remaining holders of the Notes have entered into an agreement with the Company whereby the Notes were amended. The Maturity Date of the Notes was extended to February 28, 2008 and, from September 1, 2007 until the Notes are paid in full, the interest rate accruing on the principal was increased from 10% per annum to 12% per annum. In addition, the Company agreed to issue to the remaining holders of the Notes in the aggregate 218,000 shares of the Company's common stock.

On November 1, 2007, ABC sold $350,000 in convertible notes ("2007 Notes"). Investors in the 2007 Notes also received 200,000 shares of common stock. The 2007 Notes have the following terms: each note matures October 31, 2008, a 10% interest rate payable in shares and a conversion rate of $ 0.35 per share. If all $350,000 of notes are converted at maturity, then including interest and the additional shares issued upon subscription, 1,300,004 shares will have been issued.

Despite the Merger, if we are unable to raise additional capital from conventional sources, including lines of credit and additional sales of additional stock in the future, we may be forced to curtail or cease our business operations. Even if we are able to continue our operations, the failure to obtain sufficient financing could have a substantial adverse effect on our business and financial results.

In the future, we may be required to seek additional capital by selling debt or equity securities, curtailing operations, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity securities, if accomplished, may result in dilution to our shareholders. We cannot assure you, however, that financing will be available in amounts or on terms acceptable to us, or at all. Our inability to obtain sufficient financing will adversely affect our operating results and prospects.

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Our forecasted operating needs and funding requirements, as well as our projected ability to obtain adequate financial resources, involve risks and uncertainties, and actual results could vary as a result of a number of factors, including the "Risk Factors" set forth above. The risks described therein are not the only ones facing us and additional risks that we do not yet know of or that we currently think are not material may also have an adverse effect on our business operations. If any of the risks actually occur, our business could be adversely affected as well as the value of our shares.

Critical Accounting Policies

The preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.

Because of our limited level of operations, we have not had to make material assumptions or estimates other than our assumption that we are a going concern. If our business increases, our principal estimates will involve whether engagements in process will be profitable.

Forward Looking Statements

ABC Funding, Inc. (referred to herein as "we" or the "Company") desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. This report contains a number of forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, future results and events and financial performance. All statements made in this annual report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, including statements related to future reserves, cash flows, revenues, profitability, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words "believe," "expect," "intend," " anticipate," "estimate," "may," "will," variations of such words and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below) and apply only as of the date of this report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "--Risk Factors" below as well as those discussed elsewhere in this report, and the risks discussed in our press releases and other communications to shareholders issued by us from time to time, which attempt to advise interested parties of the risks and factors that may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Risk Factors

The reader should carefully consider each of the risks described below. If any of the following risks develop into actual events, our business, financial condition or results of operations could be materially adversely affected and the trading price of our common stock could decline significantly.

Risk Factors of the Company

We are a company with limited operating history and very limited resources.

We have commenced business of a limited basis, and to date have been engaged principally in organization, capital-raising activities and early business development planning matters related primarily to making acquisitions or participating in strategic joint ventures in the oil and natural gas industry. To date no acquisitions have been made nor have any joint ventures been entered into by the Company; in addition, we have had no revenues and anticipate significant expenses relating to the development of our infrastructure and business. Our prospects must be considered in light of the risks, expenses, delays, problems and difficulties frequently encountered in the establishment of a new business in the energy industry, given the volatile nature of the energy markets. There can be assurance that the Company will achieve its objective and business plan, or that it will be able to succeed in achieving its objective and business plan. Given factors that are described below, there exists a possibility that an investor could suffer a substantial loss as a result of an investment in the Company.

Our common stock is listed on the OTC Bulletin Board. Our common stock is not quoted on the NASDAQ National Market System or listed on a national securities exchange. The NASDAQ National Market System and national securities exchanges require companies to fulfill certain requirements in order for their shares to be listed and to continue to be listed. The securities of a company may be ineligible for listing or, if listed, may be considered for delisting if the company fails to meet certain financial thresholds, including if the company has sustained losses from continuing operations and/or net losses in recent fiscal years. There can be no assurance that we will not report additional losses in the future or that we will be able to list or have our common stock quoted on the NASDAQ National Market or a national securities exchange. An inability to list our common stock could adversely affect our ability to raise capital in the future by issuing common stock or securities convertible into or exercisable for our common stock.

Continuing losses may mean that additional funding may not be available on acceptable terms, if at all. If adequate funds are unavailable from our operations or additional sources of financing, we might be forced to reduce or delay acquisitions or capital expenditures, sell assets, reduce operating expenses, refinance all or a portion of our debt, or delay or reduce important drilling or enhanced production initiatives.

In addition, in that instance, we may seek to raise any necessary additional funds through equity or debt financings, convertible debt financing, joint ventures with corporate partners or other sources, which may be dilutive to our existing shareholders and may cause the price of our common stock to decline.

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Substantial doubt exists as to whether our Company can continue as a going concern.

We have only generated nominal revenues since our inception and have no current source of revenues. Our lack of revenues increases the likelihood that the Company may be unable to continue as a going concern, particularly in the event that it is unable to obtain additional financing and/or attain profitable operations. The financial statements presented in this annual report do not include any adjustments that might result from the outcome of this uncertainty and if our Company cannot continue as a going concern, our shares could become devalued or even worthless.

We have future capital needs and without adequate capital we may go out of business.

Our growth and continued operations could be impaired by limitations on our access to the capital markets or traditional secured sources of credit. There is no assurance that capital will be available to us, or if available, would be adequate for the long-range growth of our Company. If financing is available, it may involve issuing securities senior to our shares or equity financings which are dilutive to holders of our shares. In addition, in the event we do not raise additional capital from conventional sources, such as our existing investors or commercial banks, there is every likelihood that our growth will be restricted and we may need to scale back or curtail implementing our business plan. Even if we are successful in raising capital, we will likely need to raise additional capital to continue and/or expand our operations. If we do not raise the additional capital, the value of our shares may become substantially devalued.

Management's decision to change the business focus of the Company from the mortgage industry to the oil and natural gas industry could ultimately prove to be unsuccessful, harming our business operations and prospects.

Management has changed the Company's business focus from the mortgage industry to the oil and natural gas industry. Accordingly, a substantial portion of our management's time will be directed toward the pursuit of identifying and acquiring business opportunities in the oil and natural gas industry. There can be no assurance that new management will be able to properly manage the direction of the Company or that any ultimate change in the Company's business focus will be successful. If new management fails to properly manage and direct the Company, the Company may be forced to scale back or abandon its existing operations, which will cause the value of our shares to decline.

A member of the Company's Board of Directors possesses significant control over our operations based, in part, upon being our controlling stockholder, and because of this he could choose a plan of action which could devalue our outstanding securities.

Alan Gaines, a member of our Board of Directors, controls 49.6% of our outstanding shares of capital stock as of the date hereof. Accordingly, Mr. Gaines could significantly influence the Company on matters submitted to the stockholders for approval. These matters include the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. This amount of control gives Mr. Gaines virtually limitless ability to determine the future of our Company, and as such, he could unilaterally elect to close the business, change the business plan or make any number of other major business decisions without the approval of other stockholders. This control may eventually make the value of our shares worthless.

Conflicts of interest for a member of our Board of Directors may exist with regards to his obligations to the Company and his obligations to businesses in which he continues to own interests and manage.

Alan Gaines, a member of our Board of Directors, also serves as an executive officer and director of each of Dune Energy, Inc. and Baseline Oil & Gas Corp., public companies also engaged in the oil and gas industry. Mr. Gaines is required to devote his time (and in the case of Dune Energy, Inc.,

12

substantially all of his business time as provided in his employment agreement) to the business and affairs of each of these entities, and his responsibilities to these other entities may have the effect of diverting his time and attention that he might have otherwise had available to devote solely to the business and operations of our Company. There can be no guarantee that Mr. Gaines will be able to devote adequate time to the affairs of the Company given his fiduciary and contractual obligations to Dune Energy, Inc. and Baseline Oil & Gas Corp.

In addition, our officers and directors are be subject to the certain duties imposed on them under the Nevada law, including a general requirement that opportunities which come to their attention may be considered opportunities that should be made available to our Company as well as the companies that they may be affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer and director. If our Company or any of the other companies with which any of our officers or directors is affiliated both desire to take advantage of an opportunity, then those officers and directors would abstain from negotiating and voting upon the business opportunity. Even in the event these procedures are followed, we cannot assure you that conflicts of interests among us, our officers and directors, and such other companies will not develop.

We have not and do not anticipate paying any cash dividends on our common stock, because of this our securities could face devaluation in the market

We have paid no cash dividends on our common stock to date and it is not anticipated that any cash dividends will be paid to holders of our common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of the business, it is anticipated that any earnings will be retained to finance our future expansion. As an investor, you should take note of the fact that a lack of a dividend can further affect the market value of our stock, and could significantly affect the value of any investment in our Company.

Notwithstanding our financial position, we will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance requirements.

In January 2006, we registered our common stock under the Securities Exchange Act of 1934, as amended, and thereby became subject to the reporting requirements promulgated by the Securities and Exchange Commission thereunder. As a public company, we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented by the Securities and Exchange Commission and applicable market regulators. These rules impose various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, for fiscal years ending on or after December 15, 2007, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. For fiscal years ending on or after December 15, 2008, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our

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internal controls over financial reporting that are deemed to be material weaknesses. Compliance with Section 404 may require that we incur substantial accounting expense and expend significant management efforts. If we are not able to comply with the requirements of Section 404 in a timely manner or if our independent registered public accounting firm later identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other applicable regulatory authorities.

Our articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability.

Our articles of incorporation and applicable Nevada law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of the Company. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person's promise to repay us therefor if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us which we will be unable to recoup.

We have been advised that in the opinion of the SEC, this type of indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against these types of liabilities, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Our board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stock holders and with the ability to adversely affect stockholder voting power and perpetuate the board's control over the Company.

Our certificate of incorporation authorizes the issuance of up to 1,000,000 shares of preferred stock, par value $ 0.001 per share.

The specific terms of the preferred stock have not been determined, including: designations; preferences; conversions rights; cumulative, relative; participating; and optional or other rights, including: voting rights; qualifications; limitations; or restrictions of the preferred stock.

The board of directors is entitled to authorize the issuance of up to 1,000,000 shares of preferred stock in one or more series with such limitations and restrictions as may be determined in its sole discretion, with no further authorization by security holders required for the issuance thereof.

The issuance of preferred stock could adversely affect the voting power and other rights of the holders of common stock. Preferred stock may be issued quickly with terms calculated to discourage, make more difficult, delay or prevent a change in control of our Company or make removal of management more difficult. As a result, the board of directors' ability to issue preferred stock may discourage the potential hostile acquirer, possibly resulting in beneficial negotiations. Negotiating with an unfriendly acquirer may result in, among other things, terms more favorable to us and our stockholders. Conversely, the issuance of preferred stock may adversely affect any market price of, and the voting and other rights of the holders of the common stock. We presently have no plans to issue any preferred stock.

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Oil and Natural Gas Prices are Volatile.

If any of the projects we participate in are successful, the prices we receive for future oil and natural gas production will heavily influence our revenue, profitability, access to capital and rate of growth. Oil and natural gas are commodities and their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand or global macroeconomic disruptions. Historically, the markets for oil and natural gas have been volatile. These markets will likely continue to be volatile in the future. The prices we may receive for any future production, and the levels of this production, depend on numerous factors beyond our control. These factors include the following:

o changes in global supply and demand for oil and natural gas;
o the actions of the Organization of Petroleum Exporting Countries, or OPEC;
o the price and quantity of imports of foreign oil and natural gas in the U.S.;
o political conditions, including embargoes, which affect other oil-producing activities;
o the level of global oil and natural gas exploration and production activity;
o the level of global oil and natural gas inventories;
o weather conditions affecting energy consumption;
o technological advances affecting energy consumption; and
o the price and availability of alternative fuels.

Lower oil and natural gas prices may not only decrease our revenues on a per unit basis but also may reduce the amount of oil and natural gas that we can produce economically. Lower prices will also negatively impact the value of our proved reserves. A substantial or extended decline in oil or natural gas prices may materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.

Competition in the oil and natural gas industry is intense.

We intend to operate in a highly competitive environment for developing properties, marketing of oil and natural gas and securing trained personnel. Many of our competitors possess and employ financial, technical and personnel resources substantially greater than ours, which can be particularly important in the areas in which we operate. Those companies may be able to pay more for productive oil and natural gas properties and prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit. Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, there is substantial competition for capital available for investment in the oil and natural gas industry. We may not be able to compete successfully in the future in acquiring prospective reserves, developing reserves, marketing oil and natural gas, attracting and retaining quality personnel and raising additional capital.

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.

Our future success will depend on the success of our exploitation, exploration, development and production activities. Our oil and natural gas exploration and production activities will be subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil or natural gas production. Our decisions to purchase, explore, develop or otherwise exploit prospects or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses,

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production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. The costs associated with drilling, completing and operating wells are often uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel drilling, including the following:

o delays imposed by or resulting from compliance with regulatory requirements;
o pressure or irregularities in geological formations;
o shortages of or delays in obtaining equipment and qualified personnel;
o equipment failures or accidents;
o adverse weather conditions;
o reductions in oil and natural gas prices;
o oil and natural gas property title problems; and
o market limitations for oil and natural gas.

Prospects that we decide to drill may not yield oil or natural gas in commercially viable quantities.

There is no way to predict in advance of drilling and testing whether any particular prospect will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. The use of seismic data and other technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in commercial quantities. We cannot assure you that the analogies we draw from available data from other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects.

We may incur substantial losses and be subject to substantial liability claims as a result of our oil and natural gas operations.

We are not insured against all risks. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition or results of operations. Our oil and natural gas exploration and production activities will be subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the possibility of:

o environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater and shoreline contamination;
o abnormally pressured formations;
o mechanical difficulties, such as stuck oil field drilling and service tools and casing collapses;
o fires and explosions;
o personal injuries and death; and
o natural disasters.

Any of these risks could adversely affect our ability to conduct operations or result in substantial losses to the Company. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. If a significant accident or other event occurs and is not fully covered by insurance, then that accident or other event could adversely affect our results of operations, financial condition and cash flows.

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We may not have enough insurance to cover all of the risks that we face.

In accordance with customary industry practices, we will maintain insurance coverage against some, but not all, potential losses in order to protect against the risks we face. We do not carry business interruption insurance. We may elect not to carry insurance if our management believes that the cost of available insurance is excessive relative to the risks presented. In addition, we cannot insure fully against pollution and environmental risks. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations.

Our operations may cause us to incur substantial liabilities for failure to comply with environmental laws and regulations.

Our oil and natural gas operations will be subject to stringent federal, state and local laws and regulations relating to the release or disposal of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas, and impose substantial liabilities for pollution resulting from our operations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, incurrence of investigatory or remedial obligations or the imposition of injunctive relief. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to maintain compliance, and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition as well as the industry in general. Under these environmental laws and regulations, we could be held strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were responsible for the release or if our operations were standard in the industry at the time they were performed.

If our access to markets is restricted, it could negatively impact our production, our income and ultimately our ability to retain our leases.

Market conditions or the unavailability of satisfactory oil and natural gas transportation arrangements may hinder our access to oil and natural gas markets or delay our production. The availability of a ready market for our oil and natural gas production depends on a number of factors, including the demand for and supply of oil and natural gas and the proximity of reserves to pipelines and terminal facilities. Our ability to market our production depends in substantial part on the availability and capacity of gathering systems, pipelines and processing facilities owned and operated by third parties. Our failure to obtain such services on acceptable terms could materially harm our business.

Our productive properties may be located in areas with limited or no access to pipelines, thereby necessitating delivery by other means, such as trucking, or requiring compression facilities. Such restrictions on our ability to sell our oil or natural gas could have several adverse affects, including higher transportation costs, fewer potential purchasers (thereby potentially resulting in a lower selling price) or, in the event we were unable to market and sustain production from a particular lease for an extended time, possibly causing us to lose a lease due to lack of production.

Item 3. Controls and Procedures

An evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-QSB was carried out by the Company under the

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supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. There have been no changes in our internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II OTHER INFORMATION

Item 2 Unregistered Sales of Equity Securities and Uses of Proceeds

On August 21, 2007, the Company issued 100,000 shares of common stock with a value of $45,000 to a non-employee as compensation for services rendered.

On September 4, 2007, the Company issued 89,248 shares of common stock in lieu of cash in payment of $44,624 of accrued interest to noteholders who chose to redeem their notes.

On September 4, 2007, the Company issued 218,000 shares of common stock with a value of $98,100 to noteholders who chose to extend the maturity date of the Notes as consideration for extending the Note's maturity date to February 28, 2008.

On September 17, 2007, the Company issued 100,000 shares of common stock with a value of $45,000 to a non-employee as compensation for services rendered.

On September 19, 2007, the Board of Directors of the Company approved the issuance of 150,000 shares of common stock with a value of $55,500 to a member of the Board of Directors as compensation for assuming the role of Chief Executive Officer of the Company.

On November 1, 2007, the Company issued 200,000 shares of common stock with a relative fair value of $58,333 to purchasers of the Company's November 2007 Notes. (see Note 5 Subsequent Events of the Notes to Financial Statements
(above)).

Item 6 Exhibits

 Exhibit No. Description
 ----------- -----------

 31.1 Section 302 Certification of Chief Executive Officer

 31.2 Section 302 Certification of Chief Financial Officer

 32.1 Section 906 Certification of Chief Executive Officer and
 Chief Financial Officer

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 12, 2007 ABC Funding, Inc.


 By: /s/ Steven Barrenechea
 -------------------------------------------
 Steven Barrenechea, Chief Executive Officer

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