10QSB 1 v056753_10-qsb.htm

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, 2006

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

For the transition period from _____________ to ______________

Commission file number __________________________________

FREEDOM FINANCIAL GROUP, INC.

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

Delaware		43-1647559
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3058 East Elm Street, Springfield, Missouri 65802

(Address of principal executive offices)

(417) 886-6600

(Issuer's Telephone Number)

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes x No o

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:

As of November 10, 2006, 19,927,001 shares of Common Stock, $0.0001 par value were outstanding.

Transitional Small Business Disclosure Format: Yes o No x

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION		3

ITEM 1.	Financial Statements	3

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3.	Controls and Procedures	32

PART II. - OTHER INFORMATION		33

ITEM 1.	Legal Proceedings	33

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

ITEM 3.	Defaults Upon Senior Securities	33

ITEM 4.	Submission of Matters to a Vote of Security Holders	33

ITEM 5.	Other Information	33

ITEM 6.	Exhibits and Reports on Form 8-K	34

INDEX TO EXHIBITS		34

PART I. - FINANCIAL INFORMATION

ITEM 1. Financial Statements

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Freedom Financial Group, Inc.

Springfield, Missouri

We have reviewed the accompanying consolidated balance sheet of Freedom Financial Group, Inc. as of September 30, 2006, and the related consolidated statements of operations for the three-month and nine-month periods ended September 30, 2006 and 2005, and changes in stockholders’ equity and cash flows for the nine-month periods ended September 30, 2006 and 2005. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2005 and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated January 20, 2006 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ BKD, LLP

Springfield, Missouri

October 30, 2006

FREEDOM FINANCIAL GROUP, INC.

Consolidated Balance Sheets

	Unaudited
	September 30,			December 31,
	2006			2005
Assets

Cash and cash equivalents	$	1,011,559		$	2,192,075
Finance receivables, net		10,398,481			9,756,170
Notes receivable, net		11,725			11,725
Repossessed assets		220,750			191,911
Property and equipment, net		300,905			308,777
Deferred financing costs		157,206			—
Other assets		170,647			159,017

Total assets	$	12,271,273		$	12,619,675

Liabilities and Stockholders’ Equity

Liabilities
Bank line of credit	$	164,689		$	—
Accounts payable		13,586			40,090
Accrued expenses		112,351			80,102
Accrued compensation costs		42,948			52,949
Dealer holdbacks		58,733			106,539
Dealer reserves		40,013			39,963
Other liabilities		66,138			—

Total liabilities		498,458			319,643

Stockholders’ Equity
Redeemable convertible preferred stock, $0.0001 par value; 8,994,357 shares authorized, issued and outstanding		13,798,817			13,798,817
Common stock, $0.0001 par value; 36,000,000 shares authorized; 10,928,252 and 9,965,759 shares issued and outstanding at September 30, 2006 and December 31, 2005 respectively		1,093			997
Additional paid-in-capital		4,716			—
Retained earnings (deficit)		(3,133,877	)		(2,446,970	)
Accumulated other comprehensive income		1,102,066			947,188

Total stockholders’ equity		11,772,815			12,300,032

Total liabilities and stockholders’ equity	$	12,271,273		$	12,619,675

See Notes to Condensed Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Operations

Unaudited

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2006			2005			2006			2005
Revenues
Interest income	$	685,385		$	613,821		$	2,032,608		$	1,604,761
Recovery of charged-off finance receivables		14,326			22,620			32,640			100,650
Other income		86,175			21,668			143,064			72,571

Total revenues		785,886			658,109			2,208,312			1,777,982

Interest Expense		24,505			—			24,505			—

Revenues After Interest Expense		761,381			658,109			2,183,807			1,777,982

Provision for Credit Losses		166,178			233,559			708,338			431,847

Net Revenues After Provision for Credit Losses		595,203			424,550			1,475,469			1,346,135

Operating Expenses		708,726			586,618			2,162,376			1,973,210

Operating Loss		(113,523	)		(162,068	)		(686,907	)		(627,075	)

Nonoperating Income
Other		—			1,586			—			2,735

Loss Before Income Taxes		(113,523	)		(160,482	)		(686,907	)		(624,340	)

Provision for Income Taxes		—			—			—			—

Net Loss	$	(113,523	)	$	(160,482	)	$	(686,907	)	$	(624,340	)


Basic and Diluted Loss Per Share	$	(0.01	)	$	(0.02	)	$	(0.06	)	$	(0.06	)

See Notes to Condensed Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Stockholders’ Equity

Unaudited

	Redeemable											Accumulated
	Convertible						Additional					Other
	Preferred		Common Stock				Paid-in		Retained			Comprehensive
	Stock		Shares		Amount		Capital		Earnings			Income		Total

Balance, December 31, 2005	$	13,798,817		9,965,759	$	997	$	0	$	(2,446,970	)	$	947,188	$	12,300,032

Net loss		—		—		—		—		(686,907	)		—		(686,907	)

Foreign currency translation adjustment		—		—		—		—		—			154,878		154,878

Comprehensive loss		—		—		—		—		—			—		(532,029	)

Stock Grant		—		962,493		96		4,716		—			—		4,812

Balance, September 30, 2006	$	13,798,817		10,928,252	$	1,093	$	4,716	$	(3,133,877	)	$	1,102,066	$	11,772,815


Balance, December 31, 2004	$	13,798,817		9,965,759	$	997	$	0	$	(1,731,382	)	$	803,244	$	12,871,676

Net loss		—		—		—		—		(624,340	)		—		(624,340	)

Foreign currency translation adjustment		—		—		—		—		—			143,738		143,738

Comprehensive loss		—		—		—		—		—			—		(480,602	)

Balance, September 30, 2005	$	13,798,817		9,965,759	$	997	$	0	$	(2,355,722	)	$	946,982	$	12,391,074

See Notes to Condensed Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Cash Flows

Unaudited

	For the Nine Months Ended September 30,
	2006			2005
Operating Activities
Net loss	$	(686,907	)	$	(624,340	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		34,049			43,326
Provision for credit losses		708,338			431,847
Deferred discount income		(417,093	)		(491,606	)
Recovery of charged-off finance receivables		321,936			162,183
Stock grant expense		4,812			—
Amortization of deferred financing fees		22,458			—
Changes in
Other assets		(27,653	)		(58,957	)
Accounts payable and accrued expenses		(8,522	)		(223,300	)
Other liabilities		(44,092	)		—
Reorganization costs payable		—			(5,000	)
Net cash used in operating activities		(92,674	)		(765,847	)

Investing Activities
Purchase of finance receivables		(5,725,898	)		(8,933,881	)
Principal collected on finance receivables		4,765,350			3,953,024
Payments of dealer reserves		(9,654	)		(14,692	)
Payments of dealer holdbacks		(128,393	)		(134,069	)
Principal collected on notes receivable		—			60,780
Purchase of property and equipment		(16,613	)		(18,184	)
Proceeds from sale of property and equipment		—			2,000
Net cash used in investing activities		(1,115,208	)		(5,085,022	)

Financing Activities
Payment of deferred financing costs		(149,664	)		—
Line of credit advances		164,689			—
Net cash provided by financing activities		15,025			—


Effect of Exchange Rate Changes on Cash and Cash Equivalents		12,341			15,209

Net Decrease in Cash and Cash Equivalents		(1,180,516	)		(5,835,660	)

Cash and Cash Equivalents, Beginning of Period		2,192,075			8,779,211

Cash and Cash Equivalents, End of Period	$	1,011,559		$	2,943,551

See Notes to Condensed Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Notes to Condensed Consolidated Financial Statements

Unaudited

Note1: General

The accompanying unaudited condensed consolidated financial statements of Freedom Financial Group, Inc. (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-QSB. Accordingly, certain information and footnotes required by generally accepted accounting principles for complete financial statements have been omitted. These interim statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2005 and notes thereto included in the Company’s Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2006.

The information contained herein reflects all normal and recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of operations and financial position. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Note 2: Basis of Presentation

The consolidated financial statements include the accounts of Freedom Financial Group, Inc. (FFG), successor by merger to Stevens Financial Group, Inc. (SFG) and SFG’s wholly owned subsidiaries, SFC Funding Corporation (SFC) and SFC Automobile Receivables Trust 2000A (SFC Trust) and FFG’s wholly owned Canadian subsidiary, T.C.G. - The Credit Group Inc. (TCG), formerly Sinclair Credit Group Co., all of which collectively comprise a single reporting segment, the “Company.” All significant intercompany transactions have been eliminated in consolidation.

In accordance with the American Institute of Certified Public Accountants’ Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (SOP 90-7), the Company adopted fresh start reporting as of January 1, 2003, the effective date of the Plan of Reorganization.

Note 3: Finance Receivables and Allowance for Credit Losses

Finance receivables consist of the following at September 30, 2006 and December 31, 2005, respectively:

	2006		2005

Automobiles	$	9,426,789	$	8,456,981
Bulk food		480,540		863,167
Equipment leases		473,722		704,484
Other		885,080		742,534
Total finance receivables		11,266,131		10,767,166

Less
Unearned discount		431,906		598,768
Allowance for credit losses		435,744		412,228
		867,650		1,010,996
Net finance receivables	$	10,398,481	$	9,756,170

Approximately 32% and 37% of the above finance receivables as of September 30, 2006 and December 31, 2005, respectively, are Canadian in origin.

Amounts contractually receivable (including principal and interest) under our finance receivables at September 30, 2006, were as shown in the following table. The Company expects our actual collections to differ significantly from the amounts presented below as a result of prepayments, delinquent payments, partial payments and nonpayments.

2006	$	1,714,882
2007		5,556,600
2008		4,228,084
2009		2,407,474
2010		721,778
2011		15,974
Total	$	14,644,792

Activity in the allowance for credit losses related to finance receivables for the three months ended September 30, 2006 and 2005, respectively, was as follows:

	2006			2005

Balance, beginning of period	$	447,951		$	317,934
Provision charged to expense		166,178			233,559
Losses charged off		(355,741	)		(332,569	)
Recoveries of previously charged off amounts		177,769			158,851
Effect of foreign currency translation		(413	)		12,568
Balance, end of period	$	435,744		$	390,343

Activity in the allowance for credit losses related to finance receivables for the nine months ended September 30, 2006 and 2005, respectively, was as follows:

	2006			2005

Balance, beginning of period	$	412,228		$	296,233
Provision charged to expense		708,338			431,847
Losses charged off		(1,043,219	)		(652,492	)
Recoveries of previously charged off amounts		350,776			304,384
Effect of foreign currency translation		7,621			10,371
Balance, end of period	$	435,744		$	390,343

The Company’s nonearning finance receivables totaled $233,143 at September 30, 2006. The Company provided an allowance for credit losses related to these receivables of $209,827.

Note 4: Line of Credit

On August 18, 2006, the Company entered into a revolving credit loan and security agreement with Heartland Bank (“Heartland”) to provide the Company with a revolving line of credit of up to $3,000,000 to be used for working capital and general corporate and operating purposes. The maximum loan amount is limited to the lesser of $3,000,000 or 50% of the outstanding principal balance of the Company’s domestic Installment Contracts meeting certain underwriting and delinquency criteria. Borrowings under the line of credit bear interest at the bank’s prime rate plus 3% and are collateralized by substantially all of the Company’s assets, including the Company’s wholly-owned subsidiary, TCG. The loan matures on August 18, 2007.

Upon closing of the line of credit the Company issued Heartland warrants to purchase up to 500,000 shares of the Company’s common stock at an exercise price of $0.63 per share for the first 300,000 shares and $0.70 per share for the remaining 200,000 shares. The warrants expire five years from their date of issuance and are subject to certain anti-dilution protections.

Also upon closing of the line of credit the Company issued to its investment banking firm warrants to purchase up to 227,963 shares of the Company’s common stock at an exercise price of $0.63 per share for the first 136,778 shares and $0.70 per share for the remaining 91,185 shares. The warrants expire five years from their date of issuance and are subject to certain anti-dilution protections.

All warrants issued in connection with the line of credit were determined to have a nominal fair value on their date of issuance and therefore the Company did not recognize any expense related thereto.

The Company incurred fees payable to its investment banking firm and to Heartland totaling $179,664 in connection with consummating the revolving credit loan agreement. These fees were recorded as deferred financing fees when paid and are being amortized to interest expense over the twelve month term of the loan agreement on a straight-line basis.

The loan agreement contains covenants, among others, that 1) require the Company to maintain a minimum net worth of $10,000,000 as of the end of each fiscal quarter, 2) restrict the Company’s ability to declare or pay dividends, and 3) limit the amount of capital expenditures the Company can incur in any fiscal year. The Company was in compliance with all covenants as of September 30, 2006.

Note 5: Redeemable Convertible Preferred Stock

At the Company’s Annual Meeting of Stockholders on June 23, 2006, the beneficial owners of the Freedom Financial Group I Statutory Trust voted to 1) convert all of the Company’s outstanding preferred stock, currently held by the Freedom Financial Group I Statutory Trust, into a like number of shares of common stock; 2) distribute all such common shares to the respective beneficial owners in exchange for their Trust Shares; and 3) wind up the affairs of and dissolve the Statutory Trust. The Company completed the conversion and the Statutory Trust was dissolved during October 2006.

Note 6: Commitments

The Company had outstanding commitments to purchase finance receivables totaling approximately $1,519,226 as of September 30, 2006. These commitments generally expire between 20 and 30 days after they are issued if unused. Typically the Company funds between 30% and 50% of its outstanding commitments.

The Company is also obligated under certain noncancelable operating leases for premises and equipment with terms ranging up to three years. Future minimum payments under these noncancelable operating leases as of September 30, 2006 are:

2006	$	12,613
2007		28,052
Total	$	40,665

The Company’s agreement with its investment banking firm requires the Company to pay total aggregate transaction fees of not less than $250,000. As of September 30, 2006 the Company has paid its investment bankers transaction fees totaling $120,000 and remains committed to pay an additional $130,000 pursuant to the terms of the agreement.

The Company had no other commitments as of September 30, 2006.

Note 7: Loss Per Share

Basic earnings per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. Since the effect of converting the shares of redeemable preferred stock, and the exercise of warrants to purchase common stock, would be antidilutive for the three months and nine months ended September 30, 2006 and 2005, respectively (due to the net losses for those periods), basic and diluted loss per share amounts for those periods are based on the weighted average number of common shares outstanding.

So long as any preferred stock is outstanding, no dividend or distribution shall be declared or paid on any shares of common stock.

Loss per share for the three months ended September 30, 2006, was computed as follows:

				Weighted
				Average		Per Share
	Loss			Shares		Amount

Net loss	$	(113,523	)		10,928,252
Basic and diluted loss per share						$	(0.01	)

Loss per share for the three months ended September 30, 2005, was computed as follows:

				Weighted
				Average		Per Share
	Loss			Shares		Amount

Net loss	$	(160,482	)		9,965,759
Basic and diluted loss per share						$	(0.02	)

Loss per share for the nine months ended September 30, 2006, was computed as follows:

	Loss			Weighted Average Shares		Per Share Amount

Net loss	$	(686,907	)		10,896,521
Basic and diluted loss per share						$	(0.06	)

Loss per share for the nine months ended September 30, 2005, was computed as follows:

				Weighted
				Average		Per Share
	Loss			Shares		Amount

Net loss	$	(624,340	)		9,965,759
Basic earnings per share						$	(0.06	)

Note 8: Operating Expenses

The components of operating expenses for the three months ended September 30, 2006 and 2005, respectively, are as follows:

	2006		2005

Salaries and benefits	$	353,885	$	351,014
Professional fees		104,478		91,887
Other		250,363		143,717

	$	708,726	$	586,618

The components of operating expenses for the nine months ended September 30, 2006 and 2005, respectively, are as follows:

	2006		2005

Salaries and benefits	$	1,138,543	$	1,137,288
Professional fees		419,239		380,355
Other		604,594		455,567

	$	2,162,376	$	1,973,210

Note 9: Foreign Operations

The Company’s foreign operations, all of which are in Canada, are conducted through its wholly owned subsidiary, T.C.G. - The Credit Group Inc. based in Winnipeg, Manitoba. Total assets, net of valuation allowances, associated with foreign operations were $4,282,153 at September 30, 2006.

Total revenues, loss before taxes and net loss from foreign operations for the three months ended September 30, 2006 and 2005, respectively, were as shown below. Loss before income taxes and net loss reflect interest charges on amounts due to FFG of $102,995 and $74,699 for the three months ended September 30, 2006 and 2005, respectively. Loss before income taxes and net loss also reflect management and accounting fees charged to TCG by FFG for certain administrative services performed by FFG on TCG’s behalf of $24,000 for each of the three month periods ended September 30, 2006 and 2005. These interest charges and management and accounting fees eliminate in consolidation.

	2006		2005

Total revenues	$	279,119	$	258,613

Income (Loss) before income taxes		25,846		(47,103	)

Net Income (Loss)		25,846		(47,103	)

Total revenues, loss before taxes and net loss from foreign operations for the nine months ended September 30, 2006 and 2005, respectively, were as shown below. Loss before income taxes and net loss reflect interest charges on amounts due to FFG of $297,624 and $202,732 for the nine months ended September 30, 2006 and 2005, respectively. Loss before income taxes and net loss also reflect management and accounting fees charged to TCG by FFG for certain administrative services performed by FFG on TCG’s behalf of $72,000 for each of the nine month periods ended September 30, 2006 and 2005. These interest charges and management and accounting fees eliminate in consolidation.

	2006			2005

Total revenues	$	864,215		$	730,245

Loss before income taxes		(30,733	)		(81,743	)

Net loss		(30,733	)		(81,743	)

Note 10: Comprehensive Income/(Loss)

The components of comprehensive income/(loss) for the three months ended September 30, 2006 and 2005 are as follows:

	2006			2005

Net loss	$	(113,523	)	$	(160,482	)
Foreign currency translation adjustment		(14,722	)		207,653

Comprehensive income/(loss)	$	(128,245	)	$	47,171

The components of comprehensive loss for the nine months ended September 30, 2006 and 2005 are as follows:

	2006			2005

Net loss	$	(686,907	)	$	(624,340	)
Foreign currency translation adjustment		154,878			143,738

Comprehensive loss	$	(532,029	)	$	(480,602	)

Note 11: Additional Cash Flow Information

The Company made cash interest payments totaling $559 during the three month and nine month periods ended September 30, 2006 and no cash interest payments during the three and nine month periods ended September 30, 2005.

The Company made no cash payments for income taxes during the three month and nine month periods ended September 30, 2006 and 2005, respectively.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “intend,” “anticipate,” “believe,” “estimate,” “plan,” and “expect,” and variations of these words and similar expressions are intended to identify these forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are considered to be forward-looking statements. We express our expectations, beliefs or projections in good faith and believe our expectations reflected in these forward-looking statements are based on reasonable assumptions; however, we cannot assure you that these expectations, beliefs or projections will prove to have been correct. Risks, uncertainties and assumptions that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, among other things: (i) the risks associated with business expansion; (ii) the ability to obtain sufficient outside debt and/or equity financing on terms acceptable to us in order to meet our cash requirements over the coming 12 months; (iii) our ability to compete successfully against competitors with significantly greater financial, marketing and advertising resources than the Company; and (iv) the risk of adverse economic conditions lessening demand for our products.

Readers are referred to the caption “Risk Factors” appearing at the end of ITEM 1, Description of Business in our annual report on Form 10-KSB, filed on March 30, 2006, for additional factors that may affect our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-QSB might not occur. We undertake no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements of the Company and the related notes thereto and other information included or incorporated by reference herein.

Overview

We are a consumer finance company specializing in the acquisition, collection and servicing of sub-prime automobile loans purchased from independent used car dealers. We invest significant amounts of cash to acquire Installment Contracts. (As used herein, the term “Installment Contract” includes all motor vehicle installment contracts, consumer installment contracts and small ticket leases acquired by the Company.) We generate cash over the terms of those Installment Contracts in the form of interest and principal payments we collect.

Our primary source of revenue is interest income generated from our portfolio of Installment Contracts.

The Company’s predecessor, SFG, filed for Chapter 11 bankruptcy on March 19, 2001. See Part I, Item 1, under the heading Reorganization of Predecessor Under Chapter 11 in the Company’s registration statement on Form 10-SB/A, filed on September 28, 2005.

As a result of the Company’s reorganization, the Company’s U.S. operations were suspended between March 19, 2001 and January 1, 2003. From January 1, 2003 through October of 2004, the Company engaged in limited operations. Due to this lengthy period of suspended or limited operations, when the Company fully re-entered the U.S. marketplace in October of 2004 it was essentially as a “start-up” organization. We consider ourselves to be a “growth” company, in that our primary focus is on increasing the size of our Installment Contracts portfolio. Our goal is to grow our portfolio to a size such that the interest income generated from the portfolio is sufficient to provide consistent operating profits.

The Company’s primary focus is on acquiring sub-prime automobile loans from independent used car dealers. In addition, the Company’s Canadian subsidiary, TCG, has in the past acquired a variety of consumer Installment Contracts, including small ticket leases, loans secured by home appliances and other consumer goods, and loans for bulk food purchases. While TCG will continue to acquire these types of Installment Contracts, TCG’s primary focus is on acquiring sub-prime automobile loans from independent used car dealers. On a consolidated basis, the Company’s portfolio of outstanding Installment Contracts has been increasingly comprised of sub-prime automobile loans. The trend in the percentage of the Company’s outstanding receivables from automobile-secured Installment Contracts is as follows:

December 31, 2003	17	%
December 31, 2004	45	%
March 31, 2005	61	%
June 30, 2005	72	%
September 30, 2005	77	%
December 31, 2005	79	%
March 31, 2006	80	%
June 30, 2006	82	%
September 30, 2006	84	%

The Company is devoting the majority of its marketing resources and efforts to acquiring sub-prime automobile loans, and anticipates that this trend will continue over the coming twelve months.

Over the course of the next year, in addition to closely monitoring this trend, the Company’s management will be focused on the following:

(1)	Consistently acquiring an increasing volume of sub-prime automobile-secured Installment Contracts, through our point-of-sale programs, that meet the Company’s underwriting guidelines;

(2)	Obtaining additional outside debt and/or equity financing to meet the Company’s future cash requirements;

(3)	Minimizing the credit losses in the Installment Contracts portfolio; and

(4)

Monitoring key performance measures, including cost per loan acquired, book-to-look ratio (computed as the number of contracts acquired compared to the number of credit applications received/reviewed), turnaround time for responding to credit applications submitted by dealers, and turnaround time for funding a loan package submitted by a dealer.

Recent Developments

At the Company’s Annual Meeting of Stockholders on June 23, 2006, the Company’s stockholders voted to 1) convert all of the Company’s outstanding preferred stock, currently held by the Freedom Financial Group I Statutory Trust, into a like number of shares of common stock; 2) distribute all such common shares to the respective beneficial owners in exchange for their Trust Shares; and 3) wind up the affairs of and dissolve the Statutory Trust. The actual conversion was completed and the Statutory Trust dissolved in October of 2006.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

The Company considers the determination of the allowance for credit losses to involve a higher degree of judgment and complexity than its other significant accounting policies. The allowance for credit losses is calculated with the objective of maintaining an allowance for credit losses that management believes is adequate to absorb reasonably estimable probable losses in the Company’s portfolio of Installment Contracts. Management’s determination of the adequacy of the allowance for credit losses is based on periodic evaluations of the Company’s portfolio of Installment Contracts and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, value of collateral, the amount and timing of expected future cash flows on delinquent loans, estimated losses and general amounts for historical loss experience. The process also considers prevailing and expected future economic conditions, uncertainties in estimating losses and inherent risks in the Installment Contracts portfolio. All of these factors may be subject to significant change. To the extent actual outcomes differ from management estimates, additional provisions for credit losses may be required that would adversely impact our earnings in future periods.

The Company’s management evaluates the adequacy of the allowance for credit losses on a regular basis. This evaluation is based on a review of various quantitative and qualitative analyses. Quantitative analyses include the review of all loans charged-off by asset class, static pool analysis by month of acquisition and by dealer, review of delinquency trends, and analysis of the historical cumulative losses in the portfolio. Other quantitative analyses include a review of the current delinquency ratios and an analysis of the relative size of each asset class in relation to historical amounts. Qualitative analyses include an assessment of prevailing and anticipated economic conditions, trends in deficiency balance collections, trends in the number of loan modifications and extensions, trends in average borrower credit scores and trends in the percentage of balances recovered through sale of collateral. The analysis of the adequacy of the allowance for credit losses is dependent upon effective quantitative and qualitative analyses, some of which are inherently subjective as they require estimates that are susceptible to significant revision as more information becomes available.

Selected Financial Data

The following table presents selected unaudited summary information regarding our results of operations for the three and nine months ended September 30, 2006 and 2005. This table should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto, included herein.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Consolidated Summary of Operations:
Interest income	$	685,385		$	613,821		$	2,032,608		$	1,604,761
Recovery of charged-off finance receivables		14,326			22,620			32,640			100,650
Other income		86,175			21,668			143,064			72,571
Total revenues		785,886			658,109			2,208,312			1,777,982

Interest expense		24,505			-			24,505			-
Revenues after interest expense		761,381			658,109			2,183,807			1,777,982
Provision for credit losses		166,178			233,559			708,338			431,847

Net revenues after provision for credit losses		595,203			424,550			1,475,469			1,346,135

Operating expenses		708,726			586,618			2,162,376			1,973,210

Operating loss		(113,523	)		(162,068	)		(686,907	)		(627,075	)

Non-operating income		-			1,586			-			2,735

Loss before income taxes		(113,523	)		(160,482	)		(686,907	)		(624,340	)

Income taxes		-			-			-			-

Net loss	$	(113,523	)	$	(160,482	)	$	(686,907	)	$	(624,340	)

Basic and diluted loss per share	$	(0.01	)	$	(0.02	)	$	(0.06	)	$	(0.06	)
Other Selected Data:
Installment Contracts acquired during the period (total principal amount)	$	1,636,268		$	3,171,617		$	6,138,863		$	9,750,545
Purchase price of Installment Contracts acquired	$	1,553,594		$	3,002,790		$	5,806,824		$	9,058,592
Percentage of dollar amount paid to principal balance acquired		94.9	%		94.7	%		94.6	%		92.9	%
Number of Installment Contracts acquired during the period		246			469			966			1,642
Average principal balance acquired	$	6,652		$	6,763		$	6,355		$	5,938
Acquisition cost per acquired Installment Contract (including overhead)	$	887		$	635		$	814		$	571
Monthly servicing cost per Installment Contract (including overhead)	$	20.75		$	20.93		$	21.42		$	28.19

The following table presents selected unaudited summary information regarding our financial condition as of September 30, 2006 and December 31, 2005. This table should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto, included herein.

	September 30, 2006		December 31, 2005
Consolidated Summary of Financial Condition:
Installment Contracts receivable, net	$	10,398,481	$	9,756,170
Total assets	$	12,271,273	$	12,619,675

Total liabilities	$	498,458	$	319,643
Total stockholders' equity	$	11,772,815	$	12,300,032

Results of Operations

Interest Income

Our interest income totaled $685,385 and $2,032,608 for the three months and nine months ended September 30, 2006, respectively, compared to $613,821 and $1,604,761 for the three months and nine months ended September 30, 2005, respectively.

The following tables present information relative to the average balances and interest rates of our interest earning assets for the three and nine months ended September 30, 2006 and 2005, respectively:

	For the Three Months Ended September 30, 2006 and 2005
	2006						2005
	Average		Interest				Average		Interest
	Balance		Income		Yield		Balance		Income		Yield

Installment Contracts	$	10,903,219	$	675,353		24.78%	$	8,748,961	$	585,368		26.76%
Cash and cash equivalents		1,053,189		9,647		3.66%		3,617,994		27,682		3.06%
Notes receivable		11,725		385		13.13%		39,087		771		7.89%

Total	$	11,968,133	$	685,385		22.91%	$	12,406,042	$	613,821		19.79%

	For the Nine Months Ended September 30, 2006 and 2005
	2006						2005
	Average		Interest				Average		Interest
	Balance		Income		Yield		Balance		Income		Yield

Installment Contracts	$	10,633,303	$	1,990,409		24.89%	$	6,930,311	$	1,490,134		28.67%
Cash and cash equivalents		1,435,853		41,079		3.81%		5,648,626		110,912		2.62%
Notes receivable		11,725		1,120		12.74%		56,712		3,715		8.73%

Total	$	12,110,881	$	2,032,608		22.38%	$	12,635,649	$	1,604,761		16.93%

The decrease in yield on our Installment Contracts is primarily the result of changes in the mix of our portfolio. Throughout 2005 and the first nine months of 2006 our portfolio of Installment Contracts has been increasingly comprised of contracts acquired through our point-of-sale automobile financing programs. These contracts typically have lower yields than the other types of contracts in our portfolio, among them, automobile contracts acquired in bulk purchase transactions, small ticket leases, loans secured by home appliances and other consumer goods and loans for bulk food purchases. Our total interest yield has increased as Installment Contracts have comprised a higher percentage of our total interest earning assets.

The following tables set forth the changes in interest income attributable to changes in volume (change in average balance multiplied by the prior period yield) and changes in rate (change in yield multiplied by the prior period average balance). Changes due to the rate/volume variance (the combined effect of change in yield and change in average balance) have been allocated proportionately based on the absolute value of the rate and volume variances.

	For the Three Months Ended September 30, 2006 Compared to the Three Months Ended September 30, 2005
	Volume			Rate			Total
Increase (decrease) in interest income:
Installment Contracts	$	128,819		$	(38,834	)	$	89,985
Cash and cash equivalents		(24,983	)		6,947			(18,036	)
Notes receivable		(7,645	)		7,260			(385	)

Total Interest Income	$	96,191		$	(24,627	)	$	71,564

	For the Nine Months Ended September 30, 2006 Compared to the Nine Months Ended September 30, 2005
	Volume			Rate			Total
Increase (decrease) in interest income:
Installment Contracts	$	662,478		$	(162,203	)	$	500,275
Cash and cash equivalents		(180,356	)		110,522			(69,834	)
Notes receivable		(6,152	)		3,558			(2,594	)

Total Interest Income	$	475,970		$	(48,123	)	$	427,847

Provision for Credit Losses

Our consolidated provision for credit losses totaled $166,178 and $708,338 for the three and nine months ended September 30, 2006, respectively, compared to $233,559 and $431,847 for the three and nine months ended September 30, 2005, respectively. The decrease in the provision for the three months ended September 30, 2006 compared to 2005 is primarily a result of a decrease in net charge-offs as a percent of average outstanding installment contracts from 7.94% for the three months ended September 30, 2005 to 6.53% for the three months ended September 30, 2005. The increase in the provision for the nine months ended September 30, 2006 compared to 2005 is a result of the increase in the size of our portfolio of Installment Contracts. As the Company continues to acquire Installment Contracts, and our average contracts receivable outstanding increases, we expect the charge to our earnings for credit losses will likewise increase.

Operating Expenses

Our operating expenses totaled $708,726 and $2,162,376 for the three and nine months ended September 30, 2006, respectively, compared to $586,618 and $1,973,210 for the three and nine months ended September 30, 2005, respectively. A summary of these expenses follows:

	Three Months Ended September 30,
	2006		2005		Percent Change

Salaries and benefits	$	353,885	$	351,014		0.8%
Professional fees		104,478		91,887		13.7%
Other		250,363		143,717		74.2%
Total	$	708,726	$	586,618		20.8%

	Nine Months Ended September 30,
	2006		2005		Percent Change

Salaries and benefits	$	1,138,543	$	1,137,288		0.1%
Professional fees		419,239		380,355		10.2%
Other		604,594		455,567		32.7%
Total	$	2,162,376	$	1,973,210		9.6%

The increase in professional fees during the three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005 resulted from significant legal fees incurred during 2006 in connection with the Company’s efforts to convert its outstanding preferred stock into common stock. Other operating costs includes, among other items, occupancy costs, licenses and taxes, depreciation, insurance, postage, supplies, communications, travel and stockholder relations. Other expenses increased during the three months ended September 30, 2006 compared to the three months ended September 30, 2005 primarily as a result of a $77,000 increase in stockholder relations expenses incurred in connection with the conversion of the Company’s preferred stock into common stock and a $15,000 increase in the cost of our directors and officers liability insurance. Other expenses increased during the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005 primarily as a result of a $112,000 increase in stockholder relations expenses incurred in connection with the conversion of the Company’s preferred stock into common stock and a $48,000 increase in the cost of our directors and officers liability insurance.

Our growth plan, if achieved, will cause our operating costs to increase over time.

We classify our operating expenses as either acquisition costs, servicing costs or administrative costs. Acquisition costs include all direct marketing, business development and underwriting expenses, and an allocation of certain overhead costs. Servicing costs include all direct collections and servicing expenses and an allocation of certain overhead costs. Administrative costs include all general administrative expenses and all other costs not specifically identified as, or allocated to, acquisition or servicing costs. Using these classifications we determine our average acquisition cost per acquired Installment Contract and our average monthly servicing cost per serviced Installment Contract.

The Company’s average acquisition cost over the three and nine months ended September 30, 2006 was $887 and $814 per acquired Installment Contract, respectively. The Company’s average acquisition cost over the three and nine months ended September 30, 2005 was $635 and $571 per acquired Installment Contract, respectively. Our average acquisition cost is significantly impacted by the Company’s book-to-look ratio. For the three and nine months ended September 30, 2006, the Company’s book-to-look ratio in our U.S. point-of sale automobile financing program was 3.12% and 3.58%, respectively. For the three and nine months ended September 30, 2005, the Company’s book-to-look ratio in our U.S. point-of-sale automobile financing program was 5.21% and 5.87%, respectively. Management is attempting to increase this ratio, and thereby reduce our average acquisition cost, by training our Customers to send the Company only those credit applications that have a high probability of being approved by us. (The Company collectively refers to all automobile dealerships, sales merchants and lease brokers from whom it acquires Installment Contracts as “Customers”.)

The Company’s average monthly servicing cost per serviced Installment Contract during the three and nine months ended September 30, 2006 was $20.75 and $21.42 per contract, respectively. The Company’s average monthly servicing cost per serviced Installment Contract during the three and nine months ended September 30, 2005 was $20.93 and $28.19 per contract, respectively. These decreases are attributable to the increase in the size of our portfolio of Installment Contracts which has allowed us to 1) spread our fixed servicing costs over a larger number of contracts and to 2) achieve certain process efficiencies. Management anticipates that this average servicing cost per contract will decrease as the size of the portfolio of Installment Contracts increases due to efficiency gains and economies of scale. The Company does not pay affiliates to engage in collection efforts.

While the Company does not formally track our response time for responding to credit applications submitted by dealers or our response time for funding a loan package submitted by a dealer, we monitor these on a daily basis. Our goal is reduce these response times to better serve the needs of our Customers. We believe that reducing these response times will also reduce our overall costs of underwriting and funding. The Company is evaluating certain monitoring mechanisms that will allow us to precisely document and better monitor these times. We anticipate installing such mechanisms sometime during 2007.

Financial Condition

Installment Contracts Portfolio

The Company acquired Installment Contracts with outstanding principal balances totaling $1,636,268 and $6,138,863 during the three and nine months ended September 30, 2006, respectively. We invested cash of approximately $1,578,972 and $5,863,945, respectively, (including payments of dealer reserves and dealer holdbacks) to acquire these contracts. As a result of these acquisitions, our portfolio of Installment Contracts increased from $9,756,170, net of an allowance for credit losses of $412,228, at December 31, 2005 to $10,398,481, net of an allowance for credit losses of $435,744, at September 30, 2006.

All of the Company’s Installment Contracts are held for investment and are recorded at their outstanding principal balances adjusted for unamortized purchase discounts and an allowance for credit losses. Discounts on purchased Installment Contracts are recognized as income over the respective contractual terms using methods that approximate the interest method. A summary of our Installment Contracts portfolio as of September 30, 2006 and December 31, 2005, respectively, follows:

	September 30, 2006						December 31, 2005
	United States		Canada		Total		United States		Canada		Total
Automobiles	$	7,712,586	$	1,714,203	$	9,426,789	$	6,828,324	$	1,628,657	$	8,456,981
Equipment leases		-		473,722		473,722		-		704,484		704,484
Bulk food		-		480,540		480,540		-		863,167		863,167
Other		-		885,080		885,080		-		742,534		742,534
Total		7,712,586		3,553,545		11,266,131		6,828,324		3,938,842		10,767,166

Less
Unearned discount		291,855		140,051		431,906		390,979		207,789		598,768
Allowance for credit losses		241,173		194,571		435,744		199,558		212,670		412,228
Net	$	7,179,558	$	3,218,923	$	10,398,481	$	6,237,787	$	3,518,383	$	9,756,170

Asset Quality

Substantially all of the Installment Contracts we acquire are considered sub-prime and are subject to a high degree of risk of default by the obligors.

Charge-offs directly impact our earnings and cash flows. To minimize the amount of credit losses we incur, we monitor delinquent accounts, promptly repossess and remarket collateral, attempt to collect deficiency balances, and employ other servicing and collection techniques as we deem appropriate.

We calculate delinquency based on the number of days payments are contractually past due. The following table sets forth information with respect to the delinquency of our portfolio of Installment Contracts as of September 30, 2006 and December 31, 2005, respectively:

	September 30, 2006
	United States				Canada				Total
	Amount		Pct.		Amount		Pct.		Amount		Pct.

Installment Contracts	$	7,712,586		100%	$	3,553,545		100%	$	11,266,131		100%

Period of delinquency:
30 - 59 days	$	710,702		9.21%	$	69,886		1.97%	$	780,588		6.93%
60 - 89 days		366,758		4.76%		47,286		1.33%		414,044		3.68%
90 - 119 days		184,512		2.39%		48,629		1.37%		233,141		2.07%

Total	$	1,261,972		16.36%	$	165,801		4.67%	$	1,427,773		12.67%

	December 31, 2005
	United States				Canada				Total
	Amount		Pct.		Amount		Pct.		Amount		Pct.

Installment Contracts	$	6,828,324		100%	$	3,938,842		100%	$	10,767,166		100%

Period of delinquency:
30 - 59 days	$	499,705		7.32%	$	62,377		1.58%	$	562,082		5.22%
60 - 89 days		155,349		2.28%		42,591		1.08%		197,940		1.84%
90 - 119 days		104,842		1.54%		36,139		0.92%		140,981		1.31%

Total	$	759,896		11.13%	$	141,107		3.58%	$	901,003		8.37%

The following tables set forth information with respect to actual credit loss experience in our portfolio of Installment Contracts for the three and nine months ended September 30, 2006 and 2005, respectively:

	Three Months Ended September 30, 2006									Three Months Ended September 30, 2005
	United States			Canada			Total			United States			Canada			Total

Installment Contracts, net of unearned discounts, end of period	$	7,420,731		$	3,413,494		$	10,834,225		$	6,095,749		$	3,402,541		$	9,498,290

Installment Contracts, net of unearned discounts, average during the period (1)	$	7,363,929		$	3,539,289		$	10,903,218		$	5,571,111		$	3,177,850		$	8,748,961

Gross charge-offs	$	295,687		$	60,054		$	355,741		$	249,738		$	82,831		$	332,569
Recoveries		137,583			40,186			177,769			125,881			32,970			158,851

Net charge-offs	$	158,104		$	19,868		$	177,972		$	123,857		$	49,861		$	173,718

Net charge-offs as a % of avg. contracts during the period, annualized		8.59	%		2.25	%		6.53	%		8.89	%		6.28	%		7.94	%

(1) - Average is based on month-end balances

	Nine Months Ended September 30, 2006									Nine Months Ended September 30, 2005
	United States			Canada			Total			United States			Canada			Total

Installment Contracts, net of unearned discounts, end of period	$	7,420,731		$	3,413,494		$	10,834,225		$	6,095,749		$	3,402,541		$	9,498,290

Installment Contracts, net of unearned discounts, average during the period (1)	$	6,993,974		$	3,669,329		$	10,663,303		$	4,091,902		$	2,838,409		$	6,930,311

Gross charge-offs	$	801,429		$	241,790		$	1,043,219		$	484,203		$	168,289		$	652,492
Recoveries		274,810			75,966			350,776			219,159			85,225			304,384

Net charge-offs	$	526,619		$	165,824		$	692,443		$	265,044		$	83,064		$	384,108

Net charge-offs as a % of avg. contracts during the period, annualized		10.04	%		6.03	%		8.66	%		8.64	%		3.90	%		7.38	%

(1) - Average is based on month-end balances

The Company maintains an allowance for credit losses at an amount it believes is adequate to absorb reasonably estimable probable losses in its portfolio of Installment Contracts. The Company’s management evaluates the adequacy of the allowance for credit losses on a regular basis. In performing these periodic evaluations, management follows an appropriately-documented methodology. This methodology requires management to evaluate the adequacy of the allowance for credit losses based on a review of various quantitative and qualitative analyses as described in this Item 2, MANAGEMENT’S DISCUSSION AND ANALYSIS, under the heading Critical Accounting Policies, Judgments and Estimates.

Our allowance for credit losses was $435,744 at September 30, 2006 compared to $412,228 at December 31, 2005. As a percentage of our outstanding net Installment Contracts, our allowance for credit losses was 4.02% at September 30, 2006 and 4.05% at December 31, 2005.

During the nine months ended September 30, 2006, our net Installment Contracts increased $665,827. This increase was the result of a $1,087,290 increase in automobile-secured contracts offset by a $421,463 decrease in all other Installment Contracts. The $1,087,290 increase in automobile-secured Installment Contracts was comprised of a $1,561,362 increase in Installment Contracts acquired through our U.S. point-of-sale program and a $103,904 increase in Installment Contracts acquired through our Canadian point-of-sale program, offset by a $577,976 decrease in Installment Contracts acquired through bulk purchases.

As a result of the increases in automobile-secured Installment Contracts in our U.S. and Canadian portfolios from December 31, 2005 to September 30, 2006, we provided for a specific increase to our allowance for credit losses through a charge to earnings. We further increased our allowance for credit losses to account for the increase in Installment Contract delinquencies from December 31, 2005 to September 30, 2006. As of December 31, 2005, delinquent accounts, defined as accounts 30 or more days contractually past due, totaled 8.37% of our outstanding Installment Contracts. As of September 30, 2006, delinquent accounts totaled 12.67% of our outstanding Installment Contracts.

The Company’s loss history in its U.S. portfolio of Installment Contracts and in its Canadian portfolio of automobile-secured Installment Contracts is limited. Due to this limited operating history, using historical loss ratios to predict future probable losses is of limited usefulness. Additionally, uncertainty exists with respect to the accuracy of our estimates of amounts we will recover through the sale of repossessed collateral and with respect to anticipated future economic conditions, both in the U.S. and Canada, and their effect on the performance of our portfolio of Installment Contracts. To account for these limitations and uncertainties, we recognized an additional provision for credit losses and further increased our allowance for credit losses.

During the nine months ended September 30, 2006, we experienced net charge-offs of $692,443, which represented 8.66% of our average outstanding Installment Contracts during the period. During the year ended December 31, 2005, we experienced net charge-offs of $523,156, which represented 6.85% of our average outstanding Installment Contracts during the year. To account for this increase in charge-offs, we provided for a specific increase to our allowance for credit losses.

The various increases to our allowance for credit losses described in the preceding paragraphs were substantially offset by net charge-offs during the three months ended September 30, 2006 totaling $384,108, resulting in an allowance for credit losses as of September 30, 2006 of $435,744 or 4.02% of our outstanding net Installment Contracts.

Based on the analyses we performed related to our allowance for credit losses as described above and as described in this Item 2, MANAGEMENT’S DISCUSSION AND ANALYSIS, under the heading Critical Accounting Policies and Judgments, we believe that our allowance for credit losses is adequate to cover probable losses that can be reasonably estimated as of September 30, 2006.

The following tables set forth the activity in the allowance for credit losses for the three and nine months ended September 30, 2006 and 2005, respectively:

	Three Months Ended September 30, 2006									Three Months Ended September 30, 2005
	United States			Canada			Total			United States			Canada			Total

Balance at beginning of period	$	236,147		$	211,804		$	447,951		$	153,954		$	163,980		$	317,934

Charge-offs		(295,687	)		(60,054	)		(355,741	)		(249,738	)		(82,831	)		(332,569	)
Recoveries		137,583			40,186			177,769			125,881			32,970			158,851

Net charge-offs		(158,104	)		(19,868	)		(177,972	)		(123,857	)		(49,861	)		(173,718	)

Provision for credit losses		163,130			3,048			166,178			158,871			74,688			233,559

Effect of foreign currency translation		-			(413	)		(413	)		-			12,568			12,568

Balance at end of period	$	241,173		$	194,571		$	435,744		$	188,968		$	201,375		$	390,343

	Nine Months Ended September 30, 2006									Nine Months Ended September 30, 2005
	United States			Canada			Total			United States			Canada			Total

Balance at beginning of period	$	199,558		$	212,670		$	412,228		$	139,921		$	156,312		$	296,233

Charge-offs		(801,429	)		(241,790	)		(1,043,219	)		(484,203	)		(168,289	)		(652,492	)
Recoveries		274,810			75,966			350,776			219,159			85,225			304,384

Net charge-offs		(526,619	)		(165,824	)		(692,443	)		(265,044	)		(83,064	)		(348,108	)

Provision for credit losses		568,234			140,104			708,338			314,091			117,756			431,847

Effect of foreign currency translation		-			7,621			7,621			-			10,371			10,371

Balance at end of period	$	241,173		$	194,571		$	435,744		$	188,968		$	201,375		$	390,343

Liquidity and Capital Resources

We require substantial capital resources and cash to support our business strategy.

The Company’s growth strategy requires the Company to increase its acquisitions of Installment Contracts. We intend to acquire Installment Contracts with principal balances totaling approximately $25,000,000 (roughly 2,700 Installment Contracts) during the next fifteen months. We expect to pay between 92% and 96% of the outstanding principal balance for these Installment Contracts, or a total of $23,000,000 to $24,000,000. We expect to fund these acquisitions from a combination of internally generated cash flow, bank lines of credit and additional equity capital. We can give no assurance that we will be able to secure such additional financing on terms acceptable to us.

The Company began 2006 with $2,192,075 cash on hand and had cash on hand of $1,011,559 at September 30, 2006. Operating activities used cash of $16,723 during the three months ended September 30, 2006 and used cash of $92,674 during the nine months ended September 30, 2006. Operating activities do not include payments made by the Company to acquire Installment Contracts or the collection of principal on these Installment Contracts. We invested cash of approximately $1,579,000 and $5,864,000 (including payments of dealer reserves and dealer holdbacks) to acquire Installment Contracts during the three and nine month periods ended September 30, 2006, respectively. We collected principal payments on our Installment Contracts of approximately $1,576,000 and $4,765,000 during the three and nine month periods ended September 30, 2006, respectively.

The Company has no material commitments for capital expenditures as of September 30, 2006. However, the Company completed a significant upgrade to its accounting and loan servicing software systems on August 1, 2006. Expenditures for these systems totaled approximately $20,000 during the quarter ending September 30, 2006. The Company expects to spend approximately $200,000 upgrading its underwriting systems over the coming twelve months. We believe these investments will serve to strengthen our internal controls, allow us to quicken our response time to our Customers, provide management with improved reporting tools and fulfill our software needs for the foreseeable future.

Each and every calendar quarter, the Company is required to redeem approximately 320,000 outstanding shares of preferred stock, if, at the sole determination of the Company’s Board of Directors, the Company’s funds allow such redemption, taking into account the Company’s current and future cash requirements. Given the Company's anticipated liquidity needs, no preferred stock redemptions have been made to date. This redemption requirement ceased to exist upon the conversion of all of the Company’s outstanding preferred stock into common stock during October 2006.

The Company and its investment adviser are seeking to obtain additional equity financing of $10,000,000 to $15,000,000 through a private placement sale of its common stock during the first quarter of 2007. We can give no assurance that we will be able to secure such additional financing on terms acceptable to us.

As the Company continues to grow, we will need to recruit and hire additional sales, operating and administrative personnel. We expect to be able to fund the costs of these activities from operating cash flows.

Off-Balance Sheet Arrangements

The Company, in its ordinary course of business, commits to purchase certain Installment Contracts from its Customers. Each commitment is essentially an “offer” by the Company to purchase a specific Installment Contract that the Company has pre-approved, and Customers generally have between 20 and 30 days to “accept” the offer by selling to the Company the pre-approved Installment Contract. The Company had outstanding commitments to acquire Installment Contracts totaling approximately $1,519,000 as of September 30, 2006. Typically, the Company funds between 30% and 50% of its outstanding commitments.

2006	$	12,613
2007		28,052
Total	$	40,665

The Company had no other off-balance sheet arrangements as of September 30, 2006.

ITEM 3. Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2006.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. - OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is not currently a party to any pending legal proceeding other than routine litigation that is incidental to the Company’s business.

As a consumer finance company, the Company can be subject to various consumer claims and litigation seeking damages and statutory penalties based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against the Company could take the form of class action complaints by consumers. The Company, as assignee of Installment Contracts originated by dealers, may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The Company is also subject to other litigation common to the automobile finance industry and businesses in general. The damages and penalties claimed by consumers and others in these types of matters can be substantial. The relief typically requested by the plaintiffs varies but can include requests for compensatory, statutory and punitive damages.

Management believes that the Company has taken prudent steps to address the litigation risks associated with the Company’s business. However, there can be no assurance that the Company will be able to successfully defend against all such claims or that the determination of any such claim in a manner adverse to the Company would not have a material adverse effect on the Company’s automobile finance business.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Concurrent with the Company entering into a revolving credit loan and security agreement, the Company issued warrants to purchase 436,778 shares of its common stock at an exercise price of $0.63 per share and 291,158 shares at $0.70 per share. See additional details in PART I, ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS, under the heading Recent Developments.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

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

None.

ITEM 5. Other Information

None.

ITEM 6. Exhibits and Reports on Form 8-K

INDEX TO EXHIBITS

Exhibit Number		Description

2.1 (a)		Corrected Trustee’s Amended Plan of Reorganization
2.2 (a)		Disclosure Statement for Trustee’s Amended Plan of Reorganization
3.1 (a)		First Amended and Restated Certificate of Incorporation
3.1.1 (a)		Certificate of Amendment to Certificate of Incorporation
3.2 (a)		Bylaws
3.2.1 (a)		Amendment to Bylaws
4.1 (a)		Amended and Restated Trust Agreement of Freedom Financial Group I Statutory Trust
10.1 (a)		Employment Agreement with Jerald L. Fenstermaker
10.1.1 (e)		Extension of Employment Agreement with Jerald L. Fenstermaker
10.2 (a)		Investment Banking Agreement with Milestone Advisors, LLC
10.3 (a)		Unanimous Consent of the Board of Directors Adopting Executive Management Stock Bonus Plan
10.4 (a)		Office Lease - 3058 East Elm
10.5 (b)		Purchase and Sale Agreement, dated April 7, 2003, between Freedom Financial Group, Inc. (as Seller) and The Cadle Company (as Buyer)
10.6 (b)		Commercial Real Estate Purchase Contract, dated May 9, 2003, between Freedom Financial Group, Inc. (as Seller) and New Life Church of God (as Buyer)
10.7 (b)		Real Estate Sale Contract, dated June 4, 2003, between Donald D. Bass and Don W. Bass (as Buyers) and Freedom Financial Group, Inc. (as Seller)
10.8 (b)		Application and Order by Bankruptcy Court Approving Employment of Biltmore Associates
10.9 (d)		Revolving Credit Loan and Security Agreement
10.10 (d)		Promissory Note
10.11 (d)		Stock Pledge Agreement
10.12 (d)		Warrant for 300,000 shares of common stock
10.13 (d)		Warrant for 200,000 shares of common stock
10.14 (d)		Warrant for 136,778 shares of common stock
10.15 (d)		Warrant for 91,185 shares of common stock
11.1		Statement Re: Computation of Per Share Earnings - See Note 7 to Condensed Consolidated Financial Statements
14.1 (c)		Code of Ethics
31.1		Certification of Chief Executive Officer Under Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer Under Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications of the Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002

(a) Incorporated by reference to the Company’s registration statement filed on Form 10-SB on May 2, 2005 (File Number 000-51286).

(b) Incorporated by reference to the Company’s first amended registration statement filed on Form 10-SB/A on July 22, 2005 (File Number 000-51286).

(c) Incorporated by reference to the Company’s quarterly report filed on Form 10-QSB on August 15, 2005 (File Number 000-51286).

(d) Incorporated by reference to the Company’s Current Report filed on Form 8-K on August 24, 2006 (File Number 000-51286).

(e) Incorporated by reference to the Company’s Current Report filed on Form 8-K on October 10, 2006 (File Number 000-51286).

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.


	FREEDOM FINANCIAL GROUP, INC.

Date: November 10, 2006	By:	/s/ Jerald L. Fenstermaker
		Jerald L. Fenstermaker, President and Chief Executive Officer


Date: November 10, 2006	By:	/s/ Daniel F. Graham
		Daniel F. Graham, Chief Financial Officer