UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period ended June 30, 2010.
	OR
£	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: 333-129919

True North Finance Corporation

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

DELAWARE	20-3345780
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4999 France Avenue South, Suite 248

Minneapolis, Minnesota 55410

(Address of principal executive offices)

Issuer’s Telephone Number: (952) 358-6120

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes £ No £

Indicate by check mark whether the registrant is a large-accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £	Accelerated filer £	Non-accelerated filer £	Smaller reporting company R
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: The number of shares outstanding of the Registrant’s Series A common stock and Series B common stock as of August 11, 2010, was 1,000,000, and 67,354,092, respectively, and the number of the Registrant’s preferred shares outstanding was 48,643.

Transitional Small Business Disclosure Format (check one): Yes £ No R

INDEX

PART  I. FINANCIAL INFORMATION	3
Item  1. Financial Statements (Unaudited)	3
Item  2. Management’s Discussion and Analysis or Plan of Operation	19
Item  3. Quantitative and Qualitative Disclosures about Market Risk	23
Item  4. Controls and Procedures	23
PART  II. OTHER INFORMATION	24
Item  1. Legal Proceedings	24
Item  2. Unregistered Sales of Equity Securities and Use of Proceeds. None	24
Item  3. Defaults Upon Senior Securities. None	24
Item  4. Submission of Matters to a Vote of Security Holders. None	24
Item  5. Other Information.  None	24
Item  6. Exhibits	25
SIGNATURES	26
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART  I.   FINANCIAL INFORMATION

Item  1.Financial Statements (Unaudited).

FINANCIAL STATEMENTS

TRUE NORTH FINANCE COPORATION

FINANCIAL STATEMENTS

JUNE 30, 2010 AND JUNE 30, 2009

3

TABLE OF CONTENTS

FINANCIAL SECTION

	PAGE
Financial Statements:
Consolidated Balance Sheets	5
Consolidated Statements of Operations	6
Consolidated Statements of Cash Flows	7
Notes to Financial Statements	8

4

TRUE NORTH FINANCE CORPORATION
(FORMERLY CS FUND GENERAL PARTNER, LLC)
CONSOLIDATED BALANCE SHEETS
ASSETS
	June 30, 2010 (Unaudited)			December 31, 2009
CURRENT ASSETS
Cash	$	1,580,072		$	69,220
Interest receivable		-			3,798
Other current assets		-			70,559
Total current assets		1,580,072			143,577
Property and equipment (net)		72,031			128,460
Investments in notes receivable net of allowance of $979,750 and $1,643,485
as of June 30, 2010 and December 31,2009 respectively		310,000			1,250,000
Investments in notes receivable, related party, net of allowance of $0 and $0
as of June 30, 2010 and December 31,2009 respectively		-			171,489
Investments in real estate loans, net of allowance of $0 and $0
as of June 30, 2010 and December 31,2009 respectively		-			6,426,000
Real estate held for sale		4,000,000			39,540,000
Deposits and other assets		1,355,763			1,112,768
Total assets	$	7,317,866		$	48,772,294
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	142,470		$	1,056,922
Accounts payable, related parties		73,500			59,464
Current portion of notes payable		4,000,000			60,782,223
Current portion of notes payable, related party		-			1,300,000
Other current liabilities, related party		29,417			538,784
Other current liabilities		568,764			7,934,675
Total current liabilities		4,814,151			71,672,068
LONG TERM LIABILITIES
Notes payable, net of discount		12,831,456			9,930,000
Notes payable, related parties, net of discount		3,499,215			628,000
Total liabilities commitments and contingencies		21,144,822			82,230,068
STOCKHOLDERS' DEFICIT
Preferred stock, $1,000 stated value, 50,000 shares authorized;
48,643 and 36,643 shares issued and outstanding at June 30, 2010 and December 31, 2009 respectively		16,700,298			16,700,298
Common stock (Series A), $.01 par value, 1,000,000 shares authorized;
1,000,000 shares issued and outstanding		10,000			10,000
Common stock (Series B), $.01 par value, 150,000,000 shares authorized;
67,354,092 and 67,354,092 shares issued and outstanding
at June 30, 2010 and December 31, 2009, respectively		673,541			673,541
Additional paid-in capital		41,687			41,687
Accumulated (deficit)		(31,252,482	)		(46,951,058	)
Total True North Finance Corporation stockholders' deficit		(13,826,956	)		(29,525,532	)
Non-controlling interests		-			(3,932,242	)
Total stockholders' deficit		(13,826,956	)		(33,457,774	)
Total liabilities and stockholders' deficit	$	7,317,866		$	48,772,294

5

TRUE NORTH FINANCE CORPORATION
(FORMERLY CS FUND GENERAL PARTNER, LLC)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	For the Three Months Ended June 30, 2010			For the Three Months Ended June 30, 2009		For the Six Months Ended June 30, 2010			For the Six Months Ended June 30, 2009
INTEREST AND FEE INCOME
Interest and fee income	$	50,650		$	-	$	50,650		$	-
Interest and fee income, related party		1,970			-		4,951			-
		52,620			-		55,601			-
OPERATING EXPENSES
Insurance		7,546			-		37,435			-
Payroll		127,151			-		293,734			-
Professional fees		454,909			-		556,688			-
Interest expense		2,324,116			-		4,559,741			-
Interest expense, related parties		146,382			-		196,673			-
Other expense		495,160			-		1,198,998			-
Other expense, related parties		1,205,421			-		1,580,486			-
Total operating expenses		4,760,685			-		8,423,755			-
Loss from operations		(4,708,065	)		-		(8,368,154	)		-
INCOME (LOSS) FROM REAL ESTATE HELD FOR SALE
Income related to real estate held for sale		126,143			-		245,299			-
Expenses related to real estate held for sale		(86,949	)		-		(222,230	)		-
Gains from real estate held for sale		291,667			-		291,667			-
Total loss from real estate held for sale		330,861			-		314,736			-
OTHER INCOME
Gain from deconsolidation		26,611,512			-		26,611,512			-
Gain from sale of investments		-			-		84,500			-
Total other income		26,611,512					26,696,012
Loss before provision for income taxes		22,234,308			-		18,642,594			-
					-					-
Deferred income tax benefit		-			-		-			-
Net income		22,234,308			-		18,642,594			-
Net income attributable to noncontrolling interests		560,957			-		988,224			-
Net income attributable to True North	$	22,795,265		$	-	$	19,630,818		$	-
Gain per share:
Basic and diluted attributable to True North Stockholders	$	0.33		$	-	$	0.29		$	-
Weighted average basic and diluted shares outstanding		68,354,092			37,331,993		68,354,092			37,331,993
Other income (expense), net - related party

6

TRUE NORTH FINANCE CORPORATION
(FORMERLY CS FUND GENERAL PARTNER, LLC)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
	For the Six Months Ended June 30, 2010			For the Six Months Ended June 30, 2009
Cash flows from operating activities:
Net income	$	18,642,594		$	-
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation		15,651			-
Gain on sale of investments		(84,500	)
Gain from deconsolidation		(26,611,512	)
Amortization of debt fees		46,692			-
Amortization of prepaid expenses		2,000
Amortization of discount on notes payable		87,655
Gains from real estate held for sale		(291,667	)
Changes in operating assets and liabilities:					-
Interest receivable		3,798			-
Other current assets		17,833			-
Accounts payable and accrued liabilities		(941,625	)		-
Accrued interest		4,085,184			-
					-
Net cash used by operating activities		(5,027,897	)		-
Cash flows from investing activities:
Proceeds from investments		1,405,795			-
Purchase of notes receivable		(310,000	)		-
Cash surrendered in deconsolidation		(117,062	)		-
Net cash used by investing activities		978,733			-
Cash flows from financing activities:
Proceeds from notes payable		5,880,600			-
Principal payments on notes payable		(320,584	)		-
Net cash provided by financing activities		5,560,016			-
Net change in cash and cash equivalents		1,510,852			-
Cash and cash equivalents, beginning of period		69,220			-
Cash and cash equivalents, end of period	$	1,580,072		$	-
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,006,903		$	-
Cash paid for income taxes	$	-		$	-

Supplemental disclosures of non-cash investing and financing activities
Assets acquired in merger				$	88,896,106
Less liabilities assumed					(74,954,068	)
Net assets acquired				$	13,942,038
Deconsolidation of net assets of subsidiary
Cash	$	(117,062	)
Other current assets		(50,726	)
Property and equipment		(40,778	)
Investments in notes receivables		(100,194	)
Real estate held for sale		(29,366,000	)
Other assets		(609,890	)
Accounts payable and accrued liabilities		2,777,128
Accrued interest		8,392,042
Notes payable		46,715,216
Less current perioud noncontrolling interest		(988,224	)
Gain from deconsolidation	$	26,611,512

7

TRUE NORTH FINANCE CORPORATION

(FORMERLY CS FUND GENERAL PARTNER, LLC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – Nature of Operations and Summary of Significant Accounting Policies

Reference to the Company

References to “we”, “us”, “our”, “True North” or the “Company” in these notes to the consolidated financial statements refer to True North Finance Corporation, a Delaware corporation, and its subsidiaries.  On June 22, 2009, CS Financing Corporation changed its name to True North Finance Corporation.  As discussed below, the financial statements prior to June 30, 2009 are those of CS Fund General Partner, LLC.

Reverse Acquisition Accounting

CS Fund General Partner, LLC became a wholly owned subsidiary of True North Finance Corporation pursuant to a merger on June 30, 2009.  Under the purchase method of accounting in a business combination effected through an exchange of equity interests, the entity that issues the equity interests is generally the acquiring entity.  In some business combinations (commonly referred to as reverse acquisitions), however, the acquired entity issues the equity interests.  FASB ASC 805-10, “Business Combinations” requires consideration of the facts and circumstances surrounding a business combination that generally involve the relative ownership and control of the entity by each of the parties subsequent to the merger.  Based on a review of these factors, the June 2009 merger with CS Fund General Partner, LLC (“the Merger”) was accounted for as a reverse acquisition (i.e. True North Finance Corporation was considered as the acquired company and CS Fund General Partner, LLC was considered as the acquiring company).  As a result, True North Finance Corporation’s assets and liabilities as of June 30, 2009, the date of the Merger closing, have been incorporated into CS Fund General Partner, LLC’s balance sheet based on the fair values of the net assets acquired, which equaled the consideration paid for the acquisition.  FASB ASC 805-10 also requires an allocation of the acquisition consideration to individual assets and liabilities including tangible assets, and financial assets.  Further, the Company’s operating results (post Merger) include CS Fund General Partner, LLC’s operating results prior to the date of closing and the results of the combined entity following the closing of the Merger.  Although CS Fund General Partner, LLC was considered the acquiring entity for accounting purposes, the Merger was structured so that CS Fund General Partner, LLC became a wholly owned subsidiary of True North Finance Corporation.

Also on June 30, 2009, the Company issued 40,000 shares of preferred stock to Capital Solutions Monthly Income Fund, L.P.  On that same date, Capital Solutions Monthly Income Fund, L.P. distributed 36,643 shares of the preferred stock to certain limited partners in complete liquidation of their capital accounts.  Other limited partners indicated an interest in converting their limited partner interests to Series 1 Notes.  Accordingly, they did not receive preferred stock and remained as limited partners on June 30, 2009.  These limited partners are reflected on the balance sheet as non-controlling interests.  In July 2009, $886,707 of the limited partnership interests was liquidated in exchange for Series 1 Notes.  As a result of these transactions, the Company obtained control of Capital Solutions Monthly Income Fund, L.P. and True North Finance Corporation.

CS Fund General Partner, LLC is the general partner of Capital Solutions Monthly Income Fund.  The investment in Capital Solutions Monthly Income Fund, L.P. is reflected on the balance sheet as Non-controlling interest of ($0) and ($3,932,242) as of June 30, 2010 and December 31, 2009 respectively.

  Deconsolidation

On June 30, 2010 the Company transferred the assets and liabilities of their subsidiary Capital Solutions Monthly Income Fund, LP, after these assets had been voluntarily surrendered to the Company pursuant to the Company’s security interest, to a liquidating trust not controlled by the Company.  The Company has no continuing involvement with the Capital Solutions Monthly Income Fund, LP. The Company received no cash consideration in the transfer.  In addition, the Company issued 12,000 shares of preferred stock to Capital Solutions Monthly Income Fund, LP’s Series 1 Note-holders. At the time of the spin-off, Capital Solutions Monthly Income Fund, LP’s liabilities exceeded their assets by $26,611,512.  Accordingly, the Company recognized a gain for this amount as a gain from deconsolidation on June 30, 2010.

Nature of Operations

The Company was incorporated in Delaware on August 19, 2005.  The Company primarily finances real estate and other transactions from proceeds of the Company’s offering of Five Year Notes-Series A (the “Notes Offering”).

CS Fund General Partner, LLC, a Delaware Limited Liability Company, was formed on November 24, 2004.  CS Fund General Partner, LLC was the general partner of Capital Solutions Monthly Income Fund.

Capital Solutions Monthly Income Fund, L.P. (the Partnership), a Delaware limited partnership, was formed on November 4, 2004.  The Partnership was originally formed to achieve advantageous rates of return through purchasing secured, but subordinated, notes relating to the financing for residential and commercial real estate development, construction and investment property.  In June of 2008, the Partnership foreclosed on assets secured by the outstanding notes.  The Partnership continues to own real estate for the purpose of investment and development.

On June 30, 2010, the Company transferred the assets and liabilities of their subsidiary Capital Solutions Monthly Income Fund, LP to a liquidating trust not controlled by the Company.

8

NOTE 1 – Nature of Operations and Summary of Significant Accounting Policies (cont.)

Condensed Financial Statements

The accompanying condensed unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. In the opinion of management, the accompanying unaudited financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations. Interim results of operations are not necessarily indicative of the results that may be achieved for the full year. The financial statements and related notes do not include all information and footnotes required by U.S. generally accepted accounting principles for annual reports. This quarterly report should be read in conjunction with the financial statements included in the Company’s report on Form 10-K filed on May 28, 2009 with the U.S. Securities and Exchange Commission for the year ended December 31, 2009.

Consolidated Financial Statements

In the consolidated financial statements and the notes thereto, all references to historical information, balances and results of operations are related to CS Fund General Partner LLC as the predecessor company pursuant to reverse acquisition accounting rules.  Although pre-merger True North Finance Corporation was an operating company since 2006, under reverse acquisition accounting rules, the merged Company’s consolidated financial statements reflect our results as an operating company since January 1, 2008. Accordingly, the Company’s operating results (post-Merger) include the operating results of CS Fund General Partner LLC prior to the date of the Merger and the results of the combined entity following the closing of the Merger.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain amounts previously reported have been reclassified to conform to the current year presentation.

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization.  Depreciation is provided using the straight-line method over the estimated useful lives of the related assets, generally three to seven years.  Amortization on capital leases is over the lesser of the estimated useful life or the term of the lease.  Expenditures for repairs and maintenance are charged to operations as incurred.  We periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment.  We use an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

Revenue Recognition

Interest on our investments in notes receivable is recognized as revenue when earned according to the terms of the loans, using the effective interest method.  We do not accrue interest income on loans once they are determined to be non-performing.  A loan is considered non-performing:  (1) when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement; or (2) when the payment of interest is 90 days past due.

Cash receipts will be allocated to interest income, except when such payments are specifically designated by the terms of the loan as principal reduction or when management does not believe our investment in the loan is fully recoverable.

Investments in Real Estate Loans

We may from time to time acquire or sell investments from or to our manager or other related parties without a premium.  The primary purpose is to either free up capital to provide liquidity for various reasons, such as loan diversification, or place excess capital in investments to maximize the use of our capital.  Selling or buying loans allows us to diversify our loan portfolio within these parameters.  Due to the short-term nature of the loans we make and the similarity of interest rates in loans we normally would invest in, the fair value of a loan typically approximates its carrying value.  Accordingly, discounts or premiums typically do not apply upon sales of loans and therefore, generally no gain or loss is recorded on these transactions, regardless of whether to a related or unrelated party.

9

NOTE 1 – Nature of Operations and Summary of Significant Accounting Policies (cont.)

Investments in real estate loans are generally secured by deeds of trust or mortgages.  Generally, our real estate loans require interest only payments with a balloon payment of the principal at maturity.  We have also made loans that defer interest and principal until maturity.  We have both the intent and ability to hold real estate loans until maturity and therefore, real estate loans are classified and accounted for as held for investment and are carried at amortized cost.  Loans sold to or purchased from affiliates are accounted for at the principal balance and no gain or loss is recognized by us or any affiliate.

Loan-to-value ratios are initially based on appraisals obtained at the time of loan origination and are updated, when new appraisals are received, to reflect subsequent changes in value estimates.  Such appraisals are generally dated within 12 months of the date of loan origination and may be commissioned by the borrower.

The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The Company’s impaired loans include troubled debt restructuring, and performing and non-performing loans in which full payment of principal or interest is not expected.  The Company calculates an

allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price of the fair value of its collateral.

Loans that have been modified from their original terms are evaluated to determine if the loan meets the definition of a Troubled Debt Restructuring (“TDR”).  When the Company modifies the terms of an existing loan that is considered a TDR, it is considered performing as long as it is in compliance with the modified terms of the loan agreement.  If the modification calls for deferred interest, it is recorded as interest income as cash is collected.

Allowance for Loan Losses

We maintain an allowance for loan losses on our investments in real estate loans for estimated credit impairment.  Management’s estimate of losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrower’s ability to repay, prevailing economic conditions and the underlying collateral securing the loan.  Additions to the allowance are provided through a charge to earnings and are based on an assessment of certain factors, which may indicate estimated losses on the loans.  Actual losses on loans are recorded as

a charge-off or a reduction to the allowance for loan losses.  Generally, subsequent recoveries of amounts previously charged off are added back to the allowance and included as income.

Estimating allowances for loan losses requires significant judgment about the underlying collateral, including liquidation value, condition of the collateral, competency and cooperation of the related borrower and specific legal issues that affect loan collections or taking possession of the property. 

Additional facts and circumstances may be discovered as we continue our efforts in the collection and foreclosure processes.  This additional information often causes management to reassess its estimates.  Circumstances that may cause significant changes in our estimated allowance include, but are not limited to:

·   Changes in the level and trends relating to non-performing receivables including past due interest payments and past due principal payments;

·   Declines in real estate market conditions, which can cause a decrease in expected market value;

·   Discovery of undisclosed lines (including but not limited to, community improvement bonds, easements and delinquent property taxes);

·   Lack of progress on real estate developments after we advance funds.  We will customarily monitor progress of real estate developments and approve loan advances.  After further inspection of the related property, progress on construction occasionally does not substantiate an increase in value to support the related loan advances;

·   Unanticipated legal or business issues that may arise subsequent to loan origination or loan advances or upon the sale of foreclosed property; and

·   Appraisals, which are only opinions of value at the time of the appraisal, may not accurately reflect the current value of the property.

10

NOTE 1 – Nature of Operations and Summary of Significant Accounting Policies (cont.)

The Company considers a loan to be impaired when based on current information and events, it is probable that Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest or principal is 90 days past due. 

Fair Value Disclosures

As of June 30, 2010, we had no assets or liabilities utilizing Level 1 or Level 2 inputs and assets and liabilities utilizing Level 3 inputs included investments in real estate loans, unsecured borrowings.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  Accordingly, our degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, an asset or liability will be classified in its entirety based on the lowest level of input that is significant to the measurement of fair value.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure.  Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date.  We use prices and inputs that are current as of the measurement date, including during periods of market dislocation, such as the recent illiquidity in the auction rate securities market.  In periods of market dislocation,

the observability of prices and inputs may be reduced for many instruments.  This condition may cause our financial instruments to be reclassified from Level 1 to Level 2 or Level 3 and/or vice versa.

Our valuation techniques will be consistent with at least one of the three possible approaches: the market approach, income approach and/or cost approach.  Our Level 1 inputs are based on the market approach and consist primarily of quoted prices for identical items on active securities exchanges.  Our Level 2 inputs are primarily based on the market approach of quoted prices in active markets or current transactions in inactive markets for the same or similar collateral that do not require significant adjustment based on unobservable inputs.  Our Level 3 inputs are primarily based on the income and cost approaches, specifically, discounted cash flow analyses, which utilize significant inputs based on our estimates and assumptions.

The following tables presents the valuation of our financial assets and liabilities as of June 30, 2010, measured at fair value on a recurring basis by input levels:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at 6/30/2010		Carrying Value on Balance Sheet at 6/30/2010
Assets
Investment in real estate held for sale	$	-	$	-	$	4,000,000	$	4,000,000	$	4,000,000
Investments in notes receivable	$	-	$	-	$	310,000	$	310,000	$	310,000
Liabilities
Notes payable	$	-	$	-	$	20,330,672	$	20,330,672	$	20,330,672

11

NOTE 1 – Nature of Operations and Summary of Significant Accounting Policies (cont.)

The following table presents the changes in our financial assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from December 31, 2009 to June 30, 2010:

	Assets
	Investment in real estate held for sale			Investment in notes receivable			Investments in real estate loans
Balance on December 31, 2009	$	39,540,000		$	1,421,489		$	6,426,000
Change in temporary valuation adjustment included in net loss
					--			--
Sales, purchases, pay downs and reduction of assets		--			--			--
Deconsolidation of Subsidiaries		(22,940,000	)		(100,194	)		(6,426,000	)
Sale of investments		--			(1,321,295	)		--
Purchase of investments		--			310,000			--
Surrender of investments		12,600,000
Transfer to Level 1		--			--			--
Transfer from Level 2		--			--			--
Balance on June 30, 2010, net of temporary valuation adjustment	$	4,000,000		$	310,000		$	-

	Liabilities
	Notes Payable
Balance on December 31, 2009	$	72,640,223
Increase in Series 1 notes payable		-
Increase in notes payable, net of discount		5,880,600
Deconsolidation of Subsidiaries		(46,715,216	)
Decrease in notes payable		(320,584	)
Surrender of investments		(11,242,007	)
Amortization of discount		87,655
Transfer to Level 1		-
Transfer to Level 2		-
Balance on June 30, 2010, net of temporary valuation adjustment	$	20,330,671

Stock Based Compensation

The Company applies Generally Accepted Accounting Principles (GAAP) for all compensation related to stock, options, or warrants.  GAAP requires the recognition of compensation cost using a fair value based method whereby compensation is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to employees and non-employees.  Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.

Real Estate Held for Sale

Real estate held for sale includes real estate acquired through purchases and foreclosure and will be carried at the lower of the recorded amount, inclusive of any senior indebtedness, or the property’s estimated fair value, less estimated costs to sell, with fair value based upon appraisals and knowledge of local market conditions.  The carrying values of real estate held for sale are assessed on a regular basis from updated appraisals, comparable sales values or purchase offers.  Third party appraisals are obtained annually.  Impairment losses are recorded if the third party appraisals are less than the net recorded value.

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NOTE 1 – Nature of Operations and Summary of Significant Accounting Policies (cont.)

Management classifies real estate held for sale when the following criteria are met:

·   Management commits to a plan to sell the properties;

·   The property is available for immediate sale in its present condition subject only to the terms that are usual and customary;

·   An active program to locate a buyer and other actions required to complete a sale have been initiated;

·   The sale of the property is probable;

·   The property is being actively marketed for sale at a reasonable price;

·   Withdrawal or significant modification of the sale is not likely.

Our investments in real estate held for sale are accounted for at the lower of cost or fair value less costs to sell with fair value based on appraisals and knowledge of local market conditions.

Classification of Operating Results from Real Estate Held for Sale

US GAAP generally requires operating results from long lived assets held for sale to be classified as discontinued operations as a separately stated component of net  income. Our operations related to real estate held for sale are separately identified in the accompanying consolidated statements of income.

Income Taxes

The Company accounts for its income taxes in accordance with GAAP, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards.  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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company accounts for uncertainty in tax positions in accordance with GAAP which requires the recognition of a tax position when it is more likely than not that the tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the position.

Earnings Per Share

Basic earnings per common shares (“EPS”) is calculated by dividing net income available to common stockholders by the weighted average number of shares outstanding during the period.  For periods prior to the Merger, to determine the weighted average number of shares outstanding, the number of True North Finance Corporation common shares issued for outstanding CS Fund General Partner, LLC member shares was equated to member shares issued and outstanding during prior periods.

Recent accounting policies

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements.  Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated.  This ASU is effective upon the issuance of this ASU.  The adoption of this ASU did not have a material impact on our consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”).  Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors.  The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010.  The amendments are to be applied prospectively.  Early adoption is permitted.  We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

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NOTE 2 – Going Concern and Management’s Plan of Action

The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced losses from operations during the last year that raise substantial doubt as to its ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon its ability to obtain the capital necessary to attain profitable operations, devising a management plan to develop a profitable operation and lowering the level of problem assets to an acceptable level and meeting current working capital requirements.

In this regard, management has developed a capital plan, which includes, but is not limited to: (1) raising capital through the Company’s Bond offering which we anticipate will occur in 2010; and  (2) selling real estate currently held by the Company.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

NOTE 3 – Investments in Notes Receivable

Investments inNotes receivable consist of the following as of June 30, 2010:

	As of June, 2010
	Balance		Allowance for loan losses		Balance, net of allowance
Note receivable to Impact Solutions Consulting, Inc. bearing interest at 18%, secured by personal property, with the entire unpaid balance of principal and interest due November 1, 2010.	$	250,000	$	-	$	250,000
Note receivable to DuraBan Worldwide, Inc. bearing interest at 18%, secured by personal property, with the entire unpaid balance of principal and interest due September 15, 2010.		60,000		-		60,000
The Company issued secured notes receivable to RES.  The notes were secured by real estate in Northern California.  RES is controlled by former directors of True North.  As of December 31, 2009, this note was the subject of litigation and was delinquent.  Accordingly, we have reserved the entire amount of the note receivable.		979,750		979,750		-
	$	1,289,750	$	979,750	$	310,000

Investments inNotes receivable consist of the following as of December 31, 2009:

	As of December 31, 2009
	Balance		Allowance for loan losses		Balance, net of allowance
The Company acquired a note receivable secured by residential property.	$	900,000	$	-	$	900,000
Note receivable to a related party (our controlling shareholder) bearing interest at 6%, unsecured with the entire unpaid balance of principal and interest due upon demand.		171,488		-		171,488
The Company acquired from a related party a discounted unsecured loan portfolio. As of 12/31/09 the loan was considered non-performing (i.e., based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest is 90 days past due).  We will recognize a gain under the cost recovery method.		300,000		-		300,000
The Company acquired from a related party a discounted loan portfolio bearing an interest rate of 23.25% , secured by personal property with interest and principal payable in monthly installments of $15,000, with a maturity date of February 13, 2010.		50,000		-		50,000
The Company issued secured notes receivable to RES.  The notes were secured by real estate in Northern California.  RES is controlled by former directors of True North.  As of December 31, 2009, this note was the subject of litigation and was delinquent.  Accordingly, we have reserved the entire amount of the note receivable.		979,750		979,750		-
	$	2,404,239	$	979,750	$	1,421,489

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NOTE 4 – Deposits and Other Assets

The Company’s deposits and other assets consist of the following:

As of June 30, 2010	Balance
Option to acquire 1st mortgage on Gulf Lakes	$	899,577
Debt Placement costs net of accumulated amortization		448,853
Loan origination costs net of accumulated amortization	7,333
Total Depostis and Other Assets	$	1,355,763

In June of 2010, the company acquired from Capital Solutions Monthly Income Fund, LP an option to acquire the 1st mortgage on Gulf Lakes (real property in Lee County, Florida) and recorded the option at net carrying cost, which approximates fair value.  The option price was $899,577 less than the net fair value mortgage.  Debt placement costs are cost the company continues to amortize in connection with their Bond Offering.

NOTE 5 – Real Estate Held for Sale

At June 30, 2010 and December 31, 2009, we held properties with a total carrying value of approximately $4 million and $39.5 million respectfully and recorded as investments in real estate held for sale.  Our investments in real estate held for sale are accounted for at the lower of cost or fair value less costs to sell with fair value based on appraisals and knowledge of local market conditions.  It is our intent to hold the marina property and maximize our investment.  However, it is not our intent to invest in or own real estate as a long term investment.  We seek to sell our properties held for sale as quickly as possible taking into account current economic conditions.  Set forth below is a summary of investments in real estate held for sale.  As a result of the Spin-off on June 30, 2010, all of the Real Estate Held for Sale except for (2) Village of Lloyd Harbor was transferred to the liquidating trust in the Spin-off transaction

As of June 30, 2010	Assets Acquired in June 30, 2009 Acquisition		2009 Impairment on Real Estate Held for Sale			Balance as of and June 30, 2010			Senior Debt Balance
(2) Village of Lloyd Harbor		4,000,000		-			4,000,000	*		4,000,000
	$	4,000,000	$	-		$	4,000,000		$	4,000,000
As of December 31, 2009	Assets Acquired in June 30, 2009 Acquisition		2009 Impairment on Real Estate Held for Sale			Balance as of December 31, 2009			Senior Debt Balance
(1) Marina at Cape Haze, LLC	$	46,000,000	$	(18,800,000	)	$	27,200,000	*	$	15,660,115
(2) Village of Lloyd Harbor		4,000,000		-			4,000,000	*		4,000,000
(3) Hidden Canyon		7,000,000		-			7,000,000	*		7,000,000
(4) Oak Vista LLC		1,530,000		(1,530,000	)		-			-
(5) SLP of Spring Lake Garden, LLC		1,050,000		-			1,050,000			-
(6) Reserve at Royal Oaks, LLC		250,000		(125,000	)		125,000			-
(7) Wrights Crossing, LLC		200,000		(35,000	)		165,000			-
(8) The Wave		5,000,000		(5,000,000	)		-			-
	$	65,030,000	$	(25,490,000	)	$	39,540,000		$	26,660,115

* These properties are subject to senior debt which is currently delinquent.  The Company is at risk of losing these properties to foreclosure if the senior debt is not brought current.  M&I Bank, the senior lender on the Marina at Cape Haze property has begun foreclosure proceedings.  We are working with M&I Bank to avoid the continuation of the foreclosure.

(1) Marina at Cape Haze LLC – An operating marina located on an overall area of approximately 37.75 acres of property.  The property is divided into two sub-tracts.  Sub-tract A has a boat storage building which contains 30,340 square feet of gross building area.  The Cabana/Recreational hall contains 1,493 square feet of gross building area.  The sub-tract contains 106 wet slips and 200 dry slips.  Subtract B has a shell building which is a commercial sales office building containing 1,560 square feet of gross building area.  As of 3/31/10 we have evaluated the carrying value of the property based on an updated appraisal obtained January 25, 2010.  It is our intention to hold this property and develop it in order to maximize our investment.  See Note 11 regarding pending litigation in connection with this property.

(2) Village of Lloyd Harbor – Approximately 17.6 acres of vacant land.  The parcel contains roughly 700 feet of water frontage on Long Island Sound.  The property is currently in the platting process to be subdivided into two separate lots to take advantage of its prime beachfront location.  As of 3/31/10 we have evaluated the carrying value of the property based on an updated appraisal obtained January 26, 2010.

(3) Hidden Canyon – A 53 lot residential subdivision in Cave Creek, AZ. In April 2010, this property transferred to the lienholder in full payment of the amount owed.  Accordingly, the book value as of March 31, 2010 was equal to the liability at March 31, 2010 of $7,291,667.

(4) Oak Vista Property – Approximately 2.34 acres of vacant land intended to be held for future development.  As of 3/31/10 we have evaluated the carrying value of the property based on an updated appraisal obtained February 4, 2010.  See Note 11 regarding pending litigation in connection with this property.

(5) SLP of Spring Lake Garden, LLC – Approximately 130,796 square feet or 3 acres of property located in Spring Lake Park Minnesota.  The lot is zoned with a provision for the elderly and handicapped and is available for future development.  As of 3/31/10 we have evaluated the carrying value of the property based on an updated appraisal obtained May 6, 2009.

(6) Reserve at Royal Oaks, LLC –Approximately 1,094 acres or 2 blocks of property containing 20 townhome sites.  As of 3/31/10 we have evaluated the carrying value of the property based on an updated appraisal obtained January 26, 2010.

(7) Wrights Crossing, LLC – Approximately 12.2 acres of vacant land located in the City of Big Lake Minnesota.  As of 3/31/10 we have evaluated the carrying value of the property to be $165,000 based on our evaluation of the property and negotiations of a recent purchase involving the property.

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NOTE 6 – Notes Payable

The Company’s notes payable as of June 30, 2010 and December 31, 2009 are summarized as follows:

Description	As of December 31, 2009		As of June 30, 2010		Matures	Interest Rate
Five Year Notes-Series A issued in 2006, 2007, and 2008 (unsecured) interest paid monthly	$	9,930,000	$	9,930,000	2011 - 2013	10%
Notes- Series A, related party		628,000		2,444,797	2013	12.50%
Notes- Series A		-		2,901,456	2013	12.50%
Series 1 Four Year Notes issued in 2009 (unsecured) interest paid monthly		30,630,101		-	2013	12%*
Note Payable issued in 2009 secured by Arizona real estate, interest paid monthly		7,000,000		-	2013	10%*
Note Payable issued in 2009 secured by New York real estate, interest paid monthly		4,000,000		4,000,000	2012	15%*
Senior Debt secured by real estate foreclosed in 2008, interest paid monthly or quarterly		15,660,115		-	2011 - 2013	15-18%*
Notes Payable (Gulf Lakes and Spring Lake Gardens)		4,792,007		-	2010 - 2013	15-18%*
Note Payable to Transactional Finance, related party		-		1,054,418	2011	15%
Total Notes Payable	$	72,640,223	$	20,330,671

The Company is currently delinquent on all notes payable except for the Five Year Series A Notes, the Notes – Series A, related party and the note payable to Transactional Finance, related party.  The Company has accrued interest at the default rate and reflected the notes payable as current liabilities for all delinquent notes payable.

* Reflects the default rate for notes that are delinquent.

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NOTE 7 – Related Parties

The Company’s related party transactions can be summarized as follows:

Notes Receivable – The Company held a note receivable from Transactional Finance (our controlling shareholder) in the amount of $0 and $171,489 as of June 30, 2010 and December 31, 2009 respectively.

Notes Payable – The Company had notes payable to related parties as follows:

Note offering (Friends & Family controlled by officers directors)	June 30, 2010 $ 2,444,798		December 31, 2009 $ 628,000
Notes payable to Officer’s of the company		-		1,300,000
Notes payable to Transactional Finance		1,054,418		-
Total	$	3,499,216	$	1,928,000

Current Payables – The Company had the following current payables to related parties:

Due to Capital Solutions Management (for pre-acquisition fees)	June 30, 2010 $ 24,417		December 31, 2009 $ 200,885
Accrued interest on notes payable to officers		-		58,500
Accrued interest on Friends & Family notes payable		10,187		2,486
Amounts due to limited partners		-		276,913
Total	$	34,604	$	538,784

Related party accounts payable - $73,500 and $59,464 was due to officers of the Company as of June 30, 2010 December 31, 2009 respectively.

Interest income – The Company reported $1,970 and $0 of interest income from Transactional Finance for the three months period ended June 30, 2010 and June 30, 2009 respectively. The Company reported $4,951 and $0 of interest income from Transactional Finance for the six months period ended June 30, 2010 and June 30, 2009 respectively.

Interest expense - The Company recognized interest expense of $146,382 and $0 on the related party notes payable described above for the three months period ended June 30, 2010 and June 30, 2009 respectively. The Company recognized interest expense of $184,168 and $0 on the related party notes payable described above for the six months period ended June 30, 2010 and June 30, 2009 respectively.

Other expense – The Company recognized other expenses of $1,205,421 and $0 paid to Transactional Finance for advisory fees for the three months period ended June 30, 2010 and June 30, 2009 respectively. The Company recognized other expenses of $1,580,486 and $0 paid to Transactional Finance for advisory fees for the six months period ended June 30, 2010 and June 30, 2009 respectively.

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NOTE 8 – Stockholders’ Deficit

Preferred Stock

On June 30, 2009 the Board of Directors authorized the issuance of 36,642 shares of preferred stock, stated value $1,000 per share to Capital Solutions Monthly Income Fund, L.P. On June 30, 2010, the Company issued an additional 12,000 shares of preferred stock to the Series 1 Note holders of Capital Solutions Monthly Income Fund, L.P. in connection with the Deconsolidation. The additional shares issued were recorded at $0 based on an evaluation performed by the Company at the time of issuance.

Common Stock

In June of 2009 the Company increased the authorized shares of common stock (referred to as Series B) from 70,000,000 to 150,000,000 and issued 36,331,993 to Transactional Finance, LLC in connection with the Merger.  Total shares issued and outstanding of the Series B common stock is 67,354,092 as of December 31, 2009.

In June of 2009 the authorized and issued 1,000,000 shares of Series A common stock to Transactional Finance, LLC in connection with the Merger.  The Series A common stock has a priority voting position.  As a result of the issuance of the Series B and Series A common stock in June of 2009, Transactional Finance, LLC has voting control of 70% of the Company.  For periods prior to the Merger, to determine the weighted average number of shares outstanding, the number of True North Finance Corporation common shares issued for outstanding CS Fund General Partner, LLC member shares was equated to member shares issued and outstanding during prior periods.

Stock Options

On August 1, 2009, Christopher Clouser received 11,476,094 stock options of which 50% vested immediately and 50% vesting when the Company raises $50,000,000 in new capital.

NOTE 9 – Commitments and Contingencies

Except as stated below, currently we are not party to any legal proceedings.  We may initiate legal proceedings, from time to time, when borrowers breach their lending agreements.  From time to time, we may be subject to legal actions, initiated by borrowers, governmental authorities or others that arise from the running of our business.

The Securities and Exchange Commission’s anticipated filing of a civil injunctive action against us may have a material adverse effect on our business.

On January 28, 2010, the Company received a notice from the Chicago regional office staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”).  The notice informed the Company of the Staff’s intention to recommend to the Commission that the SEC bring a civil action alleging that previous management engaged in transactions in violation of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder.  The notice was issued in connection with an investigation into possible violations of federal securities laws stemming from (1) the accrual of income on subsequently written-off real estate loans in 2008, and (2) disclosure issues in connection with Capital Solutions Monthly Income Fund (The Fund) in 2008. The alleged violations occurred prior to the June 30, 2009 Merger.  Previous management of the Fund and Company believe they acted appropriately and the Company intends to work with the SEC to resolve the matter.

The Company entered into a lease for office space in Minnesota.  The lease obligates the Company to the following annual lease payments:

2010	$	108,394
2011		112,563
2012		112,563
2013		116,732
2014		119,859
	$	570,111

NOTE 10 – Subsequent Events

Events Subsequent to June 30, 2010

None.

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

Some of the statements in this Quarterly Report on Form 10-Q, including, but not limited to this Management’s Discussion and Analysis or Plan of Operation, contain forward-looking statements regarding the Company’s business, financial condition, and results of operations and prospects that are based on the Company’s current expectations, estimates and projections. In addition, other written or oral statements which constitute forward-looking statements may be made by the Company or on the Company’s behalf. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “would” or variations of such words and similar expressions are intended to identify such forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These statements are not guarantees of future performance, and are inherently subject to risks and uncertainties that are difficult to predict. As a result, actual outcomes and results may differ materially from the outcomes and results discussed in or anticipated by the forward-looking statements. All such statements are therefore qualified in their entirety by reference to the factors specifically addressed in the section entitled “Factors That May Affect Future Results of Operations” in the Company’s Annual Report on Form 10-K. New risks can arise and it is not possible for management to predict all such risks, nor can management assess the impact of all such risks to the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. The Company undertakes no obligation to revise or update publicly any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report on Form 10-Q, other than as required by law.

Overview

We have recently modified our mission as follows: the mission of the Company is to ethically source safe, high yielding investments by utilizing custom financing structures, performing extensive due diligence and maintaining a broad referral network.  After much consideration, we have elected to pursue our mission by creating numerous new “investment pods” which will be individually managed and initially focused on certain market niches.  The primarily objective of these investment pods is to source and service investments that provide current yields between 400 to 800 basis points above our cost of funds.

Despite our operating history, we are positioned as an early stage finance company.  We will initially focus on financing completed transactions in our intended investment markets of:  opportunistic equity, trade finance, distressed sellers, bridge finance and real estate finance.

Our business model is to originate, service and collect unique and custom finance transactions.  We may do this by primarily financing or investing directly in “completed transactions” in our intended investment markets. A completed transaction is a transaction where the ultimate liquidity has already been contracted for (i.e. pre-sold goods, pre-leased real estate, etc.). We plan to invest for our own account directly on our balance sheet.  We seek to generate revenue and profits by making loans and investments at yields higher than the interest rates we must pay on our debt and other future potential obligations of the Company.    This interest yield spread will consist of interest on the loan plus points and other fees.

Due to the lack of competition in the credit market and other factors, we continue to see an abundance of excellent, and perhaps historical, high yield finance opportunities.  With the demand for our lending clearly established, we continue to attempt to structure, and restructure, the Company to attract investment capital.  We contemplate formally pursuing a registered debt offering within the next 30 days.  We anticipate pricing the debt at a per annum coupon rate of 8¾ to 9½ percent. Interest would be paid monthly and principal would balloon in five years.  The proceeds of the offering would be used to retire existing debt, make investments in our lending business and for working capital. We are also seeking a secured credit facility and have identified numerous investment prospects.  This secured credit facility, if received, would only be available for investments and not working capital.

In addition to preparing for our capital campaign, we will also continue the process of interviewing and recruiting members of our board and investment committee.  To the extent we are able to raise investable capital, our investment committee will assume the primary responsibility of approving pod level investments and identifying and correlating new pod investment strategies.  Our existing investment pod strategies were chosen, in part, due to their attractive correlation and historical track record of providing consistent consolidated long term positive returns.  We expect the investment committee to maintain market awareness and fund our investment pods accordingly.  We have also spent considerable effort on a process to establish clear, performance orientated and ethical investment protocols for our investment pod managers.  The launch of the investment pods will be aligned with the progress of our capital campaign.

19

On June 30, 2010, the Company spun off its real estate holding portfolio by executing a Quit Claim Bill of Sale conveying to CSMIF Liquidating Trust the Company’s interests in Capital Solutions Monthly Income Fund, LP together with 12,000 shares of the Company’s preferred stock. The Company did not receive cash consideration for the Quit Claim Bill of Sale.  After the Company acquired the general partner of Capital Solutions Monthly Income Fund, L.P. (the “Fund”) on June 30, 2009, the real estate assets owned by the Fund had been reported on the Company’s consolidated financial statements.  Since acquiring the general partner, the real estate assets held by the Fund had a significant decrease in fair market value.  Recent third-party appraisals showed a decrease in values of the real estate portfolio by approximately 35% over the last 12 months.  As a result of the decline in value of the real estate held by the Fund, the liabilities exceeded the fair value of the assets immediately before the June 30, 2010 transaction.  The Company has also made loans to the Fund totaling $1,258,529 as of June 30, 2010. These loans we satisfied on June 30, 2010 by the Fund transferring to the Company its interest in a certain loan purchase agreement whereby the Company has the eight month option to pay approximately $4,700,000 to acquire a senior deed of trust on real estate appraised for approximately $5,600,000. The Company also divested real estate that was held directly on its balance sheet in the 2nd quarter where the fair market values had fallen to levels that didn’t support continued investment. Such divesture was done without recourse to the Company.

We maintain a website at www.truenorthfinance.com.  We are not including the information contained in our website as part of, nor incorporating it by reference into, this Form 10-Q.  We will make available on our website free of charge our future Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, Current Reports on Form 8-K, and amendments to those reports, as soon as reasonable practical after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission.

We have had net losses since inception.  We had an accumulated deficit as of June 30, 2010 of $31,252,482, which primarily reflects loss on the value of our real estate and expenditures including professional fees and services necessary for the start of our operations, as compared to an accumulated deficit as of March 31, 2010, of $50,115,505.  The decrease of the accumulated deficit as of June 30, 2010, as compared to March 31, 2010, was principally the result of deconsolidation of Capital Solutions Monthly Income Fund, LP.

We believe our ability to continue as a going concern depends in large part on our ability to immediately raise sufficient capital to enable us to make loans and receive revenue from our lending activities in excess of our debt obligations and our operating expenses.  If we are unable to raise such additional capital, we may be forced to discontinue our business.

Liquidity

Liquidity is a measure of our sources of funds available to meet our obligations as they arise. We require cash to fund new and existing loan commitments, repay and service indebtedness, make new investments, and pay expenses related to general business operations. Our sources of liquidity are cash and cash equivalents, new borrowings, proceeds from asset sales, principal and interest collections, and additional equity and debt financings. We currently have only nominal revenue.  We anticipate continued investments by principals and affiliates of the Company, loan repayments and asset sales of approximately $2,000,000 anticipated to be received by the end 3rdnd quarter of 2010 will provide adequate liquidity to fund the Company’s operations over the 3rd and 4th quarters of 2010.  We are seeking, but have not secured, additional sources of liquidity beyond the  3rd and 4th quarters.  Thereafter, to the extent we are successful in raising investable capital, and historically we have not been, we expect that the primary source of our liquidity will come from interest and fees earned on our loans and other investments made with the proceeds from new investments. Nevertheless, some short-term liquidity will be provided by the net proceeds from any new capital received.

Capital Resources and Results of Operations

As we have yet to raise sufficient capital to pursue our business strategy, we have limited operations to discuss.  Our current capital resources have been provided primarily through debt financing.  To date, our material commitments include payments to existing creditors and administrative personnel.  These expenses will be paid from cash flow from asset sales or from the net proceeds of the financings.  We believe we have identified prospects to purchase several investments sufficient to meet these obligations for the 3rd and 4th  quarters of 2010.  We are still seeking additional capital to better capitalize our business and will endeavor to commence a debt offering, which, in turn, will generate cash to fund our finance operations thereby producing net income and additional revenue.  We currently have limited revenue from operations and in all likelihood will be required to make future expenditures in connection with our distribution efforts along with general and administrative expenses before we will earn any material revenue.

The results of operations are related to CS Fund General Partner LLC as the predecessor company pursuant to the reverse acquisition accounting rules. Accordingly, the Company’s operating results (pre-Merger) include the operating results of CS Fund General Partner LLC prior to the date of the Merger (June 30, 2009). Prior to June 30, 2009 CS Fund General Partner LLC had $0 operating income.

Consolidated operating expenses increased to $4,760,685 for the three months ended June 30, 2010 from $0 for the three months ended June 30, 2009. The increase was primarily due to a $127,151 increase in compensation and benefits, a $454,909 increase in professional fees and a $2,470,498 increase in interest expense.

Consolidated operating expenses increased to $8,423,755 for the six months ended June 30, 2010 from $0 for the six months ended June 30, 2009. The increase was primarily due to a $293,734 increase in compensation and benefits, a $556,688 increase in professional fees and a $4,756,414 increase in interest expense.

On April 22, 2010, the Company received a loan from its principal shareholder in the amount of $1,250,000. The loan is secured by all the assets of the Company, bears interest at the approximate rate of 15.5%, has no prepayment penalty and is amortized in twelve equal monthly installments. The Company is current on its repayment obligations.

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Capital Raising Challenges

Our funding has considerably been below our expectations.  We continue to encounter significant practical and regulatory challenges in successfully commencing an offering sufficient to make significant investments.

Concentration Restrictions

We expect to establish formal concentration restrictions that will require the investment committee or board’s approval for any investment.  As we increase our portfolio of investments, our concentration restrictions will evolve.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K promulgated under the Securities Act.

Critical Accounting Estimates

Revenue Recognition

Interest on our investments in notes receivable is recognized as revenue when earned according to the terms of the loans, using the effective interest method.  We do not accrue interest income on loans once they are determined to be non-performing.  A loan is considered non-performing:  (1) when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement; or (2) when the payment of interest is 90 days past due.

Cash receipts will be allocated to interest income, except when such payments are specifically designated by the terms of the loan as principal reduction or when management does not believe our investment in the loan is fully recoverable.

Investments in Real Estate Loans

We may from time to time acquire or sell investments from or to our manager or other related parties without a premium.  The primary purpose is to either free up capital to provide liquidity for various reasons, such as loan diversification, or place excess capital in investments to maximize the use of our capital.  Selling or buying loans allows us to diversify our loan portfolio within these parameters.  Due to the short-term nature of the loans we make and the similarity of interest rates in loans we normally would invest in, the fair value of a loan typically approximates its carrying value.  Accordingly, discounts or premiums typically do not apply upon sales of loans and therefore, generally no gain or loss is recorded on these transactions, regardless of whether to a related or unrelated party.

Investments in real estate loans are generally secured by deeds of trust or mortgages.  Generally, our real estate loans require interest only payments with a balloon payment of the principal at maturity.  We have also made loans that defer interest and principal until maturity.  We have both the intent and ability to hold real estate loans until maturity and therefore, real estate loans are classified and accounted for as held for investment and are carried at amortized cost.  Loans sold to or purchased from affiliates are accounted for at the principal balance and no gain or loss is recognized by us or any affiliate.

Loan-to-value ratios are initially based on appraisals obtained at the time of loan origination and are updated, when new appraisals are received, to reflect subsequent changes in value estimates.  Such appraisals are generally dated within 12 months of the date of loan origination and may be commissioned by the borrower.

The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  The Company’s impaired loans include troubled debt restructuring, and performing and non-performing loans in which full payment of principal or interest is not expected.  The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price of the fair value of its collateral.

Loans that have been modified from their original terms are evaluated to determine if the loan meets the definition of a Troubled Debt Restructuring (“TDR”).  When the Company modifies the terms of an existing loan that is considered a TDR, it is considered performing as long as it is in compliance with the modified terms of the loan agreement.  If the modification calls for deferred interest, it is recorded as interest income as cash is collected.

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Allowance for Loan Losses

We maintain an allowance for loan losses on our investments in real estate loans for estimated credit impairment.  Management’s estimate of losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrower’s ability to repay, prevailing economic conditions and the underlying collateral securing the loan.  Additions to the allowance are provided through a charge to earnings and are based on an assessment of certain factors, which may indicate estimated losses on the loans.  Actual losses on loans are recorded as a charge-off or a reduction to the allowance for loan losses.  Generally, subsequent recoveries of amounts previously charged off are added back to the allowance and included as income.

Estimating allowances for loan losses requires significant judgment about the underlying collateral, including liquidation value, condition of the collateral, competency and cooperation of the related borrower and specific legal issues that affect loan collections or taking possession of the property. 

Additional facts and circumstances may be discovered as we continue our efforts in the collection and foreclosure processes.  This additional information often causes management to reassess its estimates. Circumstances that may cause significant changes in our estimated allowance include, but are not limited to:

· Changes in the level and trends relating to non-performing receivables including past due interest payments and past due principal payments;

· Declines in real estate market conditions, which can cause a decrease in expected market value;

· Discovery of undisclosed lines (including but not limited to, community improvement bonds, easements and delinquent property taxes);

· Lack of progress on real estate developments after we advance funds.  We will customarily monitor progress of real estate developments and approve loan advances.  After further inspection of the related property, progress on construction occasionally does not substantiate an increase in value to support the related loan advances;

· Unanticipated legal or business issues that may arise subsequent to loan origination or loan advances or upon the sale of foreclosed property; or

· Appraisals, which are only opinions of value at the time of the appraisal, may not accurately reflect the current value of the property.

The Company considers a loan to be impaired when based on current information and events, it is probable that Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest or principal is 90 days past due. 

Real Estate Held for Sale

Real estate held for sale includes real estate acquired through purchases and foreclosure and will be carried at the lower of the recorded amount, inclusive of any senior indebtedness, or the property’s estimated fair value, less estimated costs to sell, with fair value based upon appraisals and knowledge of local market conditions.  The carrying values of real estate held for sale are assessed on a regular basis from updated appraisals, comparable sales values or purchase offers.  Third party appraisals are obtained annually.  Impairment losses are recorded if the third party appraisals are less than the net recorded value.

Management classifies real estate held for sale when the following criteria are met:

· Management commits to a plan to sell the properties;

· The property is available for immediate sale in its present condition subject only to the terms that are usual and customary;

· An active program to locate a buyer and other actions required to complete a sale have been initiated;

· The sale of the property is probable;

· The property is being actively marketed for sale at a reasonable price;

· Withdrawal or significant modification of the sale is not likely.

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Directors and Officers Insurance

On November 15, 2007, November 15, 2008 and November 15, 2009, the Company renewed an insurance policy which covers its officers and directors in the event they are sued in connection with the performance of their duties as they relate to the company.  The premiums for such insurance policy have been financed by a third party.

Employees

The Company expects to hire up to an additional 7 employees during calendar year 2010.

Contractual Commitments

The table below summarizes our contractual obligations as of June 30, 2010.  Amounts relating to our Notes reflect the principal due to Notes investors and do not include interest payments on the Notes.

Contractual Obligation	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Notes	16,330,672	1,054,418	15,276,254	0	0
Senior Asset Lenders	4,000,000	0	4,000,000	0	0

Item  3.   Quantitative and Qualitative Disclosures about Market Risk.

Disclosure not required as a result of the Company’s status as a smaller reporting company.

Item  4.   Controls and Procedures.

Evaluation of disclosure controls and procedures

As of June 30, 2010, the Company carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Exchange Act.  This evaluation was done under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer. Based upon that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective in gathering, analyzing and disclosing information needed to satisfy our disclosure obligations under the Exchange Act.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls that materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

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PART  II.  OTHER INFORMATION

Item  1.Legal Proceedings.

Except as stated below, currently we are not party to any legal proceedings.  We may initiate legal proceedings, from time to time, when borrowers breach their lending agreements.  From time to time, we may be subject to legal actions, initiated by borrowers, governmental authorities or others that arise from the running of our business.

On January 28, 2010, the Company received a notice from the Chicago regional office staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”).  The notice informed the Company of the Staff’s intention to recommend to the Commission that the SEC bring a civil action alleging that the Company, and its Chief Financial Officer engaged in transactions in violation of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder.  The notice was issued in connection with an investigation into possible violations of federal securities laws stemming from the accrual of income on subsequently written-off real estate loans in 2008.  The total income reported by the Company in 2008 was approximately $554,000. The Company believes it acted appropriately and the Company intends to work with the SEC to resolve the matter. The Securities and Exchange Commission’s anticipated filing of a civil injunctive action against us may have a material adverse effect on our business.

Item  2.Unregistered Sales of Equity Securities and Use of Proceeds.  None

Item  3.Defaults Upon Senior Securities.  None

Item  4.Submission of Matters to a Vote of Security Holders.  None

Item  5.Other Information.  None

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Item  6.Exhibits.

Index to Exhibits

Exhibit Number	Exhibit	Method of Filing
31.1	Rule 13a-14(a)/15d-14(a) Certifications: Certification of Chief Executive Officer pursuant to Rule 15d.	Filed herewith.
31.2	Rule 13a-14(a)/15d-14(a) Certifications: Certification of Chief Financial Officer pursuant to Rule 15d.	Filed herewith.
32.1	Section 1350 Certifications of Chapter 63 of Title 18 of the United States Code.	Filed herewith.
32.2	Section 1350 Certifications of Chapter 63 of Title 18 of the United States Code.	Filed herewith.

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SIGNATURES

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

By:           /s/ Todd A. Duckson                                                                           

Todd A. Duckson

Chief Executive Officer

(Principal Executive Officer)

Dated:                                           

By:           /s/ Mark Williams                                                                

Mark Williams

Chief Financial Officer

(Principal Financial and Accounting Officer)

Dated:                                           

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