Unassociated Document

10QSB 1 v074243_10qsb.htm Unassociated Document

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 March 31, 2007

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 May 11, 2007 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	14

ITEM 3.	Controls and Procedures	26

PART II. - OTHER INFORMATION		27

ITEM 1.	Legal Proceedings	27

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

ITEM 3.	Defaults Upon Senior Securities	27

ITEM 4.	Submission of Matters to a Vote of Security Holders	27

ITEM 5.	Other Information	27

ITEM 6.	Exhibits and Reports on Form 8-K	28

INDEX TO EXHIBITS		28

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 March 31, 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for the three-month periods ended March 31, 2007 and 2006. 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, 2006 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 March 15, 2007 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, 2006 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

May 10, 2007

FREEDOM FINANCIAL GROUP, INC.

Consolidated Balance Sheets

	Unaudited
	March 31,			December 31,
	2007			2006
Assets
Cash and cash equivalents	$	1,491,591		$	1,276,994
Finance receivables, net		10,044,845			9,676,164
Repossessed assets		222,806			326,185
Accrued interest receivable		118,641			131,428
Property and equipment, net		268,246			277,181
Deferred financing costs		67,374			112,290
Other assets		46,635			21,753

Total assets	$	12,260,138		$	11,821,995

Liabilities and Stockholders’ Equity
Liabilities
Bank line of credit	$	1,182,019		$	419,309
Accounts payable		42,877			15,867
Accrued expenses		113,012			107,147
Accrued compensation costs		38,716			53,903
Dealer holdbacks		39,023			48,895
Dealer reserves		34,210			37,873

Total liabilities		1,449,857			682,994

Stockholders’ Equity
Common stock, $0.0001 par value; 36,000,000 shares authorized; 19,927,001 shares issued and outstanding at March 31, 2007 and December 31, 2006		1,993			1,993
Additional paid-in-capital		13,802,633			13,802,633
Retained earnings (deficit)		(3,959,644	)		(3,596,479	)
Accumulated other comprehensive income		965,299			930,854

Total stockholders’ equity		10,810,281			11,139,001

Total liabilities and stockholders’ equity	$	12,260,138		$	11,821,995

See Notes to Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Operations

Unaudited

	Three Months Ended
	March 31,			March 31,
	2007			2006
Revenues
Interest income	$	651,170		$	656,221
Other		48,611			38,855

Total revenues		699,781			695,076

Interest Expense		66,466			—

Revenues After Interest Expense		633,315			695,076

Provision for Credit Losses		364,323			297,488

Net Revenues After Provision for Credit Losses		268,992			397,588

Operating Expenses		632,157			778,293

Operating Loss		(363,165	)		(380,705	)

Provision for Income Taxes		—			—

Net Loss	$	(363,165	)	$	(380,705	)

Basic and Diluted Loss Per Share	$	(0.02	)	$	(0.04	)

See Notes to Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Stockholders’ Equity

Unaudited

	Redeemable Convertible Preferred		Common Stock				Additional Paid-in		Retained			Accumulated Other Comprehensive
	Stock		Shares		Amount		Capital		Earnings			Income			Total
Balance, December 31, 2006	$	0		19,927,001	$	1,993	$	13,802,633	$	(3,596,479	)	$	930,854		$	11,139,001

Net loss		—		—		—		—		(363,165	)		—			(363,165	)

Foreign currency translation adjustment		—		—		—		—		—			34,445			34,445

Comprehensive loss		—		—		—		—		—			—			(328,720	)

Balance, March 31, 2007	$	0		19,927,001	$	1,993	$	13,802,633	$	(3,959,644	)	$	965,299		$	10,810,281

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

Net loss		—		—		—		—		(380,705	)		—			(380,705	)

Foreign currency translation adjustment		—		—		—		—		—			(19,532	)		(19,532	)

Comprehensive loss		—		—		—		—		—			—			(400,237	)

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

Balance, March 31, 2006	$	13,798,817		10,928,252	$	1,093	$	4,716	$	(2,827,675	)	$	927,656		$	11,904,607

See Notes to Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Cash Flows

Unaudited

	Three Months Ended March 31,
	2007			2006
Operating Activities
Net loss	$	(363,165	)	$	(380,705	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation		12,598			10,144
Provision for credit losses		364,323			297,488
Deferred discount income		(97,285	)		(151,313	)
Recovery of charged-off finance receivables		161,124			136,281
Stock grant expense		—			4,812
Amortization of deferred financing fees		44,916			—
Changes in
Other assets		(8,627	)		(5,698	)
Accounts payable and accrued expenses		17,475			105,045
Net cash provided by operating activities		131,359			16,054

Investing Activities
Purchase of finance receivables		(2,159,349	)		(2,121,332	)
Principal collected on finance receivables		1,496,916			1,595,865
Payments of dealer reserves		(5,453	)		(4,618	)
Payments of dealer holdbacks		(21,882	)		(45,906	)
Purchase of property and equipment		(1,770	)		(1,308	)
Net cash used in investing activities		(691,538	)		(577,299	)

Financing Activities
Payment of deferred financing fees		—			(25,532	)
Line of credit advances, net		762,710			—
Net cash provided by (used in) financing activities		769,646			(25,532	)


Effect of Exchange Rate Changes on Cash and Cash Equivalents		12,066			(3,049	)

Net Increase (Decrease) in Cash and Cash Equivalents		214,597			(589,826	)

Cash and Cash Equivalents, Beginning of Period		1,276,994			2,192,075

Cash and Cash Equivalents, End of Period	$	1,491,591		$	1,602,249

See Notes to Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Notes to Consolidated Financial Statements

Unaudited

Note 1: General

The accompanying unaudited 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. The consolidated balance sheet of the Company as of December 31, 2006 has been derived from the audited consolidated balance sheet of the Company as of that date. These interim statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006 and notes thereto included in the Company’s Form 10-KSB filed with the Securities and Exchange Commission on March 27, 2007.

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), and FFG’s wholly owned Canadian subsidiary, T.C.G. - The Credit Group Inc. (TCG), 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 March 31, 2007 and December 31, 2006, respectively:

	2007		2006

Automobiles	$	9,639,656	$	9,110,368
Bulk food		387,235		420,208
Equipment leases		306,682		379,003
Other		840,375		875,745
Total finance receivables		11,173,948		10,785,324

Less
Unearned discount		410,087		388,193
Allowance for credit losses		719,016		720,967
		1,129,103		1,109,160
Net finance receivables	$	10,044,845	$	9,676,164

Approximately 26% and 29% of the above finance receivables as of March 31, 2007 and December 31, 2006, respectively, are Canadian in origin.

Amounts contractually receivable (including principal and interest) under our finance receivables at March 31, 2007, 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.

2007	$	4,652,214
2008		4,914,466
2009		3,302,688
2010		1,660,196
2011		327,490
2012		7,497
Total	$	14,864,551

Activity in the allowance for credit losses related to finance receivables for the three months ended March 31, 2007 and 2006, respectively, was as follows:

	2007			2006

Balance, beginning of period	$	720,967		$	412,228
Provision charged to expense		364,323			297,488
Losses charged off		(426,636	)		(362,817	)
Recoveries of previously charged off amounts		57,745			86,685
Effect of foreign currency translation		2,617			(2,215	)
Balance, end of period	$	719,016		$	431,369

The Company’s nonearning finance receivables totaled $214,736 at March 31, 2007. The Company provided an allowance for credit losses related to these receivables of $193,262.

Note 4: Bank 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 finance receivables meeting certain underwriting and delinquency criteria. Borrowings under the line of credit bear interest at the bank’s prime rate plus 3% (11.25% at March 31, 2007) 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.

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 not in violation of any financial covenants as of March 31, 2007.

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.

Note 5: Income Taxes

We adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”) on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. Our evaluation was performed for the tax years ended December 31, 2003, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions as of March 31, 2007.

We may from time to time be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest or penalties, it has been classified in the financial statements as provision for income taxes.

Note 6: Commitments and Contingencies

The Company had outstanding commitments to purchase finance receivables totaling approximately $1,462,644 as of March 31, 2007. These commitments generally expire between 20 and 30 days after they are issued if unused. Typically, the Company funds between 30% and 40% of its outstanding commitments.

On October 10, 2005, the Company entered into an agency agreement with an investment banking firm to act as the Company’s exclusive placement agent in connection with raising debt and/or equity financing. The agreement called for the Company to pay cumulative transaction fees totaling not less than $250,000. As of March 31, 2007 the Company has paid transaction fees totaling $120,000 and remains committed to pay an additional $130,000 upon consummation of a financing transaction or cancellation of the agreement by the Company.

The Company is also obligated under certain noncancelable operating leases for premises and equipment with terms ranging up to 39 months. Future minimum payments under these noncancelable operating leases as of March 31, 2007 are:

2007	$	38,727
2008		34,095
2009		8,698
2010		2,900
Total	$	84,420

Certain officers of the Company hold a total of 1,932,993 shares of the Company’s common stock, all or a portion of which, the Company may be required to repurchase, at the option of the officers upon the occurrence of certain events, which the Company believes are not probable at this time, at a price per share ranging from 90% to 100% of the common stock’s fair market value. The specific terms concerning these options and the repurchase of the common stock are set forth in the following documents: Employment Agreement with Jerald L. Fenstermaker, filed as an exhibit to the Company’s registration statement filed on Form 10-SB on May 2, 2005; Addendum to Employment Agreement with Jerald L. Fenstermaker, filed as an exhibit to the Company’s Form 8-K filed on May 2, 2006; Extension of Employment Agreement filed with Jerald L. Fenstermaker, filed as an exhibit to the Company’s Form 8-K filed on October 10, 2006; 2003 Stock Grant (Unanimous Consent of the Board), filed as an exhibit to the Company’s registration statement filed on Form 10-SB on May 2, 2005; and Stock Grant Agreement dated January 9, 2006, filed as an exhibit to the Company’s Form 8-K filed on January 11, 2006.

The Company had no other commitments as of March 31, 2007.

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 common stock warrants would be anti-dilutive for the three months ended March 31, 2007 and the effect of converting the redeemable preferred stock would be antidilutive for the three months ended March 31, 2006, basic and diluted loss per share amounts are based on the weighted average number of common shares outstanding.

Loss per share for the three months ended March 31, 2007, was computed as follows:

				Weighted
				Average		Per Share
	Loss			Shares		Amount

Net loss	$	(363,165	)		19,927,001
Basic and diluted loss per share						$	(0.02	)

Loss per share for the three months ended March 31, 2006, was computed as follows:

				Weighted
				Average		Per Share
	Loss			Shares		Amount

Net loss	$	(380,705	)		10,823,003
Basic and diluted loss per share						$	(0.04	)

Note 8: Operating Expenses

The components of operating expenses for the three months ended March 31, 2007 and 2006, respectively, are as follows:

	2007		2006

Salaries and benefits	$	375,750	$	411,576
Professional fees		102,896		214,951
Insurance		41,113		35,847
Other		112,398		115,919

	$	632,157	$	778,293

Note 9: Stock Based Compensation

On January 9, 2006, in anticipation of the potential conversion of the Company’s outstanding preferred stock into common stock and to address the anti-dilution rights granted to certain officers of the Company with respect to common stock issued to them under the terms of the February 2003 Stock Bonus Plan (see Note 6, Commitments and Contingencies), the Company entered into a Stock Grant Agreement (the “Agreement”) pursuant to which the officers were granted a total of 962,493 restricted shares of common stock (the “Grant Shares”). As a condition to receiving the Grant Shares under the Agreement, the officers agreed to waive their rights to receive bonuses of additional common stock resulting from any future conversion of the Company’s preferred stock into common stock. Additionally, the Agreement places various conditions and restrictions on both the Grant Shares and on all other shares then-owned by them (the “Existing Shares”):

The Grant Shares are subject to forfeiture if the Company does not raise at least $10,000,000 in debt and/or equity financing before January 9, 2009. Additionally, each officer must forfeit their Grant Shares if their employment with the Company is terminated for any reason prior to the Company raising at least $10,000,000 in debt and/or equity financing.

2.	The officers relinquish any rights to receive dividends or proceeds from the liquidation of the Company until the Company has raised debt and/or equity financing of not less than $10,000,000.

The officers may not sell any Existing Shares or Grant Shares until the Company has raised debt and/or equity financing of at least $10,000,000. No sooner than six months after raising debt and/or equity financing of at least $10,000,000 the officers may sell all of their Existing Shares and up to half of their Grant Shares. The officers may sell the remainder of their Grant Shares only if the Company has raised debt and/or equity financing of at least $15,000,000.

4.	Notwithstanding the above restrictions, the officers’ Existing Shares and Grant Shares may be sold upon their death or permanent disability, or if there is a change in control of the Company.

The Company has accounted for the Stock Grant Agreement under the provisions of FASB Statement No. 123(R), “Share Based Payment”, and determined the fair value of the Grant Shares to be $4,812 on the date they were granted. The fair value of the Grant Shares was estimated using several methods including discounted cash flow analysis, liquidation analysis and comparison to recent sales prices of the Company’s preferred stock and unrestricted common stock. As a result of this Stock Grant Agreement the Company recognized compensation expense of $4,812 in its statement of operations for the three months ended March 31, 2006.

Note 10: 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 $4,221,660 at March 31, 2007.

Total revenues, loss before taxes and net loss from foreign operations for the three months ended March 31, 2007 and 2006, respectively, were as shown below. Loss before income taxes and net loss reflect interest charges on amounts due to FFG of $101,464 and $92,678 for the three months ended March 31, 2007 and 2006, 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 March 31, 2007 and 2006. These interest charges and management and accounting fees eliminate in consolidation.

	2007			2006

Total revenues	$	214,348		$	282,466

Loss before income taxes		(93,287	)		(36,457	)

Net Loss		(93,287	)		(36,457	)

Note 11: Additional Cash Flow Information

The Company made cash interest payments totaling $14,614 during the three month period ended March 31, 2007 and no cash interest payments during the three month period ended March 31, 2006.

The Company made no cash payments for income taxes during the three month periods ended March 31, 2007 and 2006, respectively.

Note 12: Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under this statement, fair value measurements would be separately disclosed by level within the fair value hierarchy. This statement is effective for our fiscal year beginning January 1, 2008. We are in the process of evaluation this statement, but do not expect that the adoption of SFAS No. 157 will have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of SFAS No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term objectives for accounting for financial instruments. SFAS No. 159 is effective for our fiscal year beginning January 1, 2008. We are in the process of evaluating this statement, but do not expect that the adoption of SFAS No. 159 will have a material impact on our consolidated financial statements.

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 27, 2007, 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, Stevens Financial Group, Inc., 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 now also acquires 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	%
December 31, 2005	79	%
December 31, 2006	84	%
March 31, 2007	86	%

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 2007, 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.

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 for the three months ended March 31, 2007 and 2006. This table should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto, included herein.

	Three Months Ended March 31,
	2007			2006

Installment Contracts acquired during the period (total principal amount)	$	2,296,334		$	2,292,972
Purchase price of Installment Contracts acquired	$	2,166,948		$	2,159,201
Percentage of dollar amount paid to principal balance acquired		94.4	%		94.2	%
Number of Installment Contracts acquired during the period		303			387
Average principal balance acquired	$	7,579		$	5,925
Acquisition cost per acquired Installment Contract (including overhead)	$	632		$	804
Monthly servicing cost per Installment Contract (including overhead)	$	21.79		$	22.15

Results of Operations

Interest Income

Our interest income totaled $651,170 for the three months ended March 31, 2007, compared to $656,221 for the three months ended March 31, 2006.

The following tables present information relative to the average balances and interest rates of our interest earning assets for the three months ended March 31, 2007 and 2006, respectively:

	For the Three Months Ended March 31, 2007 and 2006
	2007						2006
	Average		Interest				Average		Interest
	Balance		Income		Yield		Balance		Income		Yield

Installment Contracts	$	10,542,936	$	639,762		24.27%	$	10,350,998	$	637,877		24.65%
Cash and cash equivalents		1,354,427		11,216		3.31%		1,899,416		17,982		3.79%
Notes receivable		6,212		192		12.36%		11,725		362		12.35%

Total	$	11,903,575	$	651,170		21.88%	$	12,262,139	$	656,221		21.41%

The decrease in yield on our Installment Contracts is primarily the result of changes in the mix of our portfolio. Throughout 2006 and the first three months of 2007 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 table sets 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 March 31, 2007 Compared to the Three Months Ended March 31, 2006
	Volume			Rate			Total
Increase (decrease) in interest income:
Installment Contracts	$	10,793		$	(8,907	)	$	1,886
Cash and cash equivalents		(4,710	)		(2,056	)		(6,766	)
Notes receivable		(171	)		-			(171	)

Total Interest Income	$	5,912		$	(10,963	)	$	(5,051	)

Interest Expense

We incurred interest expense of $66,466 during the three months ended March 31, 2007 on the outstanding balance of our bank line of credit. During the three months ended March 31, 2006 we had no outstanding borrowings and therefore incurred no interest expense during the period.

Provision for Credit Losses

Our consolidated provision for credit losses totaled $364,323 for the three months ended March 31, 2007, compared to $297,488 for the three months ended March 31, 2006. The increase in the provision for the three months ended March 31, 2007 compared to 2006 is a result of an increase in net charge-offs which totaled $368,891 during the three months ended March 31, 2007 compared to net charge-offs of $276,132 during the three months ended March 31, 2006. 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 $632,157 for the three months ended March 31, 2007, compared to $778,293 for the three months ended March 31, 2006. A summary of these expenses follows:

	Three Months Ended March 31,
	2007		2006		Percent Change

Salaries and benefits	$	375,750	$	411,576		-8.70%
Professional fees		102,896		214,951		-52.13%
Insurance		41,113		35,847		14.69%
Other		112,398		115,919		-3.04%
Total	$	632,157	$	778,293		-18.78%

Salaries and benefits decreased primarily as a result of employee bonuses paid in 2006 that did not recur in 2007, and a decrease in the number of individuals employed by the Company during the three months ended March 31, 2007 compared to the three months ended March 31, 2006. As the company continues to grow we expect our salaries and benefits costs to increase, but anticipate that as a percentage of total revenues these costs will decrease. The decrease in professional fees during the three months ended March 31, 2007 compared to the three months ended March 31, 2006 resulted from significant non-recurring legal fees incurred during 2006 in connection with the conversion of the Company’s outstanding preferred stock into common stock. Insurance expense increased due to higher premiums experienced in 2007, the result of an increase in coverage limits of our directors and officers liability insurance policy. Other operating costs includes, among other items, occupancy costs, licenses and taxes, depreciation, postage, supplies, communications, travel and stockholder relations.

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

The Company’s average cost to acquire an Installment Contract (which includes all direct marketing, business development and underwriting expenses and an allocation of certain overhead costs) during the three month period ended March 31, 2007 was approximately $632 per contract as compared to $804 for the three month period ended March 31, 2006. This decrease in average acquisition cost is a result of a reduced sales and marketing staff employed by the Company during the three months ended March 31, 2007 as compared to the three months ended March 31, 2006, offset by a decrease in the Company’s book-to-look ratio. For the three month period ended March 31, 2007, the Company’s book-to-look ratio was 6.42% compared to 7.71% for the three month period ended March 31, 2006. 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 and purchased by us.

The Company’s average monthly cost to service an Installment Contract (which includes all direct collections and servicing expenses and an allocation of certain overhead costs) during the three month period ended March 31, 2007 was $21.79 per serviced contract as compared to $22.15 during the three month period ended March 31, 2006. 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 we do 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 or early in 2008.

Financial Condition

Installment Contracts Portfolio

The Company acquired Installment Contracts with outstanding principal balances totaling $2,296,334 during the three months ended March 31, 2007. We invested cash of approximately $2,186,684 (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 $9,676,164, net of an allowance for credit losses of $720,967, at December 31, 2006 to $10,044,845, net of an allowance for credit losses of $719,016, at March 31, 2007.

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 March 31, 2007 and December 31, 2006, respectively, follows:

	March 31, 2007						December 31, 2006
	United States		Canada		Total		United States		Canada		Total
Automobiles	$	8,294,235	$	1,345,421	$	9,639,656	$	7,692,121	$	1,418,247	$	9,110,368
Equipment leases		-		306,682		306,682		-		379,003		379,003
Bulk food		-		387,235		387,235		-		420,208		420,208
Other		-		840,375		840,375		-		875,745		875,745
Total		8,294,235		2,879,713		11,173,948		7,692,121		3,093,203		10,785,324

Less
Unearned discount		310,727		99,360		410,087		273,457		114,736		388,193
Allowance for credit losses		560,536		158,480		719,016		551,192		169,775		720,967
Net	$	7,422,972	$	2,621,873	$	10,044,845	$	6,867,472	$	2,808,692	$	9,676,164

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 March 31, 2007 and December 31, 2006, respectively:

	March 31, 2007
	United States				Canada				Total
	Amount		Pct.		Amount		Pct.		Amount		Pct.

Installment Contracts	$	8,294,235		100%	$	2,879,713		100%	$	11,173,948		100%

Period of delinquency:
30 - 59 days	$	692,046		8.34%	$	30,773		1.07%	$	722,819		6.47%
60 - 89 days		309,212		3.73%		53,501		1.86%		362,713		3.25%
90 - 119 days		207,120		2.50%		7,615		0.26%		214,735		1.92%

Total	$	1,208,378		14.57%	$	91,889		3.19%	$	1,300,267		11.64%

	December 31, 2006
	United States				Canada				Total
	Amount		Pct.		Amount		Pct.		Amount		Pct.

Installment Contracts	$	7,692,121		100%	$	3,093,203		100%	$	10,785,324		100%

Period of delinquency:
30 - 59 days	$	748,375		9.73%	$	109,720		3.55%	$	858,095		7.96%
60 - 89 days		462,508		6.01%		76,418		2.47%		538,926		5.00%
90 - 119 days		266,282		3.46%		61,657		1.99%		327,939		3.04%

Total	$	1,477,165		19.20%	$	247,795		8.01%	$	1,724,960		15.99%

The following tables set forth information with respect to actual credit loss experience in our portfolio of Installment Contracts for the three months ended March 31, 2007 and 2006, respectively:

	Three Months Ended March 31, 2007									Three Months Ended March 31, 2006
	United States			Canada			Total			United States			Canada			Total

Installment Contracts, net of unearned discounts, end of period	$	7,983,509		$	2,780,352		$	10,763,861		$	6,789,074		$	3,695,669		$	10,484,743

Installment Contracts, net of unearned discounts, average during the period (1)	$	7,674,408		$	2,868,528		$	10,542,936		$	6,621,541		$	3,729,458		$	10,350,999

Gross charge-offs	$	326,376		$	100,260		$	426,636		$	277,707		$	85,110		$	362,817
Recoveries		23,430			34,315			57,745			75,060			11,625			86,685

Net charge-offs	$	302,946		$	65,945		$	368,891		$	202,647		$	73,485		$	276,132

Net charge-offs as a % of avg. contracts during the period, annualized		15.79	%		9.20	%		14.00	%		12.24	%		7.88	%		10.67	%

(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 $719,016 at March 31, 2007 compared to $720,967 at December 31, 2006. As a percentage of our outstanding net Installment Contracts, our allowance for credit losses was 6.68% at March 31, 2007 and 7.09% at December 31, 2006.

During the three months ended March 31, 2007, our net Installment Contracts increased $366,730. This increase was the result of a $493,230 increase in automobile-secured contracts offset by a $126,500 decrease in all other Installment Contracts. The $493,230 increase in automobile-secured Installment Contracts was comprised of a $625,662 increase in Installment Contracts acquired through our U.S. point-of-sale program offset by a $71,613 decrease in Installment Contracts acquired through our Canadian point-of-sale program, and a $60,819 decrease in Installment Contracts acquired through bulk purchases.

As a result of the increases in automobile-secured Installment Contracts in our U.S. portfolio from December 31, 2006 to March 31, 2007, we provided for a specific increase to our allowance for credit losses through a charge to earnings. As of December 31, 2006, delinquent accounts, defined as accounts 30 or more days contractually past due, totaled 15.99% of our outstanding Installment Contracts. As of March 31, 2007, delinquent accounts totaled 11.64% 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.

During the three months ended March 31, 2007, we experienced net charge-offs of $368,891, which represented 14.00% of our average outstanding Installment Contracts during the period. During the year ended December 31, 2006, we experienced net charge-offs of $1,015,798, which represented 9.57% 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 March 31, 2007 totaling $368,891, resulting in an allowance for credit losses as of March 31, 2007 of $719,016 or 6.68% 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 March 31, 2007.

The following tables set forth the activity in the allowance for credit losses for the three months ended March 31, 2007 and 2006, respectively:

	Three Months Ended March 31, 2007									Three Months Ended March 31, 2006
	United States			Canada			Total			United States			Canada			Total

Balance at beginning of period	$	551,192		$	169,775		$	720,967		$	199,558		$	212,670		$	412,228

Charge-offs		(326,376	)		(100,260	)		(426,636	)		(277,707	)		(85,110	)		(362,817	)
Recoveries		23,430			34,315			57,745			75,060			11,625			86,685

Net charge-offs		(302,946	)		(65,945	)		(368,891	)		(202,647	)		(73,485	)		(276,132	)

Provision for credit losses		312,290			52,033			364,323			223,805			73,683			297,488

Effect of foreign currency translation		-			2,617			2,617			-			(2,215	)		(2,215	)

Balance at end of period	$	560,536		$	158,480		$	719,016		$	220,716		$	210,653		$	431,369

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 $15,000,000 (roughly 2,500 Installment Contracts) during 2007. We expect to pay between 92% and 96% of the outstanding principal balance for these Installment Contracts, or a total of approximately $14,000,000. 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. If we are unable to secure such additional financing, we will be unable to meet our objective of acquiring Installment Contracts with principal balances totaling approximately $15,000,000 during 2007.

The Company began 2007 with $1,276,994 cash on hand and had cash on hand of $1,491,591 at March 31, 2007. Operating activities provided cash of $131,359 during the three months ended March 31, 2007.

We invested cash of approximately $2,187,000 (including payments of dealer reserves and dealer holdbacks) to acquire Installment Contracts during the three month period ended March 31, 2007. We collected principal payments on our Installment Contracts of approximately $1,497,000 during the three month period ended March 31, 2007.

During the three months ended March 31, 2007 the Company received advances on its bank line of credit totaling $762,710 to partially fund the acquisition of Installment Contracts. Total advances outstanding under the line of credit agreement at March 31, 2007 totaled approximately $1,182,000.

We paid financing fees totaling $25,532 during the three months ended March 31, 2006 in connection fund raising activities performed by our investment banking firm. These fees were recorded as deferred financing fees when paid and are being amortized to interest expense over the twelve-month term of our bank line of credit agreement.

The bank line of credit 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 March 31, 2007.

The Company has no material commitments for capital expenditures as of March 31, 2007. The Company expects to spend approximately $100,000 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.

The Company and its investment adviser are seeking to obtain additional equity financing in an amount up to $10,000,000. We can give no assurance that we will be able to secure such additional equity financing or other forms of additional financing (either debt or equity) 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 $1,463,000 as of March 31, 2007. Typically, the Company funds between 30% and 40% of its outstanding commitments.

2007	$	38,727
2008		34,095
2009		8,698
2010		2,900
Total	$	84,420

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 March 31, 2007 the Company has paid its investment bankers transaction fees totaling $120,000 and remains committed to pay an additional $130,000 upon consummation of a financing transaction or cancellation of the agreement by the Company.

The Company had no other off-balance sheet arrangements as of March 31, 2007.

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 March 31, 2007.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2007 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

None.

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)		Addendum to Employment Agreement with Jerald L. Fenstermaker

10.1.2 (g)		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)		Stock Grant Agreement dated January 9, 2006

10.10 (f)		Revolving Credit Loan and Security Agreement

10.11 (f)		Promissory Note

10.12 (f)		Stock Pledge Agreement

10.13 (f)		Warrant for 300,000 shares of common stock

10.14 (f)		Warrant for 200,000 shares of common stock

10.15 (f)		Warrant for 136,778 shares of common stock

10.16 (f)		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

21.1 (a)		Subsidiaries

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 January 9, 2006 (File Number 000-51286).

(e) Incorporated by reference to the Company’s Current Report filed on Form 8-K on May 2, 2006 (File Number 000-51286).

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

(g) 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: May 14, 2007	By:	/s/ Jerald L. Fenstermaker
		Jerald L. Fenstermaker, President and Chief Executive Officer



Date: May 14, 2007	By:	/s/ Daniel F. Graham
		Daniel F. Graham, Chief Financial Officer