Unassociated Document

10QSB 1 v113045_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, 2008

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

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

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 8, 2008 20,462,543 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	29

PART II. - OTHER INFORMATION		30

ITEM 1.	Legal Proceedings	30

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

ITEM 3.	Defaults Upon Senior Securities	30

ITEM 4.	Submission of Matters to a Vote of Security Holders	30

ITEM 5.	Other Information	30

ITEM 6.	Exhibits	31

INDEX TO EXHIBITS		31

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, 2008, and the related consolidated statement of operations for the three-month period ended March 31, 2008 and stockholders’ equity and cash flows for the three-month period ended March 31, 2008. 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, 2007 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 21, 2008 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, 2007 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Weaver & Martin, LLC

Kansas City, Missouri

May 8, 2008

FREEDOM FINANCIAL GROUP, INC.

Consolidated Balance Sheets

	Unaudited
	March 31,			December 31,
	2008			2007
Assets
Cash and cash equivalents	$	2,650,042		$	1,857,695
Finance receivables, net		9,623,674			9,677,815
Accrued interest receivable		101,037			124,980
Property and equipment, net		298,864			274,426
Deferred financing costs		498,573			76,365
Other assets		78,187			17,861

Total assets	$	13,250,377		$	12,029,142
Liabilities and Stockholders’ Equity

Liabilities
Bank line of credit	$	3,051,648		$	1,503,567
Accounts payable		22,439			20,489
Accrued expenses		40,465			32,838
Accrued compensation costs		33,703			58,112
Dealer holdbacks		20,251			26,388
Dealer reserves		10,749			24,993

Total liabilities		3,179,255			1,666,387

Stockholders’ Equity
Common stock, $0.0001 par value; 36,000,000 shares authorized; 19,927,001 shares issued; 19,922,543 shares outstanding		1,993			1,993
Additional paid-in-capital		13,833,802			13,802,873
Retained earnings (deficit)		(5,215,839	)		(5,041,509	)
Accumulated other comprehensive income		1,451,559			1,599,791
Treasury stock, at cost; 4,458 shares		(393	)		(393	)

Total stockholders’ equity		10,071,122			10,362,755

Total liabilities and stockholders’ equity	$	13,250,377		$	12,029,142

See Notes to Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Operations

Unaudited

	Three Months Ended
	March 31, 2008			March 31, 2007
Revenues
Interest income	$	622,922		$	651,170
Other income		40,128			48,611

Total revenues		663,050			699,781

Interest Expense		103,205			66,466

Revenues After Interest Expense		559,845			633,315

Provision for Credit Losses		31,620			364,323

Net Revenues After Provision for Credit Losses		528,225			268,992

Operating Expenses		702,554			632,157

Operating Loss		(174,329	)		(363,165	)

Provision for Income Taxes		—			—

Net Loss	$	(174,329	)	$	(363,165	)


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

See Notes to Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Stockholders’ Equity

Unaudited

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

Net loss		—		—			—		—		(1,445,030	)		—			—			(1,445,030	)

Foreign currency translation adjustment		—		—			—		—		—			668,937			—			668,937

Comprehensive loss		—		—			—		—		—			—			—			(776,093	)

Purchase of treasury stock		—		(139,458	)		—		—		—			—			(12,303	)		(12,303	)

Stock Grant		—		135,000			—		240		—			—			11,910			12,150

Balance, December 31, 2007	$	0		19,922,543		$	1,993	$	13,802,873	$	(5,041,509	)	$	1,599,791		$	(393	)	$	10,362,754

Net loss		—		—			—		—		(174,329	)		—			—			(174,329	)

Foreign currency translation adjustment		—		—			—		—		—			(148,232	)		—			(148,232	)

Comprehensive loss		—		—			—		—		—			—			—			(322,561	)

Stock warrants issued		—		—			—		30,929		—			—			—			30,929

Balance, March 31, 2008	$	0		19,922,543		$	1,993	$	13,833,802	$	(5,215,838	)	$	1,451,559		$	(393	)	$	10,071,122

See Notes to Consolidated Financial Statements.

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Cash Flows

Unaudited

	For the Three Months Ended March 31,
	2008			2007
Operating Activities
Net loss	$	(174,329	)	$	(363,165	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation		12,494			12,598
Provision for credit losses		31,620			364,323
Deferred discount income		(80,347	)		(97,285	)
Recovery of charged-off finance receivables		355,383			161,124
Amortization of deferred financing fees		49,796			44,916
Deferral of Origination Costs		(19,747	)		—
Amortization of Deferred Origination Costs		3,602			—
Changes in
Other assets		(22,151	)		(8,627	)
Accounts payable and accrued expenses		(14,135	)		17,475
Net cash provided by operating activities		142,186			131,359

Investing Activities
Purchase of finance receivables		(1,926,285	)		(2,159,349	)
Principal collected on finance receivables		1,594,762			1,496,916
Payments of dealer reserves		(14,674	)		(5,453	)
Payments of dealer holdbacks		(7,440	)		(21,882	)
Purchase of property and equipment		(46,548	)		(1,770	)
Net cash used in investing activities		(400,185	)		(691,538	)

Financing Activities
Deferred Financing Costs		(469,426	)		―
Line of credit advances, net		1,576,433			762,710
Net cash provided by financing activities		1,107,007			762,710


Effect of Exchange Rate Changes on Cash and Cash Equivalents		(56,660	)		12,066

Net Increase (Decrease) in Cash and Cash Equivalents		792,348			214,597

Cash and Cash Equivalents, Beginning of Period		1,857,694			1,276,994

Cash and Cash Equivalents, End of Period	$	2,650,042		$	1,491,591

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 (the “SEC”) 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, 2007 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, 2007 and notes thereto included in the Company’s Form 10-KSB filed with the SEC on March 21, 2008.

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, 2008 and December 31, 2007, respectively:

	2008		2007

Automobiles	$	9,502,307	$	9,514,608
Other		1,155,411		1,348,009
Total finance receivables		10,657,718		10,862,617

Less
Unearned discount		383,831		373,426
Allowance for credit losses		650,213		811,376
		1,034,044		1,184,802
Net finance receivables	$	9,623,674	$	9,677,815

Approximately 21% and 23% of the above finance receivables as of March 31, 2008 and December 31, 2007, respectively, are Canadian in origin.

Amounts contractually receivable (including principal and interest) under our finance receivables at March 31, 2008, 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.

2008	$	4,296,358
2009		4,511,064
2010		3,263,012
2011		1,678,715
2012		322,871
2013		7,183
Total	$	14,079,203

Activity in the allowance for credit losses related to finance receivables for the three months ended March 31, 2008 and 2007, respectively, was as follows:

	2008			2007

Balance, beginning of period	$	811,376		$	720,967
Provision charged to expense		31,620			364,323
Losses charged off		(541,583	)		(426,636	)
Recoveries of previously charged off amounts		355,383			57,745
Effect of foreign currency translation		(6,583	)		2,617
Balance, end of period	$	650,213		$	719,016

The Company’s non-earning finance receivables totaled $68,400 at March 31, 2008. The Company provided an allowance for credit losses related to these receivables of $61,560.

Note 4: Bank Line of Credit

On January 31, 2008, the Company entered into a Revolving Credit Loan and Security Agreement (“the Loan Agreement”) with ReMark Lending Co. a division of ReMark Capital Group, LLC. for a line of credit of up to $15,000,000. At the closing, which occurred on the same date, the Company executed and delivered to the Lender a promissory note in the principal amount of $15,000,000, bearing interest at the greater of 6.00% or prime rate, plus 2.00%, adjusted daily. The maximum loan amount is limited to the Maximum Average Advance Rate scale as specified in the Loan Agreement. The initial Maximum Average Advance Rate of 45% of eligible receivables will increase incrementally each quarter until February, 2009 when the rate for the remaining term of the loan becomes 80% of eligible receivables. The Loan Agreement also contains a Minimum Utilization Percentage which mandates a minimum outstanding balance required under the facility. The initial Minimum Utilization Percentage of 20% increases incrementally through August 2008 when the minimum required utilization becomes 50% of the facility for the remaining term of the loan. Under the terms of the Note, the Company is required to make monthly payments of interest, fees, and principal (if a borrowing base deficiency with respect to principal exists), with the entire principal balance and accrued interest due January 2010. The amount due under the Note may be accelerated upon a default by the Company, which includes failure to make a payment when it is due. As security for the Note, the Company granted the Lender a security interest in all assets of the Company. The Company’s previously outstanding line of credit balance with Heartland Bank was paid in full with the initial proceeds of the line.

The loan agreement contains covenants, among others, that 1) require the Company to maintain a minimum net worth of $7,500,000 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, 2008.

The Company incurred fees payable to its investment banking firm, its attorneys, and to ReMark totaling $543,783 in connection with consummating the line of credit loan agreement. These fees were recorded as deferred financing fees when paid and are being amortized to interest expense over the 24 month term of the loan agreement on a straight-line basis.

In connection with the Loan Agreement, the Company entered into an agreement to issue to the Lender at the time of or before the second borrowing on the line occurred, warrants to purchase 700,000 shares of common stock for five years at an exercise price of $0.35 per share. Pursuant to this agreement the warrants were issued on February 22, 2008. The warrants were valued at $30,929 using the Black-Scholes method adjusted by a liquidity valuation allowance applied due to the limited trading of the Company’s common stock.

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, 2005, 2006 and 2007, the tax years which remain subject to examination by major tax jurisdictions as of March 31, 2008.

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 $2,314,697 as of March 31, 2008. These commitments generally expire between 20 and 30 days after they are issued if unused. Typically, the Company funds between 20% and 30% of its outstanding commitments.

The Company is also obligated under certain noncancelable operating leases for premises and equipment with terms ranging up to 60 months. Future minimum payments under these noncancelable operating leases as of March 31, 2008 are:

2008	$	42,210
2009		58,653
2010		52,134
2011		48,875
Thereafter		77,386
Total	$	279,258

Certain officers of the Company hold a total of 1,529,583 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 Management Shareholders Agreements filed as exhibits to the Company’s Form 8-Ks filed on August 17, 2007, and December 17, 2007.

The Company had no other commitments as of March 31, 2008.

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, 2008 and 2007, 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, 2008, was computed as follows:

	Loss			Weighted Average Shares		Per Share Amount
Net loss	$	(174,329	)		19,922,543
Basic and diluted loss per share						$	(0.01	)

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

	Loss			Weighted Average Shares		Per Share Amount

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

Note 8: Operating Expenses

The components of operating expenses for the three months ended March 31, 2008 and 2007, respectively, are as follows:

	2008		2007

Salaries and benefits	$	417,420	$	375,750
Professional fees		113,168		102,896
Insurance		44,221		41,113
Other		127,745		112,398

	$	702,554	$	632,157

Note 9: Stock Based Compensation

On August 16, 2007 the Company entered into an agreement concerning the shares of Common Stock owned by Management Stockholders which superseded all prior agreements between the parties and which rescinded and terminated all prior agreements between the parties pertaining to the Management Stockholders' shares of Common Stock in the Corporation. Under this agreement Management agreed to certain conditions and restrictions on all shares owned by Management. Most of these conditions and restrictions were met with the completion of the financing transaction finalized on January 31, 2008.

The Company determined that in accordance with Financial Accounting Standards Board Statement No. 123(R), “Share Based Payment”, no incremental compensation cost resulted from the execution of the 2007 Agreement, and the Company therefore recognized no compensation expense as a result of entering into the 2007 Agreement.

As inducement for and pursuant to Thomas Holgate’s appointment as Senior Vice President, on December 17, 2007, the Company and Mr. Holgate entered into a Management Stockholder Agreement. The terms of the Agreement provided that the Company transfer 135,000 shares of stock in the Company to Mr. Holgate. The Agreement placed various restrictions and conditions on the Shares, most of which were met with the completion of the financing transaction finalized on January 31, 2008.

The Company determined in accordance with Financial Accounting Standards Board Statement No. 123(R), “Share Based Payment” the value of the shares to be $12,150 at the time they were granted, and the Company therefore recognized this amount as compensation expense as a result of entering into the Agreement.

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 $3,772,352 at March 31, 2008.

Total revenues, loss before taxes and net loss from foreign operations for the three months ended March 31, 2008 and 2007, respectively, were as shown below. Loss before income taxes and net loss reflect interest charges on amounts due to FFG of $86,937 and $101,464 for the three months ended March 31, 2008 and 2007, 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 the three month period ended March 31, 2008 and 2007. These interest charges and management and accounting fees eliminate in consolidation.

	2008			2007

Total revenues	$	175,362		$	214,348

Loss before income taxes	$	(69,377	)	$	(93,287	)

Net Loss	$	(69,377	)	$	(93,287	)

Note 11: Additional Cash Flow Information

The Company made cash interest payments totaling $43,578 and $14,614 during the three month periods ended March 31, 2008 and 2007, respectively.

The Company made no cash payments for income taxes during the three month periods ended March 31, 2008 and 2007.

Note 12: Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”), Fair Value Measurements. SFAS 157 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 SFAS 157, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. Management believes the adoption of this pronouncement will not have a material impact on the Company’s consolidated financial statements.

In September 2006, the United States Securities and Exchange Commission (the “SEC”) staff issued Staff Accounting Bulletin No. 108 (“SAB 108”), Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB 108 requires that public companies utilize a “dual-approach” to assessing the quantitative effects of financial misstatements. This dual approach includes both an income statement focused assessment and a balance sheet focused assessment. The guidance in SAB 108 must be applied to annual financial statements for fiscal years ending after November 15, 2006. The adoption of this pronouncement did not have a material impact on the Company’s 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.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Note 13: Subsequent Events

The Company has entered into substantive discussions to discontinue its investment in its subsidiary, T.C.G. - The Credit Group, Inc., located in Winnipeg, Manitoba, Canada. It is the intent of the Company to consolidate all of its operations in Springfield, Missouri and focus exclusively on the sub-prime auto market in the Midwest United States. The Company expects that the final disposition of the subsidiary will be determined before the quarter ended June 30, 2008.

Pursuant to Mr. Maxwell’s appointment as Chief Financial Officer, on April 21, 2008, the Company granted to him One Hundred Thousand (100,000) shares of common stock in the Company. The shares are subject to the normal restrictions applying to common stock granted and may be resold pursuant to SEC Rule 144.

The Company entered into a Management Compensation Plan (“the Plan”) with its executive officers on April 21, 2008. The terms of the Plan provide that the Company will transfer a total of Four Hundred Thousand (400,000) shares of common stock in the Company to its executive officers, and also provides for cash incentives based upon the performance of the Company as compared to its 2008 and 2009 budget. The stock is considered vested subject to forfeiture if specific goals in the Company’s 2008 and 2009 budget are not met.

On April 21, 2008 the Company granted 10,000 shares of the Company’s common stock to each of its directors, except Jerald L. Fenstermaker. The stock was granted pursuant to a new compensation arrangement the Company entered into with its outside Board of Directors. The arrangement stipulates that the directors will be paid a $6,000 annual retainer, $1,000 per quarterly meeting, and each director will receive a one time grant of 10,000 shares of common stock in the Company, subject to various conditions and restrictions placed upon the shares. In addition, the arrangement stipulates additional compensation to be paid to directors for committee meetings, to the Chairman, and Chairs of committee meetings. The costs under the new director compensation plan are expected to be approximately the same as the prior plan.

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 21, 2008, 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 primarily 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. These types of Installment Contract will continue to become a decreasing component of our portfolio with the disposition and liquidation of TCG expected in the quarter ended June 30, 2008. 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	%
December 31, 2007	87	%
March 31, 2008	89	%

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 next fifteen months, 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

The Company has entered into substantive discussions to discontinue its investment in its subsidiary, T.C.G. – The Credit Group, Inc., located in Winnipeg, Manitoba, Canada. It is the intent of the Company to consolidate all of its operations in Springfield, Missouri and focus exclusively on the sub-prime auto market in the Midwest United States. The Company expects that the final disposition of the subsidiary will be determined before the quarter ended June 30, 2008.

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, 2008 and 2007. This table should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto, included herein.

	Three Months Ended March 31,
	2008			2007
Installment Contracts acquired during the period (total principal amount) (a)	$	2,038,432		$	2,296,334
Purchase price of Installment Contracts acquired (a)	$	1,929,488		$	2,166,948
Percentage of dollar amount paid to principal balance acquired		94.7	%		94.4	%
Number of Installment Contracts acquired during the period (a)		223			303
Average principal balance acquired	$	9,141		$	7,579
Acquisition cost per acquired Installment Contract (including overhead)	$	612		$	632
Monthly servicing cost per Installment Contract (including overhead) (b)	$	29.14		$	21.79

(a) The decline in volume is a result of the impending liquidation of the Company’s Canadian subsidiary, T. C. G. – The Credit Group, Inc.

(b) Increase reflects a restructure of the Collection Department and investments that have resulted in lower delinquencies, fewer charge-offs and added capacity.

Results of Operations

Interest Income

Our interest income totaled $622,922 for the three months ended March 31, 2008, compared to $651,170 for the three months ended March 31, 2007.

The following table presents information relative to the average balances and interest rates of our interest earning assets for the three months ended March 31, 2008 and 2007, respectively:

	For the Three Months Ended March 31, 2008 and 2007

	2008						2007
	Average		Interest				Average		Interest
	Balance		Income		Yield		Balance		Income		Yield

Installment Contracts	$	10,359,194	$	611,596		23.62%	$	10,542,936	$	639,762		24.27%
Cash and cash equivalents		2,260,959		11,326		2.00%		1,354,427		11,216		3.31%
Notes receivable		-		-		0.00%		6,212		192		12.36%

Total	$	12,620,153	$	622,922		19.74%	$	11,903,575	$	651,170		21.88%

The decrease in yield on our Installment Contracts is primarily the result of changes in the mix of our portfolio. Throughout 2007 and the first three months of 2008 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.

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, 2008 Compared to the Three Months Ended March 31, 2007

	Volume			Rate			Total
Increase (decrease) in interest income:
Installment Contracts	$	(11,032	)	$	(17,135	)	$	(28,167	)
Cash and cash equivalents		271			(160	)		111
Notes receivable		(96	)		(96	)		(192	)

Total Interest Income	$	(10,857	)	$	(17,391	)	$	(28,248	)

Interest Expense

We incurred interest expense of $103,205, including amortization of deferred financing fees of $49,796, and $66,466, including amortization of deferred financing fees of $44,916, during the three months ended March 31, 2008 and 2007, respectively. Our interest expense increased in 2008 over 2007 as a result of the outstanding balance on our line of credit increasing from 2007 to 2008.

Provision for Credit Losses

Our consolidated provision for credit losses totaled $31,620 for the three months ended March 31, 2008, compared to $364,323 for the three months ended March 31, 2007. The decrease in the provision for the three months ended March 31, 2008 compared to 2007 is a result of a decrease in net charge-offs as a percent of net contracts to 7.19% for the three months ended March 31, 2008, from 14.00% for the three months ended March 31, 2007. 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 $706,157 for the three months ended March 31, 2008, compared to $632,157 for the three months ended March 31, 2007. A summary of these expenses follows:

	Three Months Ended March 31,
	2008		2007		Percent Change

Salaries and benefits	$	417,420	$	375,750		11.09%
Professional fees		113,168		102,896		9.98%
Insurance		44,221		41,113		7.56%
Other		127,745		112,398		13.65%
Total	$	702,554	$	632,157		11.14%

Salaries and benefits increased for the three months ended March 31, 2008 as compared to 2007 as a result of additional salaried individuals employed by the Company and related recruiting and moving expenses incurred. 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. Professional fees increased during the three months ended March 31, 2008 compared to the three months ended March 31, 2007 primarily as a result of the timing of audit and tax fee billings, offset by a decrease in legal fees incurred. Insurance expense increased due to higher premiums experienced in 2008, the result of an increase in coverage limits of our directors and officers liability insurance policy. Other operating costs include, among other items, occupancy costs, licenses and taxes, depreciation, postage, supplies, communications, travel and stockholder relations. Other operating expenses increased primarily as a result of an increase in stockholder relations expenses in 2008 as compared to 2007. The Company recognized certain credits in 2007 against professional fees related to the conversion of the Company’s preferred stock that were charged to operations during 2006, which reduced stockholder relations expenses for the three months ended March 31, 2007.

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, 2008 was approximately $612 per contract as compared to $632 for the three month period ended March 31, 2007. This decrease in average acquisition cost is a result of the Company’s implementation of Financial Accounting Standard No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (“SFAS 91”), offset by increased sales and marketing staff employed by the Company during the three months ended March 31, 2008 as compared to the three months ended March 31, 2007, and a decrease in the Company’s book-to-look ratio. Under SFAS 91 we deferred $19,748 direct costs associated with originating loans during the period ending March 31, 2008. These costs will be amortized over the terms of the related loans in accordance with SFAS 91. For the three month period ended March 31, 2008, the Company’s book-to-look ratio was 4.98% compared to 6.42% for the three month period ended March 31, 2007. 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, 2008 was $29.14 per serviced contract, as compared to $21.79 during the three month period ended March 31, 2007. This increase reflects a restructure of the Collections Department and investments that have resulted in lower delinquencies, fewer charge-offs, and added capacity. 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 to 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 during the quarter ended June 30, 2008.

Financial Condition

Installment Contracts Portfolio

The Company acquired Installment Contracts with outstanding principal balances totaling $2,038,432 during the three months ended March 31, 2008. We invested cash of approximately $1,948,399 (including payments of dealer reserves and dealer holdbacks) to acquire these contracts. Our portfolio of Installment Contracts decreased from $9,677,815, net of an allowance for credit losses of $811,376, at December 31, 2007 to $9,623,674, net of an allowance for credit losses of $650,213, at March 31, 2008.

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, 2008 and December 31, 2007 follows:

	March 31, 2008						December 31, 2007
	United States		Canada		Total		United States		Canada		Total
Automobiles	$	8,451,135	$	1,051,172	$	9,502,307	$	8,315,799	$	1,198,809	$	9,514,608
Other		-		1,155,411		1,155,411		-		1,348,009		1,348,009
Total		8,451,135		2,206,583		10,657,718		8,315,799		2,546,818		10,862,617

Less
Unearned discount		325,575		58,256		383,831		302,992		70,434		373,426
Allowance for credit losses		527,753		122,460		650,213		670,222		141,154		811,376
Net	$	7,597,807	$	2,025,867	$	9,623,674	$	7,342,585	$	2,335,230	$	9,677,815

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. Deferments and extensions are rarely granted to borrowers and have been granted to less than 5% of the loans in the portfolio. The following table sets forth information with respect to the delinquency of our portfolio of Installment Contracts as of March 31, 2008 and December 31, 2007, respectively:

	March 31, 2008
	United States				Canada				Total
	Amount		Pct.		Amount		Pct.		Amount		Pct.

Installment Contracts		8,451,135		100%		2,206,583		100%		10,657,719		100%

Period of delinquency:
31 - 60 days		114,260		1.35%		77,340		3.50%		191,600		1.80%
61 - 90 days		77,592		0.92%		16,302		0.74%		93,894		0.88%
91 – 120 days		27,322		0.32%		3,582		0.16%		30,904		0.29%
121+ days		37,496		0.44%		-		0.00%		37,496		0.35%

Total		256,670		3.04%		97,224		4.41%		353,894		3.32%


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

Installment Contracts		8,315,799		100%		2,546,818		100%		10,862,617		100%

Period of delinquency:
31 - 60 days		860,278		10.34%		66,197		2.60%		926,475		8.53%
61 - 90 days		290,704		3.50%		34,582		1.36%		325,286		2.99%
91 – 120 days		137,936		1.66%		18,243		0.72%		156,179		1.44%
121+ days		122,776		1.48%		-		0.00%		122,776		1.13%

Total		1,411,694		16.99%		119,022		4.68%		1,530,716		14.09%

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, 2008 and 2007:

	Three Months Ended March 31, 2008									Three Months Ended March 31, 2007
	United States			Canada			Total			United States			Canada			Total

Installment Contracts, net of unearned discounts, end of period	$	8,125,560		$	2,148,327		$	10,273,887		$	7,983,509		$	2,780,352		$	10,763,861

Installment Contracts, net of unearned discounts, average during the period (1)	$	8,012,106		$	2,347,088		$	10,359,194		$	7,674,408		$	2,868,528		$	10,542,936

Gross charge-offs	$	490,862		$	50,721		$	541,583		$	326,376		$	100,260		$	426,636
Recoveries	$	336,372		$	19,011		$	355,383		$	23,430		$	34,315		$	57,745

Net charge-offs	$	154,490		$	31,710		$	186,200		$	302,946		$	65,945		$	368,891

Net charge-offs as a % of avg. contracts during the period, annualized		7.71	%		5.40	%		7.19	%		15.79	%		9.20	%		14.00	%

(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 Item 2, MANAGEMENT’S DISCUSSION AND ANALYSIS, under the heading Critical Accounting Policies, Judgments and Estimates.

Our allowance for credit losses was $650,213 at March 31, 2008 compared to $811,376 at December 31, 2007. As a percentage of our outstanding net Installment Contracts, our allowance for credit losses was 6.33% at March 31, 2008 and 7.74% at December 31, 2007.

During the three months ended March 31, 2008, our net Installment Contracts decreased $215,304. This decrease was the result of a $33,653 decrease in automobile-secured contracts along with a $181,651 decrease in all other Installment Contracts. The $33,653 decrease in automobile-secured Installment Contracts was comprised of a $123,831 increase in Installment Contracts acquired through our U.S. point-of-sale program offset by a $146,406 decrease in Installment Contracts acquired through our Canadian point-of-sale program, and an $11,078 decrease in Installment Contracts acquired through bulk purchases.

As of December 31, 2007, delinquent accounts, defined as accounts 30 or more days contractually past due, totaled 14.09% of our outstanding Installment Contracts. As of March 31, 2008, delinquent accounts totaled 3.32% 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, 2008, we experienced net charge-offs of $186,200, which represented 7.19% of our average outstanding Installment Contracts during the period. During the year ended December 31, 2007, we experienced net charge-offs of $1,386,862, which represented 12.89% of our average outstanding Installment Contracts during the year.

The allowance for credit losses as of March 31, 2008 of $650,213 is 6.27% 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 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, 2008.

The following tables set forth the activity in the allowance for credit losses for the three months ended March 31, 2008 and 2007:

	Three Months Ended March 31, 2008									Three Months Ended March 31, 2007
	United States			Canada			Total			United States			Canada			Total

Balance at beginning of period	$	670,222		$	141,154		$	811,376		$	551,192		$	169,775		$	720,967

Charge-offs		(490,862	)		(50,721	)		(541,583	)		(326,376	)		(100,260	)		(426,636	)
Recoveries		336,372			19,011			355,383			23,430			34,315			57,745

Net charge-offs		(154,490	)		(31,710	)		(186,200	)		(302,946	)		(65,945	)		(368,891	)

Provision for credit losses		12,021			19,599			31,620			312,290			52,033			364,323

Effect of foreign currency translation		-			(6,583	)		(6,583	)		-			2,617			2,617

Balance at end of period	$	527,753		$	122,460		$	650,213		$	560,536		$	158,480		$	719,016

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 $16,875,000 (roughly 1,650 Installment Contracts) over the coming 12 months. We expect to pay between 94% and 95% of the outstanding principal balance for these Installment Contracts, or a total of approximately $16,000,000. We expect to fund these acquisitions from a combination of internally generated cash flow and bank financing.

The Company began 2008 with $1,857,695 cash on hand and had cash on hand of $2,650,042 at March 31, 2008. Operating activities provided cash of $142,186 during the three month period ended March 31, 2008.

We invested cash of approximately $1,949,000 (including payments of dealer reserves and dealer holdbacks) to acquire Installment Contracts during the three month period ended March 31, 2008. We collected principal payments on our Installment Contracts of approximately $1,595,000 during the three month period ended March 31, 2008.

During the three month period ended March 31, 2008 the Company received net advances on its bank line of credit totaling $1,576,433 to partially fund the acquisition of Installment Contracts. Total advances outstanding under the Company’s line of credit agreement at March 31, 2008 totaled approximately $3,052,000.

We paid fees totaling $469,426 during the three months ended March 31, 2008 in connection with fund raising activities performed by our investment banking firms, attorneys and finance company.

Our line of credit agreement contains covenants, among others, that 1) require the Company to maintain a minimum net worth of $7,500,000 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, 2008.

The Company had no material commitments for capital expenditures as of March 31, 2008. The Company expects to spend approximately $175,000 upgrading its underwriting and loan servicing 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.

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

2008	$	42,210
2009		58,653
2010		52,134
2011		48,875
Thereafter		77,386
Total	$	279,258

The Company had no other commitments as of March 31, 2008.

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, 2008.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2008 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

INDEX TO EXHIBITS

Exhibit Number	Description

2.1	Corrected Trustee’s Amended Plan of Reorganization (1)
2.2	Disclosure Statement for Trustee’s Amended Plan of Reorganization (1)
3.1	First Amended and Restated Certificate of Incorporation (1)
3.1.1	Certificate of Amendment to Certificate of Incorporation (1)
3.2	Bylaws (1)
3.2.1	Amendment to Bylaws (1)
4.1	Amended and Restated Trust Agreement of Freedom Financial Group I Statutory Trust (1)
10.1	Employment Agreement with Jerald L. Fenstermaker (1)
10.1.1	Addendum to Employment Agreement with Jerald L. Fenstermaker (5)
10.1.2	Extension of Employment Agreement with Jerald L. Fenstermaker (7)
10.2	Investment Banking Agreement with Milestone Advisors, LLC (1)
10.3	Unanimous Consent of the Board of Directors Adopting Executive Management Stock Bonus Plan (1)
10.4	Office Lease – 3058 East Elm (1)
10.5	Purchase and Sale Agreement, dated April 7, 2003, between Freedom Financial Group, Inc. (as Seller) and The Cadle Company (as Buyer) (2)
10.6	Commercial Real Estate Purchase Contract, dated May 9, 2003, between Freedom Financial Group, Inc. (as Seller) and New Life Church of God (as Buyer) (2)
10.7	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) (2)
10.8	Application and Order by Bankruptcy Court Approving Employment of Biltmore Associates (2)
10.9	Stock Grant Agreement dated January 9, 2006 (4)
10.10	Revolving Credit Loan and Security Agreement (6)
10.11	Promissory Note (6)
10.12	Stock Pledge Agreement (6)
10.13	Warrant for 300,000 shares of common stock (6)
10.14	Warrant for 200,000 shares of common stock (6)
10.15	Warrant for 136,778 shares of common stock (6)
10.16	Warrant for 91,185 shares of common stock (6)
10.17	First Amendment to Revolving Credit Loan and Security Agreement (8)
10.18	Amended and Restated Promissory Note (8)
10.19	Management Shareholders Agreement (8)
10.20	Employment Agreement with Jerald L. Fenstermaker (8)
10.21	Management Shareholders Agreement (9)
10.22	Revolving Credit Loan and Security Agreement (10)
10.23	Promissory Note (10)
10.24	Warrant Agreement (11)
10.25	Warrant for 700,000 shares of common stock (11)
11.1	Statement Re: Computation of Per Share Earnings - See Note 7 to Condensed Consolidated Financial Statements
14.1	Code of Ethics (3)
21.1	Subsidiaries (1)
31.1	Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Filed as an exhibit to the Company’s registration statement filed on Form 10-SB on May 2, 2005 (File Number 000-51286), and incorporated herein by reference.

(2) Filed as an exhibit to the Company’s first amended registration statement filed on Form 10-SB/A on July 22, 2005 (File Number 000-51286), and incorporated herein by reference.

(3) Filed as an exhibit to the Company’s Form 10-QSB filed on August 15, 2005, and incorporated herein by reference.

(4) Filed as an exhibit to the Company’s Form 8-K filed on January 9, 2006, and incorporated herein by reference.

(5) Filed as an Exhibit to the Company’s Form 8-K filed on May 2, 2006, and incorporated herein by reference.

(6) Filed as an Exhibit to the Company’s Form 8-K filed on August 24, 2006, and incorporated herein by reference.

(7) Filed as an Exhibit to the Company’s Form 8-K filed on October 10, 2006, and incorporated herein by reference.

(8) Filed as an Exhibit to the Company’s Form 8-K filed on August 17, 2007, and incorporated herein by reference.

(9) Filed as an Exhibit to the Company’s Form 8-K filed on December 20, 2007, and incorporated herein by reference.

(10) Filed as an Exhibit to the Company’s Form 8-K filed on February 5, 2008, and incorporated herein by reference.

(11) Filed as an Exhibit to the Company’s Form 8-K filed on February 28, 2008, and incorporated herein by reference.

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 8, 2008		By:	/s/ Jerald L. Fenstermaker
		Jerald L. Fenstermaker, President and Chief Executive Officer


Date: May 8, 2008		By:	/s/ J. Kevin Maxwell
		J. Kevin Maxwell, Chief Financial Officer