UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x           QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

¨           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 registrant 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) (Zip Code)

(417) 886-6600

(Registrant’s  telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x                No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨             No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of November 9, 2009 20,462,543 shares of Common Stock, $0.0001 par value were outstanding.

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	18
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	35
ITEM 4.	Controls and Procedures	35
ITEM 4T.	Controls and Procedures	35
PART II. – OTHER INFORMATION		36
ITEM 6.	Exhibits	36
INDEX TO EXHIBITS		36

2

PART I.  - FINANCIAL INFORMATION

ITEM 1.             Financial Statements

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Freedom Financial Group, Inc.

Springfield, Missouri

We have reviewed the accompanying consolidated balance sheet of Freedom Financial Group, Inc. as of September 30, 2009, and the related consolidated statement of operations for the three-month and nine-month periods ended September 30, 2009 and stockholders’ equity and cash flows for the nine-month period ended September 30, 2009.  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, 2008 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 10, 2009, 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, 2008 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

November 9, 2009

3

FREEDOM FINANCIAL GROUP, INC.

Consolidated Balance Sheets

	September 30, 2009			December 31, 2008
Assets
Cash and cash equivalents	$	2,192,134		$	2,145,436
Finance receivables, net		17,894,729			15,938,361
Accrued interest receivable		196,564			184,807
Property and equipment, net		35,244			52,064
Deferred financing fees		211,998			296,337
Deferred origination costs		169,338			138,013
Other assets		89,905			351,647
Total assets	$	20,789,912		$	19,106,665
Liabilities and Stockholders’ Equity
Liabilities
Bank line of credit	$	12,037,332		$	9,975,734
Accounts payable		8,969			34,914
Accrued expenses		137,376			147,756
Accrued compensation costs		155,478			61,262
Other liabilities		31,831			22,126
Total liabilities		12,370,986			10,241,792
Commitments and Contingencies
Stockholders’ Equity
Common stock, $0.0001 par value; 36,000,000 shares authorized; 20,467,001 shares issued; and 20,462,543 shares outstanding		2,047			2,047
Additional paid-in capital		13,882,347			13,882,347
Retained earnings (deficit)		(5,271,033	)		(4,738,477	)
Accumulated other comprehensive loss		(194,042	)		(280,651	)
Treasury stock, at cost; 4,458 shares		(393	)		(393	)
Total stockholders’ equity		8,418,926			8,864,873
Total liabilities and stockholders’ equity	$	20,789,912		$	19,106,665

See Notes to Consolidated Financial Statements.

4

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Operations

Unaudited

	Three Months Ended						Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Revenues
Interest income	$	1,074,703		$	789,875		$	3,102,260		$	2,062,787
Other income		45,095			43,425			125,180			126,920
Total revenues		1,119,798			833,300			3,227,440			2,189,707
Interest Expense		331,068			213,585			927,876			490,624
Revenues after Interest Expense		788,730			619,715			2,299,564			1,699,083
Provision for Credit Losses		323,214			196,704			1,002,819			337,118
Net Revenues After Provision for Credit Losses		465,516			423,011			1,296,745			1,361,965
Operating Expenses		614,004			644,060			1,829,301			2,068,528
Operating Loss		(148,488	)		(221,049	)		(532,556	)		(706,563	)
Gain on Liquidation of Subsidiary		-			-			-			1,380,250
Net Income (Loss) Before Income Taxes		(148,488	)		(221,049	)		(532,556	)		673,687
Provision for Income Taxes		-			-			-			-
Net Income (Loss)	$	(148,488	)	$	(221,049	)	$	(532,556	)	$	673,687
Basic and Diluted Income (Loss) Per Share	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	0.03

See Notes to Consolidated Financial Statements.

5

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Stockholders’ Equity

Unaudited

	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Total
Balance, December 31, 2007		19,922,543	$	1,993	$	13,802,873	$	(5,041,509	)	$	1,599,791		$	(393	)	$	10,362,755
Net income		—		—		—		303,032			—			—			303,032
Foreign currency translation adjustment		—		—		—		—			(280,651	)		—			(280,651	)
Comprehensive income		—		—		—		—			—			—			22,381
Liquidation of subsidiary											(1,599,791	)					(1,599,791	)
Stock warrants issued		—		—		30,928		—			—			—			30,928
Stock Grant		540,000		54		48,546		—			—			—			48,600
Balance, December 31, 2008		20,462,543	$	2,047	$	13,882,347	$	(4,738,477	)	$	(280,651	)	$	(393	)	$	8,864,873
Net loss		—		—		—		(532,556	)		—			—			(532,556	)
Foreign currency translation adjustment		—		—		—		—			86,609			—			86,609
Comprehensive loss		—		—		—		—			—			—			(445,947	)
Balance, September 30, 2009		20,462,543	$	2,047	$	13,882,347	$	(5,271,033	)	$	(194,042	)	$	(393	)	$	8,418,926

See Notes to Consolidated Financial Statements.

6

FREEDOM FINANCIAL GROUP, INC.

Consolidated Statements of Cash Flows

Unaudited

	For the Nine Months Ended September 30,
	2009			2008
Operating Activities
Net income (loss)	$	(532,556	)	$	673,687
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation		26,741			34,345
Provision for credit losses		1,002,819			337,118
Accretion of deferred contract purchase discounts		(320,304	)		(244,889	)
Recovery of charged-off finance receivables		724,235			696,966
Liquidation of subsidiary		-			(1,457,047	)
Stock grant expense		-			48,600
Deferral of origination costs		(163,462	)		(146,655	)
Amortization of deferred financing fees		216,756			194,300
Amortization of deferred origination costs		132,136			45,260
Changes in
Other assets		(118,772	)		157,628
Accounts payable and accrued expenses		56,326			9,359
Net cash provided by operating activities		1,023,919			348,672
Investing Activities
Purchase of finance receivables		(7,722,480	)		(9,515,932	)
Principal collected on finance receivables		4,456,536			4,267,962
Purchase of property and equipment		(9,922	)		(66,136	)
Sale of Relocation Asset		360,728			-
Net cash used in investing activities		(2,915,138	)		(5,314,106	)
Financing Activities
Deferred financing costs		(120,817	)		(472,347	)
Line of credit advances, net		2,050,000			5,422,760
Net cash provided by financing activities		1,929,183			4,950,413
Effect of Exchange Rate Changes on Cash and Cash Equivalents		8,734			(142,942	)
Net Increase (Decrease) in Cash and Cash Equivalents		46,698			(157,963	)
Cash and Cash Equivalents, Beginning of Period		2,145,436			1,857,694
Cash and Cash Equivalents, End of Period	$	2,192,134		$	1,699,731

See Notes to Consolidated Financial Statements.

7

FREEDOM FINANCIAL GROUP, INC.

Notes to Consolidated Financial Statements

Unaudited

Note 1: General

The accompanying unaudited consolidated financial statements of Freedom Financial Group, Inc. (“FFG” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q.  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, 2008 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, 2008 and notes thereto included in the Company’s Form 10-K filed with the SEC on March 10, 2009.

The information contained herein reflects all adjustments that, in the opinion of management, are necessary to make the financial statements not misleading.  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 FFG, FFG’s wholly owned subsidiary, Freedom Financial Auto Receivables, LLC (FFAR), and FFG’s wholly owned Canadian subsidiary, T.C.G. – The Credit Group Inc. (TCG), which collectively comprised a single reporting segment, the “Company.” The Company’s investment in TCG was liquidated in May 2008.  See Note 10, Discontinued Foreign Operations, for further discussion of the liquidation of TCG. All significant intercompany transactions have been eliminated in consolidation.

Note 3: Finance Receivables and Allowance for Credit Losses

Finance receivables consist of the following at September 30, 2009 and December 31, 2008, respectively:

	2009		2008
Automobiles	$	19,336,362	$	16,841,865
Other		231,731		466,626
Total finance receivables		19,568,093		17,308,491
Less
Unearned discount		909,823		730,331
Allowance for credit losses		763,541		639,799
		1,673,364		1,370,130
Net finance receivables	$	17,894,729	$	15,938,361

Approximately 3% and 6% of the above finance receivables as of September 30, 2009 and December 31, 2008, respectively, are Canadian in origin.

Amounts contractually receivable (including principal and interest) under our finance receivables at September 30, 2009, 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.

8

2009		2,365,984
2010		8,855,563
2011		7,596,653
2012		5,652,577
2013		2,190,864
2014		45,510
Total	$	26,707,151

Activity in the allowance for credit losses related to finance receivables for the three and nine months ended September 30, 2009 and 2008 was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Balance, beginning of period	$	762,371		$	675,940		$	639,799		$	811,376
Provision charged to expense		323,214			196,704			1,002,819			337,118
Losses charged off		(546,626	)		(384,599	)		(1,613,075	)		(1,185,637	)
Recoveries of previously charged-off amounts		217,812			166,095			724,234			696,966
Effect of foreign currency translation		6,770			(4,281	)		9,764			(9,964	)
Balance, end of period	$	763,541		$	649,859		$	763,541		$	649,859

The Company’s nonearning finance receivables totaled $185,367 at September 30, 2009.  The Company provided an allowance for credit losses related to these receivables of $166,830.

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 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% increased incrementally through August 2008 when the minimum required utilization became 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.

In accordance with the terms of the Loan Agreement, FFAR is the borrower of amounts advanced under the credit facility and FFG is the originator and servicer of receivables pledged to the credit facility. All receivables originated by FFG are conveyed without recourse to FFAR together with all other related security related to the pledged receivables, including, without limitation, the security interest of the borrower in all related financed vehicles, all collections and other monies due and to become due in respect of any pledged receivable and any security received.

9

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 of the loan agreement covenants as of September 30, 2009.

The Company incurred fees payable to its investment banking firm, its attorneys, and ReMark totaling $546,704 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.

The Company received notice in June, 2009, from the Lender that the Lender is no longer extending credit to finance companies and thus our line of credit will not be renewed or extended when it matures in January, 2010.

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, 2006, 2007 and 2008, the tax years which remain subject to examination by major tax jurisdictions as of September 30, 2009.

As of December 31, 2008, the Company had approximately $29,000,000 of net operating loss carryforwards available to offset future federal income taxes.  The carryforwards expire in 2021 through 2028. The ability to utilize an NOL carryforward is dependent on the Company’s ability to generate future net income, which cannot be assured.  A valuation allowance is established to reduce deferred tax assets if it is likely that a deferred tax asset will not be realized.

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 $328,400 as of September 30, 2009.  These commitments generally expire 20 days after they are issued if unused.  Typically, the Company funds between 20% and 30% of its outstanding commitments.

10

The Company is obligated under a noncancelable lease for its principal office with a term of five years.  Future minimum payments under this operating lease as of September 30, 2009 are as follows:

2009		12,686
2010		50,740
2011		50,740
2012		50,740
2013		29,599
Total	$	194,505

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 an officer whose employment is terminated due to a permanent disability, or after death, at the option of the officer’s estate, 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 Agreement filed as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on August 17, 2007 and the Management Shareholder Agreement filed as Exhibit 1 to the Company’s Form 8-K filed with the SEC on December 20, 2007.

The Company’s current agreement with its investment banking firm requires the Company to pay total aggregate transaction fees of not less than $550,000 to the investment banking firm should the Company consummate a loan transaction with a lender or other party that the investment banking firm introduces to the Company. If the transaction were to be consummated as a sale of all or a portion of the Company’s receivables, the fee would be 2.5% multiplied by the amount of consideration received by the Company for the sale. As of September 30, 2009, the Company had paid fees amounting to $65,000 to the investment banking firm.

As of September 30, 2009, the Company had entered into an agreement to sell substantially all of its consumer loan portfolio to an unrelated third party.  The purchase agreement for the transaction provides for a $150,000 breakage fee if the Company elected to terminate or failed to consummate the sale.  On October 19, 2009, the Company entered into a new purchase agreement with a different unrelated third party at a substantially higher sale price and terminated the first purchase agreement and on October 20, 2009, paid the $150,000 breakage fee.  The second purchase agreement provides for a $300,000 breakup fee if the Company elects to terminate the agreement.

The Company had no other commitments as of September 30, 2009.

Note 7: Earnings Per Share

Basic earnings per share is computed by dividing net income (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 and nine months ended September 30, 2009 and September 30, 2008, basic and diluted loss per share amounts are based on the weighted average number of common shares outstanding.

Earnings per share for the three and nine months ended September 30, 2009 and 2008, was computed as follows:

11

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Net income (loss)	$	(148,487	)	$	(221,049	)	$	(532,556	)	$	673,687
Weighted average shares		20,462,543			20,462,543			20,462,543			20,241,813
Basic and diluted income (loss) per share	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	0.03

Note 8: Operating Expenses

The components of operating expenses for the three and nine months ended September 30, 2009 and 2008, respectively, are as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Salaries and benefits	$	433,051		$	394,005		$	1,159,899		$	1,242,949
Professional fees		36,967			45,730			175,907			207,689
Information services		42,568			109,065			168,743			178,767
Insurance		40,071			42,073			123,146			129,102
Supplies and postage		19,401			27,846			75,672			78,748
Stockholder relations		7,735			5,305			31,672			69,037
Other		76,522			103,200			257,724			309,617
Deferral of origination costs		(42,311	)		(83,164	)		(163,462	)		(147,380	)
	$	614,004		$	644,060		$	1,829,301		$	2,068,529

Note 9: Stock Based Compensation

In connection with the Company appointing J. Kevin Maxwell as its Treasurer and Chief Financial Officer on April 21, 2008, the Company granted Mr. Maxwell 100,000 shares of its common stock.  This grant was not made subject to any contractual conditions or restrictions.

Additionally, on April 21, 2008, the Company entered into a Management Compensation Plan with its executive officers, Jerald L. Fenstermaker, Thomas Holgate and J. Kevin Maxwell, pursuant to which these executive officers were granted 200,000, 100,000 and 100,000 shares, respectively, of the Company’s common stock.  These shares of stock were considered fully vested when granted, but 50% of the shares granted are subject to forfeiture if the Company does not achieve the full year’s operating income for 2008 according to the Company’s board-approved 2008 operating budget, and an additional 50% of the shares granted are subject to forfeiture if the Company does not achieve the full year’s operating income for 2009 according to the board-approved 2009 operating budget.  The performance goal for 2008 was achieved.The plan also provides for performance-based cash compensation incentives.

Also, on April 21, 2008, in connection with a new compensation arrangement for the Company’s independent directors (i.e. all directors other than Jerald L. Fenstermaker), the Company also granted 10,000 shares to each of its four independent directors. Each director’s shares became fully vested on March 31, 2009.

12

The Company determined in accordance with FASB Statement No. 123(R) that the value of all the shares granted to executive officers and directors on April 21, 2008, was $48,600 at the time they were granted, and therefore the Company recognized this amount as compensation expense for these events.

Note 10: Discontinued Foreign Operations

Prior to May 2008, the Company’s foreign operations, all of which are in Canada, had been conducted through its wholly owned subsidiary, T.C.G. – The Credit Group Inc. (“TCG”), based in Winnipeg, Manitoba. In May 2008, TCG ceased originating new loan purchases and the Company purchased the outstanding receivables of TCG. The Company began servicing the Canadian receivables from its location in the United States, and intends to service them until they are fully collected. The remaining assets of TCG were sold and the Company’s investment in the subsidiary and accumulated foreign exchange gains were liquidated.  As a result of the liquidation the Company recognized a $1,380,250 gain in the quarter ended June 30, 2008. Total revenues, loss before taxes, and net loss from foreign operations for the three and nine months ended September 30, 2009 and 2008, respectively, were as shown below.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
Total revenues	$	37,417	$	118,400	$	139,425	$	447,188
Income before income taxes	$	34,907	$	81,140	$	92,257	$	84,440
Net income	$	34,907	$	81,140	$	92,257	$	84,440
Per share amount	$	-	$	-	$	-	$	-

Note 11: Additional Cash Flow Information

The Company made cash interest payments totaling $247,432 and $699,331 during the three and nine month periods ended September 30, 2009 and made cash interest payments totaling $143,895 and $278,024 during the three and nine month periods ended September 30, 2008.

The Company made no cash payments for income taxes during the three and nine month periods ended September 30, 2009 and 2008.

Note 12: Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (the “FASB”) issued a new pronouncement regarding fair value measurements.  The pronouncement 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 the pronouncement, fair value measurements would be separately disclosed by level within the fair value hierarchy.  This pronouncement 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.  The adoption of this statement did not have a material effect on our financial position or results of operations.

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We adopted the provisions of the FASB’s interpretation regarding accounting for uncertainty in income taxes on January 1, 2007. The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements, 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.  The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

In February 2007, the FASB issued a pronouncement regarding entities choices in to measuring 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.  The statement is effective for our fiscal year beginning January 1, 2008.  We did not elect to report additional assets and liabilities at fair value other than those required to be accounted for at fair value prior to the adoption this statement, therefore there was no material effect of the adoption of this standard on our financial statements.

On November 14, 2008, the Securities and Exchange Commission (“SEC”) issued its long-anticipated proposed International Financial Reporting Standards (“IFRS”) roadmap outlining milestones that, if achieved, could lead to mandatory transition to IFRS for U.S. domestic registrants starting in 2014.  IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (IASB).  Under the proposed roadmap, the Company could be required to prepare financial statements in accordance with IFRS, and the SEC will make a determination in 2011 regarding the mandatory adoption of IFRS for U.S. domestic registrants.  Management is currently assessing the impact that this potential change would have on the Company’s consolidated financial statements, and will continue to monitor the development of the potential implementation of IFRS.

In April 2009, the FASB issued new accounting guidance on fair value measurements. The new guidance impacts certain aspects of fair value measurement and related disclosures. The new guidance was effective beginning in the second quarter of 2009. The impact of adopting this new guidance did not have a material effect on the Company’s consolidated results of operations or financial position.  

In May 2009, the FASB issued new accounting guidance on subsequent events. The objective of this guidance is to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This new accounting guidance was effective for interim and annual periods ending after June 15, 2009. The impact of adopting this new guidance had no effect on the accompanying condensed consolidated financial statements.

In June 2009, the FASB issued new accounting guidance entitled, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“ASC”), which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. This new guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this guidance has changed how we reference various elements of GAAP when preparing our financial statement disclosures, but did not have an impact on the Company’s financial position, results of operations or cash flows.

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

We have diligently sought a credit facility refinancing or other capital infusion, which would allow us to pay off the ReMark Loan when it matures January 31, 2010, but the only solution that is currently available in the prevailing market conditions is a sale of our loan portfolio.

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On September 29, 2009, we entered into an Auto Receivables Purchase Agreement (the “FIFS Purchase Agreement”) with First Investors Financial Services, Inc. (“FIFS”), an unrelated financial services company. 

Pursuant to the Purchase Agreement, we agreed to sell all or substantially all of our portfolio of subprime used automobile installment sales contracts and other consumer receivables to FIFS for a cash purchase price calculated as the sum of a percentage of the outstanding principal balance of Receivables falling in different classes based upon their aging on the closing date. 

The Purchase Agreement provided for a $150,000 breakup fee to FIFS if we terminated the agreement or failed to consummate the Asset Sale.

On October 19, 2009, we entered into an Auto Receivables Purchase Agreement (the “ACA Purchase Agreement”) with American Credit Acceptance, LLC, an unrelated South Carolina limited liability company (“ACA”).  As a result of entering into the ACA Purchase Agreement, we terminated the Auto Receivables Purchase Agreement FIFS, Inc.  

Pursuant to the ACA Purchase Agreement, we have agreed to sell our portfolio of subprime used automobile installment sales contracts to ACA for a cash purchase price calculated as the sum of a percentage of the outstanding principal balance of Receivables falling in different classes based upon their aging and collectability on the closing date (the “ACA Asset Sale”). The aggregate purchase price payable by ACA for the Receivables is substantially higher than the price FIFS had agreed to pay under the FIFS Purchase Agreement, even after considering the breakup fee required by the FIFS Purchase Agreement.  

 We intend to use the proceeds from the ACA Asset Sale primarily to pay off our $15 million secured revolving warehouse line of credit (the “Remark Loan”) with ReMark Lending Co. (“Lender”), which had a principal balance of approximately $12 million as of September 30, 2009.  

 The projected closing date for the ACA Asset Sale is on or before December 15, 2009.  Consummation of the ACA Asset Sale is subject to fulfillment of a number of conditions, including approval by our stockholders.  There can be no assurance the ACA Asset Sale will close. 

The ACA Purchase Agreement provides for a breakup fee of $300,000 to ACA if we elect to terminate or fail to consummate the ACA Asset Sale, unless we terminate the ACA Purchase Agreement because we are able to obtain financing that will allow us to refinance the ReMark Loan. 

On October 20, 2009, we provided written notice to FIFS that we have terminated the FIFS Purchase Agreement.  We paid a $150,000 breakup fee to FIFS on termination, as required by the FIFS Purchase Agreement.

On October 9, 2009, we entered into Amendment No. 2 to our Revolving Loan and Security Agreement with our Lender.  Since the Purchase Agreement with FIFS provided for the sale of our receivables at less than the price at which we can purchase new receivables from our independent dealer network, we announced on September 23, 2009 that we were suspending the purchase of new auto loan receivables from our network of independent used automobile dealerships. 

The Lender has characterized the Asset Sale and our suspension of receivables purchases as a material adverse change in our business that constitutes an Event of Default and a Funding Termination Event under the Loan Agreement and that, as a consequence, the Lender asserts it is entitled to cease making further advances to us, declare the entire balance of the Remark Loan immediately due and payable, and enforce the Lender’s security interest in all of our assets.  We are not in default in the payment of any amount due under the Loan Agreement.  The Asset Sale and our suspension of purchasing new auto loan receivables were intended to enable us to pay off the ReMark Loan by the maturity date.  We were disappointed that the Lender elected to treat these events as an Event of Default and a Funding Termination Event under the Loan Agreement.  Nevertheless, we have agreed to the Amendment in order to avoid an acceleration of the ReMark Loan and the Lender’s sale of all of our assets that secure the ReMark Loan at this time.  Pursuant to the Amendment: 

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· We agree that an uncured Event of Default exists and is continuing under the Loan Agreement

· The Lender has agreed to forbear from exercising certain default remedies under the Loan Agreement until November 9, 2009

· The Lender has the right to appoint a Supervisory Servicer to monitor or take over our receivables servicing function at our expense

· All funds coming into the lockbox account, after payment of interest and the fees provided under the Loan Agreement (including those of a Supervisory Servicer if one is appointed), will be applied by the Lender to reduce the principal balance of the ReMark Loan and will not be remitted to us as was the practice under the Loan Agreement before the Amendment.  This should result in a more rapid paydown of the ReMark Loan

· The Lender will not provide further advances under the ReMark Loan in excess of the $12,042,000 current balance.  We had not planned to request additional advances under the ReMark Loan

· The Lender will accrue Default Rate Interest equal to the existing rate plus 4.5% commencing September 23, 2009.  The existing Note Rate of interest will be payable prior to the expiration of the forbearance period, and the difference between the Note Rate and the Default Rate Interest will be payable after expiration of the forbearance period

· The forbearance period will automatically expire on the earlier of (i) November 9, 2009, (ii) any termination of the Asset Sale, (iii) any other Event of Default under the Loan Agreement, or (iv) any default in performance of the Amendment

On November 4, 2009, we entered into an Amendment No. 3 to our Revolving Loan and Security Agreement and Forbearance ("Amendment 3"). The Lender had determined that our pending Asset Sale and our decision on September 23, 2009 to suspend the purchase of new receivables represented a change in our business that constitutes an Event of Default under the Loan and Security Agreement. Pursuant to Amendment 3 and an accompanying letter agreement, the Lender has agreed (a) to consent to the Asset Sale to ACA, and (b) to forbear from exercising its default rights under the Loan Agreement until the earliest of (i) December 15, 2009, (ii) the date on which the ACA Purchase Agreement is terminated, and (iii) a breach of any of the conditions expressed in Amendment 3. Assuming the Asset Sale is approved by our stockholders at the special meeting to be held November 30, 2009, we intend to consummate the Asset Sale and pay off the ReMark Loan by December 15, 2009. Amendment 3 thus gives us the ability to close the Asset Sale and pay off the ReMark Loan before the forbearance period expires, thus avoiding an acceleration of the ReMark Loan and the foreclosure of our assets. 

On October 6, 2009, our Board of Directors approved a Plan of Dissolution and Complete Liquidation of the Company (“Plan of Dissolution”). 

Pursuant to the Plan of Dissolution we plan to sell and reduce to cash all or substantially all of our non-cash assets (including the receivables being sold in the Asset Sale) and (i) pay or provide for all claims and obligations known to us (including the ReMark Loan), (ii) provide for any claim which is the subject of a pending action, suit or proceeding to which we are a party, (iii) provide for claims that have not been known to us but are likely to arise within 5 years after the Effective Date of our dissolution, (iv) create a contingency reserve to satisfy claims, obligations and expenses incurred in connection with the liquidation, and (vi) distribute any remaining funds to our stockholders. 

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Our management, Board and financial adviser have tried without success to obtain alternative financing to refinance the ReMark Loan to support our continued operations.  To date, however, no such financing has been obtained.  Following the payoff of the ReMark Loan, without a substitute credit facility, the Board and management do not believe we will have sufficient capital and assets to operate profitably.

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

SPECIAL CAUTIONARY NOTICE REGARDING

FORWARD-LOOKING STATEMENTS

The information included or incorporated by reference in this quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “intend,” “anticipate,” “believe,” “estimate,” “plan,” “expect,” “may,” “will,” “should,” “could,” 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 or performance, business strategy, budgets, capital commitments and resources, projected costs and plans and objectives of management for future operations, are considered to be forward-looking statements.  Freedom Financial Group, Inc. (the “Company” or “FFG”) cautions that, by their nature, forward-looking statements are not guarantees of future performance or results.  They involve risks, uncertainties and contingencies, both known and unknown, and actual results may differ materially from those expressed, contemplated or implied by the forward looking statements, or such risks, uncertainties or contingencies could affect the extent to which a certain plan, objective, projection, estimate or prediction is realized.  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.  These forward-looking statements involve risks and uncertainties including, but not limited to, the following:

(i) the risks associated with business expansion;

(ii) our ability to achieve profitable operations;

(iii) economic and market conditions, including unemployment and underemployment, recession and the risk of adverse economic conditions reducing demand for our products or adversely affecting the credit quality or collectability of our loan portfolio;

(iv) volatility of market prices and rates that could affect the value of investments or collateral held by the Company as security for the obligations of its customers;

(v) our ability to obtain debt or equity capital to sustain operations and finance growth;

(vi) our continued compliance with the financial covenants under our $15 million credit facility, and our ability to renew or refinance the credit facility when it matures in January, 2010;

(vii) political events, including legislative, regulatory, judicial or other developments that affect the Company;

(viii) the adequacy of our loss reserves; 

(ix) our ability to compete successfully against competitors with significantly greater financial, marketing and advertising resources than the Company;

(x) our ability to attract and retain skilled individuals;

(xi) the pace of technological change and the ability to develop and support technology and information systems, including Internet based systems, sufficient to manage the risks and operations of the Company’s business effectively;

(xii) risk of litigation filed against the Company; and

(xiii) inflation/deflation.

Investors are cautioned not to place undue reliance on any forward-looking statements.

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For additional information regarding these and other risks, see Item 1A - Risk Factors in our annual report on form 10-K, filed on March 10, 2009 and incorporated herein by reference.  Any forward-looking statements made or incorporated by reference in this quarterly report on Form 10-Q or that we may make from time to time are representative only as of the date they are made, and we undertake no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (“SEC”).  You may read and copy such material at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-732-0330 for more information on the public reference room. You can also find our SEC filings at the SEC’s Web site at www.sec.gov. We provide a link on our Web site to the SEC’s Web site to access our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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 motor vehicle installment contracts. 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 former Canadian subsidiary, T.C.G. – The Credit Group, Inc. (TCG”), acquired a variety of consumer installment contracts in previous years, including small ticket leases, loans secured by home appliances and other consumer goods, and loans for bulk food purchases.  During 2008, the subsidiary was liquidated and the Company purchased TCG’s outstanding portfolio of installment contracts. The Company intends to service the Canadian portfolio until the remaining balances are fully collected or liquidated in some other manner. The Company’s portfolio of outstanding installment contracts has been increasingly comprised of sub-prime automobile loans.  As of September 30, 2009, the Company’s loan portfolio consisted of over 98% sub-prime automobile loans.

The Company’s management continues to monitor the impact of current economic conditions on the Company. We continuously scrutinize delinquency rates, vehicle repossessions, bankruptcies, and other data for trends that may require us to update our underwriting standards, increase our reserve for bad debts, or take some other action.  We regularly observe unemployment statistics and information regarding worker layoffs for major employers in areas we offer our financing programs that would necessitate an appropriate action, such as offering extensions or loan modifications, on a case by case basis, to borrowers who have suffered temporary income disruptions.  Currently, less than 6% of the Company’s installment contracts have been modified or extended. We do not expect loan modifications or extensions to increase significantly as a percent of the total loan portfolio during 2009. A prolonged economic recession could adversely affect our ability to acquire suitable installment contracts.  Continued weakness in the economy could adversely affect our business and that of the dealers from which we purchase contracts and result in reductions in our revenues.

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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 subjective 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 finance receivables, credit loss history, and other relevant factors.  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. See Item 2, MANAGEMENT’S DISCUSSION AND ANALYSIS, under the headings Results of Operations – Provision for Credit Lossesand Financial Condition – Asset Quality.

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.

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Selected Portfolio Statistics

The following table presents selected unaudited portfolio statistics for the three and nine months ended September 30, 2009 and 2008.  This table should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto, included herein.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009				2008*		2009				2008*
Installment contracts acquired (total principal amount)	$	1,979,701		$	4,938,542		$	8,284,656		$	9,568,555
Purchase price of Installment contracts Acquired	$	1,834,514		$	4,675,904		$	7,722,658		$	9,066,504
Percentage of dollar amount paid to principal balance acquired		92.67	%		94.68	%		93.22	%		94.75	%
Number of installment contracts acquired during the quarter		193			450			766			870
Average principal balance acquired	$	10,258		$	10,975		$	10,815		$	10,998
Acquisition cost per acquired installment contract (US only)	$	914		$	679		$	839		$	677
Monthly servicing cost per installment contract (US only)	$	9.12		$	15.74		$	11.31		$	21.94

* Purchases of Canadian finance receivables were discontinued in May 2008.

Results of Operations

Interest Income

Our interest income totaled $1,074,703 and $3,102,260 for the three months and nine months ended September 30, 2009, respectively, compared to $789,875 and $2,062,787 for the three months and nine months ended September 30, 2008. The increase in interest income for the three and nine months ended September 30, 2009 as compared to 2008 is attributed primarily to the increase in the installment contract portfolio in the United States, offset by a decline in the outstanding balance of the Canadian installment loan portfolio and lower yields on installment contracts experienced in 2009.

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The following tables present information relative to the average balances and interest rates of our interest earning assets for the three and nine months ended September 30, 2009 and 2008, respectively:

	For the Three Months Ended September 30, 2009 and 2008
	2009							2008
	Average		Interest					Average		Interest
	Balance		Income		Yield			Balance		Income		Yield
Installment Contracts	$	18,745,592	$	1,074,353		22.92	%	$	13,138,352	$	781,443		23.79	%
Cash and cash equivalents		2,167,234		350		0.06	%		1,764,458		8,432		1.91	%
Total	$	20,912,826	$	1,074,703		20.56	%	$	14,902,810	$	789,875		21.20	%

	For the Nine Months Ended September 30, 2009 and 2008
	2009							2008
	Average		Interest					Average		Interest
	Balance		Income		Yield			Balance		Income		Yield
Installment Contracts	$	18,100,726	$	3,099,476		22.83	%	$	11,576,767	$	2,032,713		23.41	%
Cash and cash equivalents		2,060,729		2,784		0.18	%		2,026,838		30,074		1.98	%
Total	$	20,161,455	$	3,102,260		20.52	%	$	13,603,605	$	2,062,787		20.22	%

The decrease in yield on our installment contracts for the three and nine months ended September 30, 2009, compared to the three and nine months ended September 30, 2008, is primarily the result of an increase in the amortization of deferred origination costs during 2009, and changes in the mix of our portfolio.  Amortization of deferred origination costs amounted to $48,674 and $132,136 for the three and nine months ended September 30, 2009, respectively, and $29,371 and $45,330 for the three and nine months ended September 30, 2008, respectively. In addition, throughout 2008 and 2009 our portfolio of installment contracts has been increasingly comprised of contracts acquired through our United States 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, and contracts purchased by our former Canadian subsidiary which include 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.

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	For the Three Months Ended September 30, 2009 compared to the Three Months Ended September 30, 2008
	Volume		Rate			Total
Increase (decrease) in interest income:
Installment Contracts	$	320,231	$	(27,321	)	$	292,910
Cash and cash equivalents		2,500		(10,582	)		(8,082	)
Total Interest Income	$	322,731	$	(37,903	)	$	284,828

	For the Nine Months Ended September 30, 2009 compared to the Nine Months Ended September 30, 2008
	Volume		Rate			Total
Increase (decrease) in interest income:
Installment Contracts	$	1,086,160	$	(19,397	)	$	1,066,763
Cash and cash equivalents		165		(27,455	)		(27,290	)
Total Interest Income	$	1,086,325	$	(46,852	)	$	1,039,473

Interest Expense

We incurred interest expense of $331,068, including $72,252 amortization of deferred financing fees, and $213,585, including $72,252 amortization of deferred financing fees, during the three months ended September 30, 2009 and 2008, respectively.  We incurred interest expense of $927,876, including $216,755 amortization of deferred financing fees, and $490,624, including $194,300 amortization of deferred financing fees, during the nine months ended September 30, 2009 and 2008, respectively.  Our interest expense increased primarily because of the increase in the outstanding balance of our line of credit from September 30, 2008 to September 30, 2009.

Provision for Credit Losses

Our provision for credit losses totaled $323,214 and $1,002,819 for the three months and nine months ended September 30, 2009, respectively, compared to $196,704 and $337,118 for the three months and nine months ended September 30, 2008, respectively.  The increase in the provision for the three months and nine months ended September 30, 2009 compared to the three months and nine months ended September 30, 2008 is a result of a reduction of our reserve for credit losses in the first quarter of 2008, and an increase in net charge-offs in 2009 as compared to 2008. The Company assigned senior management to its account servicing and collection department in the fourth quarter of 2007, and, as a result of the improved reporting and controls over the loan losses implemented by senior management, the Company experienced an improvement in delinquencies during the first quarter of 2008. Because of this improvement in delinquencies, the Company reduced its reserve for credit losses through a lower charge to the provision during the first quarter of 2008. Net charge-offs increased in 2009 due to 1) an increase in charge-offs experienced in the first quarter of 2009, which was a result of a significant number of vehicles repossessed in late 2008, 2) approximately $124,000 in recoveries received in the first quarter 2008 on receivables that had been charged off in 2007, and 3) because of the overall growth in size of the Company’s loan portfolio from 2008 to 2009.  Net charge-offs increased to $328,814 and $888,841 for the three months and nine months ended September 30, 2009, from $218,504 and $488,671 for the three months and nine months ended September 30, 2008, respectively. As a percent of net contracts net charge-offs were 7.02% and 6.39% for the three months and nine months ended September 30, 2009, respectively, compared to 6.65% and 5.63% for the three months and nine months ended September 30, 2008, respectively. See Item 2, MANAGEMENT’S DISCUSSION AND ANALYSIS, under the heading Financial Condition – Asset Quality for a discussion of the Company’s delinquencies and actual credit loss experience and its allowance for credit losses. 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 continue to increase.

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Operating Expenses

Our operating expenses totaled $614,004 and $1,829,301 for the three months and nine months ended September 30, 2009, respectively, compared to $644,060 and $2,068,528 for the three months and nine months ended September 30, 2008, respectively.  A summary of these expenses follows:

	Three Months Ended September 30,									Nine Months Ended September 30,
	2009			2008			Percent Change			2009			2008			Percent Change
Salaries and benefits	$	433,051		$	394,005			9.91	%	$	1,159,899		$	1,242,949			-6.68	%
Professional fees		36,967			45,730			-19.16	%		175,907			207,689			-15.30	%
Information services		42,568			109,065			-60.97	%		168,743			178,767			-5.61	%
Insurance		40,071			42,073			-4.76	%		123,146			129,102			-4.61	%
Supplies and postage		19,401			27,846			-30.33	%		75,672			78,748			-3.91	%
Stockholder relations		7,735			5,305			45.81	%		31,672			69,037			-54.12	%
Other		76,522			103,200			-25.85	%		257,724			309,617			-16.76	%
Deferral of origination costs		(42,311	)		(83,164	)		-49.12	%		(163,462	)		(147,380	)		10.91	%
Total	$	614,004		$	644,060			-4.67	%	$	1,829,301		$	2,068,529			-11.57	%

Salaries and benefits increased for the three months ended September 30, 2009 as compared to 2008 because of severance costs associated with the dismissal of our loan marketing and underwriting staff in September, 2009, offset by a decrease in employee costs resulting from fewer individuals being employed by the Company in 2009 as compared to the prior year. Salaries and benefits decreased for the nine months ended September 30, 2009, as compared to 2008 because of fewer individuals employed by the Company in 2009 as compared to 2008, employee relocation expenses that occurred in 2008 that did not recur in 2009, and stock grants to the Company’s management that occurred in 2008 that did not recur in 2009.  Professional fees decreased during the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008 as a result of the December 31, 2008 accrual of fiscal 2008 audit fees, offset by examination fees billed by our lender during the nine month period ended September 30, 2009. Information services decreased for the three and nine month periods ended September 30, 2009 as compared to 2008, as a result of lower loan origination and underwriting system usage fees incurred because of the decrease in origination volume experienced during these periods. Stockholder relations decreased for the nine month period ended September 30, 2009, as compared to 2008, primarily because of the elimination of stockholder solicitation costs as a result of the reduced quorum requirement approved by the Company’s stockholders in 2008, and the systematic accrual of annual meeting expenses beginning in the 4th quarter of 2008. Supplies and postage decreased during the three month period ended September 30, 2009 as compared to 2008, because of the decrease in volume of installment contracts purchased during the period. Deferred Origination Costs decreased as a result of a decrease in the number of loans acquired during the three month period ended September 30, 2009, as compared to the three month period ended September 30, 2008. Deferred Origination Costs increased however, during the nine month period ended September 30, 2009, as compared to the nine month period ended September 30, 2008 as a result of additional origination costs identified for deferral. Other operating costs include, among other items, occupancy costs, licenses and taxes, depreciation, communications, and travel.  Other costs have decreased primarily as a result of the liquidation of our Canadian subsidiary in May 2008 and the elimination of costs related to the subsidiary.

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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 and nine month periods ended September 30, 2009 was approximately $914 and $839, respectively, per contract as compared to $679 and $677 for the three month and nine month periods ended September 30, 2008, respectively.  This increase in average acquisition cost is a result of usage costs related to loan origination and underwriting systems utilized during 2009 which were not utilized by the Company until beginning in June 2008 and lower loan acquisition volume experienced in 2009 compared to 2008. These increases have been offset by an improvement in the Company’s book to look ratio during the three and nine month period ended September 30, 2009. For the three month and nine month periods ended September 30, 2009, the Company’s book to look ratio was 5.24% and 4.87%, respectively, compared to 4.43% and 4.19% for the three month and nine month periods ended September 30, 2008.  Management is attempting to further 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, and by following up on approved applications to encourage the placement of the financing applied for with us instead of with a competitor.

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 and nine month periods ended September 30, 2009 was $9.12 and $11.31, respectively, per serviced contract, as compared to $15.74 and $21.94 during the three month and nine month periods ended September 30, 2008, respectively.  The decrease for the quarter ended September 30, 2009 reflects a restructure of the Company’s account servicing department which resulted in gains in efficiency, and investments that have resulted in lower delinquencies, fewer charge-offs and added capacity. Management anticipates that this average servicing cost per contract will continue to decrease as the size of the portfolio of installment contracts increases due to continued efficiency gains and economies of scale.

The Company formally tracks our response time for responding to credit applications received and our response time for funding loan packages submitted by dealers, and we monitor these statistics 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.

Financial Condition

Installment Contracts Portfolio

The Company acquired Installment Contracts with outstanding principal balances totaling $1,979,701 and $8,284,656, respectively, during the three months and nine months ended September 30, 2009.  We invested cash of approximately $1,834,514 and $7,722,658, respectively, to acquire these contracts.  As a result of these acquisitions, our portfolio of Installment Contracts increased from $15,938,361, net of an allowance for credit losses of $639,799, at December 31, 2008 to $17,894,729, net of an allowance for credit losses of $763,541, at September 30, 2009.

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All of the Company’s installment contracts are held for investment and are recorded at their outstanding principal balances adjusted for unamortized purchase discounts and an allowance for credit losses.  Discounts on purchased installment contracts are recognized as income over the respective contractual terms using methods that approximate the interest method.  A summary of our installment contracts portfolio as of September 30, 2009 and December 31, 2008 follows:

	September 30, 2009						December 31, 2008
	United States		Canada		Total		United States		Canada		Total
Automobiles	$	19,061,077	$	275,285	$	19,336,362	$	16,327,262	$	514,603	$	16,841,865
Other		-		231,731		231,731		-		466,626		466,626
Total		19,061,077		507,016		19,568,093		16,327,262		981,229		17,308,491
Less
Unearned discount		905,174		4,649		909,823		718,717		11,614		730,331
Allowance for
credit losses		686,826		76,715		763,541		569,794		70,005		639,799
Net	$	17,469,077	$	425,652	$	17,894,729	$	15,038,751	$	899,610	$	15,938,361

Asset Quality

Substantially all of the installment contracts we have acquired are considered sub-prime and are subject to a high degree of risk of default by the obligors.  We define sub-prime installment contracts as those entered into with borrowers that have credit scores below 620, or due to other circumstances, such borrowers have limited or no access to traditional sources of consumer credit.

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

We calculate delinquency based on the number of days payments are contractually past due.  The following table sets forth information with respect to the delinquency of our portfolio of installment contracts as of September 30, 2009 and December 31, 2008, respectively:

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	September 30, 2009
	United States					Canada					Total
	Amount		Pct.			Amount		Pct.			Amount		Pct.
Installment Contracts		19,061,077		100	%		507,016		100	%		19,568,093		100	%
Period of delinquency:
31 - 60 days		386,723		2.03	%		44,068		8.69	%		430,791		2.20	%
61 - 90 days		239,490		1.26	%		11,046		2.18	%		250,536		1.28	%
91 – 120 days		116,511		0.61	%		678		0.13	%		117,189		0.60	%
121+ days		68,179		0.36	%		-		0.00	%		68,179		0.35	%
Total		810,903		4.24	%		55,792		11.01	%		866,695		4.43	%

	December 31, 2008
	United States					Canada					Total
	Amount		Pct.			Amount		Pct.			Amount		Pct.
Installment Contracts		16,327,262		100	%		981,228		100	%		17,308,490		100	%
Period of delinquency:
31 - 60 days		392,693		2.41	%		70,388		7.17	%		463,081		2.68	%
61 - 90 days		228,915		1.40	%		33,887		3.45	%		262,802		1.52	%
91 – 120 days		38,276		0.23	%		34,230		3.49	%		72,506		0.42	%
121+ days		51,720		0.32	%		7,317		0.75	%		59,037		0.34	%
Total		711,604		4.36	%		145,822		14.86	%		857,426		4.96	%

At December 31, 2008, delinquent accounts, defined as accounts more than 30 days contractually past due, totaled 4.96% of our outstanding installment contracts.  Delinquencies declined as of September 30, 2009 to 4.43% of our outstanding installment contracts.  The decrease is attributable to the Company’s devotion of senior management personnel to its account servicing and collection efforts. New controls and systems were implemented by management beginning in 2008 to better monitor delinquent accounts, resulting in fewer delinquencies and credit losses. We expect delinquencies as a percent of the total portfolio in the United States to remain constant throughout 2009, unless continued adverse economic conditions cause higher unemployment or underemployment, or an increase in consumer prices (such as fuel), or some other significant event occurs that affects our borrowers’ ability to make their payments.

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The following tables set forth information with respect to actual credit loss experience in our portfolio of installment contracts for the three and nine months ended September 30, 2009 and 2008, respectively:

	Three Months Ended September 30,
	2009									2008
	United States			Canada			Total			United States			Canada			Total
Installment Contracts, net of unearned discounts, end of period	$	18,155,903		$	502,367		$	18,658,270		$	13,281,120		$	1,404,854		$	14,685,974
Installment Contracts, net of unearned discounts, average during the period (1)		18,202,108			543,484			18,745,592			11,510,460			1,627,893			13,138,353
Gross charge-offs		532,243			14,383			546,626			330,190			54,409			384,599
Recoveries		213,804			4,008			217,812			162,787			3,308			166,095
Net charge-offs		318,439			10,375			328,814			167,403			51,101			218,504
Net charge-offs as a % of avg. contracts during the period (annualized)		7.00	%		7.64	%		7.02	%		5.82	%		12.56	%		6.65	%
(1) - Average is based on month-end balances

	Nine Months Ended September 30,
	2009									2008
	United States			Canada			Total			United States			Canada			Total
Installment Contracts, net of unearned discounts, end of period	$	18,155,903		$	502,367		$	18,658,270		$	13,281,120		$	1,404,854		$	14,685,974
Installment Contracts, net of unearned discounts, average during the period (1)		17,931,267			615,022			18,546,289			9,569,122			2,007,645			11,576,767
Gross charge-offs		1,549,278			63,797			1,613,075			1,053,030			132,607			1,185,637
Recoveries		701,817			22,417			724,234			663,341			33,625			696,966
Net charge-offs		847,461			41,380			888,841			389,689			98,982			488,671
Net charge-offs as a % of avg. contracts during the period (annualized)		6.30	%		8.97	%		6.39	%		5.43	%		6.57	%		5.63	%
(1) - Average is based on month-end balances

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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. The Company incurs a charge against its earnings, as a provision for credit losses, based on this analysis as described in Item 2, MANAGEMENT’S DISCUSSION AND ANALYSIS, under the heading Results of Operations – Provision for Credit Losses.

Our allowance for credit losses was $763,541 at September 30, 2009 compared to $639,799 at December 31, 2008.  As a percentage of our outstanding net Installment Contracts, our allowance for credit losses was 4.09% at September 30, 2009 and 3.86% at December 31, 2008. The allowance for credit losses was 13.82% and 18.42% of past due accounts and 88.10% and 107.92% of accounts considered delinquent as of September 30, 2009 and 2008 respectively.

During the nine months ended September 30, 2009, our net Installment Contracts increased $2,080,110.  This increase was the result of a $2,310,393 increase in automobile-secured contracts offset by a $230,283 decrease in all other Installment Contracts.  The $2,310,393 increase in automobile-secured Installment Contracts was comprised of a $2,556,884 increase in Installment Contracts acquired through our U.S. point-of-sale program offset by a $236,964 decrease in Installment Contracts acquired through our Canadian point-of-sale program, and a $9,527 decrease in Installment Contracts acquired through bulk purchases.

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. For these reasons, our historical loss ratios may not be relied upon as predictions of the future performance of our portfolio or our future loss experience.

During the nine months ended September 30, 2009, we experienced net charge-offs of $888,841, which represented 6.39% of our average outstanding installment contracts during the period.  During the year ended December 31, 2008, we experienced net charge-offs of $751,578, which represented 5.96% of our average outstanding installment contracts during the year.

The allowance for credit losses as of September 30, 2009 of $763,541 is 4.09% 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 September 30, 2009.

The following tables set forth the activity in the allowance for credit losses for the three months and nine months ended September 30, 2009 and 2008, respectively:

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	Three Months Ended September 30,
	2009									2008
	United States			Canada			Total			United States			Canada			Total
Balance at beginning of period	$	682,051		$	80,320		$	762,371		$	569,794		$	106,146		$	675,940
Charge-offs		(532,243	)		(14,383	)		(546,626	)		(330,190	)		(54,409	)		(384,599	)
Recoveries		213,804			4,008			217,812			162,787			3,308			166,095
Net charge-offs		(318,439	)		(10,375	)		(328,814	)		(167,403	)		(51,101	)		(218,504	)
Provision for credit losses		323,214			-			323,214			167,403			29,301			196,704
Effect of foreign currency translation		-			6,770			6,770			-			(4,281	)		(4,281	)
Balance at end of period	$	686,826		$	76,715		$	763,541		$	569,794		$	80,065		$	649,859

	Nine Months Ended September 30,
	2009									2008
	United States			Canada			Total			United States			Canada			Total
Balance at beginning of period	$	569,794		$	70,005		$	639,799		$	670,222		$	141,154		$	811,376
Charge-offs		(1,549,278	)		(63,797	)		(1,613,075	)		(1,053,030	)		(132,607	)		(1,185,637	)
Recoveries		701,817			22,417			724,234			663,341			33,625			696,966
Net charge-offs		(847,461	)		(41,380	)		(888,841	)		(389,689	)		(98,982	)		(488,671	)
Provision for credit losses		964,493			38,326			1,002,819			289,261			47,857			337,118
Effect of foreign currency translation		-			9,764			9,764			-			(9,964	)		(9,964	)
Balance at end of period	$	686,826		$	76,715		$	763,541		$	569,794		$	80,065		$	649,859

Liquidity and Capital Resources

The Company received notice in June 2009 from its lender that the lender is no longer extending credit to finance companies and thus our line of credit will not be renewed or extended when it matures in January, 2010.  As a result of the current economic conditions and tight credit markets, we have been unable to refinance our bank line of credit. If an outstanding balance remains on the credit facility on the maturity date, we will be considered in default and the entire outstanding balance of the credit facility will become immediately due and payable.  To cure the default the lender could assume ownership of all of our assets and liquidate the assets in a manner the lender deems satisfactory in order to satisfy the line of credit balance. To date, we have not been able to secure additional financing with terms acceptable to us.

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On October 19, 2009, we entered into an Auto Receivables Purchase Agreement, pursuant to which we will, subject to certain terms and conditions, including approval by the stockholders at a Special Meeting of stockholders to be held November 30, 2009, sell substantially all of our retail installment contracts to the third party.  As consideration for this sale, we will receive an amount for such retail installment contracts calculated by a formula applying certain percentages to the outstanding principal amount of receivables of differing credit categories.  Based on the balance of the various categories estimated as of the projected sale date, the estimated purchase price would be approximately $15.0million.  The amount will vary due to principal payments and the credit quality of the portfolio at the time of the sale.

In anticipation of the Company entering into an agreement to sell its portfolio of retail installment contracts, on September 23, 2009, the Company suspended purchasing retail installment contracts and dismissed its entire marketing and underwriting staff.

On October 9, 2009, we entered into an amendment to our loan agreement with our Lender.  Under this amendment, all funds coming into the lockbox account, after payment of interest and the fees provided under the loan agreement will be applied by the Lender to reduce the principal balance of the ReMark loan and will not be remitted to us as was the practice under the loan agreement before the amendment.  In addition, the Lender will not provide further advances under loan in excess of the $12,042,000 current balance.  We believe that we have sufficient cash available for operations until the asset sale takes place.

The Company began 2009 with $2,145,436 cash on hand and had cash on hand of $2,192,134 at September 30, 2009.  Operating activities provided cash of $1,023,917 during the nine month period ended September 30, 2009.

We invested cash of approximately $7,722,000 to acquire installment contracts during the nine month period ended September 30, 2009.  We collected principal payments on our installment contracts of approximately $4,457,000 during the nine month period ended September 30, 2009.

During the nine months ended September 30, 2009 the Company received net advances on its bank line of credit totaling $2,050,000, to partially fund the acquisition of Installment Contracts.  Total advances outstanding under the line of credit agreement as of September 30, 2009 totaled approximately $12,042,000.

We paid financing fees totaling $472,347 during 2008 in connection with fund raising activities performed by our investment banking firms and fees paid to our lender. These financing fees have been deferred and are being amortized to interest expense over the term of the line of credit.  The fees amortized during the nine month period ended September 30, 2009 amounted to $216,756.

The Company’s current agreement with its investment banking firm requires the Company to pay total aggregate transaction fees of not less than $550,000 to the investment banking firm should the Company consummate a loan transaction with a lender or other party that the investment banking firm introduces to the Company. If the transaction were to be consummated as a sale of all or a portion of the Company’s receivables, the fee would be 2.5% multiplied by the amount of consideration received by the Company for the sale. As of September 30, 2009, the Company had paid fees amounting to $65,000 to the investment banking firm.

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 September 30, 2009.

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The Company spent approximately $35,000 upgrading its underwriting and loan servicing systems during the fiscal year ended December 31, 2008.  The Company had no additional material commitments for capital expenditures as of September 30, 2009.  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.

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 up to 20 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 $328,400 as of September 30, 2009.  Typically, the Company funds between 20% and 30% of its outstanding commitments.

The Company is also obligated under a noncancelable lease for its principal office with a term of five years.  Future minimum payments under this lease as of September 30, 2009 are as follows:

2009		12,686
2010		50,740
2011		50,740
2012		50,740
2013		29,599
Total	$	194,505

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 an officer whose employment is terminated due to a permanent disability, or after death, at the option of the officer’s estate, 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 Agreement filed as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on August 17, 2007 and the Management Shareholder Agreement filed as Exhibit 1 to the Company’s Form 8-K filed with the SEC on December 20, 2007.

The Company’s current agreement with its investment banking firm requires the Company to pay total aggregate transaction fees of not less than $550,000 to the investment banking firm should the Company consummate a loan transaction with a lender or other party that the investment banking firm introduces to the Company. If the transaction were to be consummated as a sale of all or a portion of the Company’s receivables, the fee would be 2.5% multiplied by the amount of consideration received by the Company for the sale. As of September 30, 2009, the Company had paid fees amounting to $65,000 to the investment banking firm.

As of September 30, 2009, the Company had entered into an agreement to sell substantially all of its consumer loan portfolio to an unrelated third party.  The purchase agreement for the transaction provided for a $150,000 breakage fee if the Company elected to terminate or failed to consummate the sale.  On October 19, 2009, the Company entered into a new purchase agreement with a different unrelated third party at a substantially higher sale price and terminated the first purchase agreement and on October 20, 2009, paid the $150,000 breakage fee.  The second purchase agreement provides for a $300,000 breakup fee if the Company elects to terminate the agreement.

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The Company had no other off-balance sheet arrangements as of September 30, 2009.

Recent Developments

We have diligently sought a credit facility refinancing or other capital infusion, which would allow us to pay off the ReMark Loan when it matures January 31, 2010, but the only solution that is currently available in the prevailing market conditions is a sale of our loan portfolio.

On September 29, 2009, we entered into an Auto Receivables Purchase Agreement (the “FIFS Purchase Agreement”) with First Investors Financial Services, Inc. (“FIFS”), an unrelated financial services company. 

Pursuant to the Purchase Agreement, we agreed to sell all or substantially all of our portfolio of subprime used automobile installment sales contracts and other consumer receivables to FIFS for a cash purchase price calculated as the sum of a percentage of the outstanding principal balance of Receivables falling in different classes based upon their aging on the closing date. 

The Purchase Agreement provided for a $150,000 breakup fee to FIFS if we terminated the agreement or failed to consummate the Asset Sale.

On October 19, 2009, we entered into an Auto Receivables Purchase Agreement (the “ACA Purchase Agreement”) with American Credit Acceptance, LLC, an unrelated South Carolina limited liability company (“ACA”).  As a result of entering into the ACA Purchase Agreement, we terminated the Auto Receivables Purchase Agreement FIFS, Inc.  

Pursuant to the ACA Purchase Agreement, we have agreed to sell our portfolio of subprime used automobile installment sales contracts to ACA for a cash purchase price calculated as the sum of a percentage of the outstanding principal balance of Receivables falling in different classes based upon their aging and collectability on the closing date (the “ACA Asset Sale”). The aggregate purchase price payable by ACA for the Receivables is substantially higher than the price FIFS had agreed to pay under the FIFS Purchase Agreement, even after considering the breakup fee required by the FIFS Purchase Agreement.  

 We intend to use the proceeds from the ACA Asset Sale primarily to pay off our $15 million secured revolving warehouse line of credit (the “Remark Loan”) with ReMark Lending Co. (“Lender”), which had a principal balance of approximately $12 million as of September 30, 2009.  

 The projected closing date for the ACA Asset Sale is on or before December 15, 2009.  Consummation of the ACA Asset Sale is subject to fulfillment of a number of conditions, including approval by our stockholders.  There can be no assurance the ACA Asset Sale will close. 

The ACA Purchase Agreement provides for a breakup fee of $300,000 to ACA if we elect to terminate or fail to consummate the ACA Asset Sale, unless we terminate the ACA Purchase Agreement because we are able to obtain financing that will allow us to refinance the ReMark Loan. 

On October 20, 2009, we provided written notice to FIFS that we have terminated the FIFS Purchase Agreement.  We paid a $150,000 breakup fee to FIFS on termination, as required by the FIFS Purchase Agreement.

On October 9, 2009, we entered into an Amendment to our Revolving Loan and Security Agreement our Lender.  Since the Purchase Agreement with FIFS provided for the sale of our receivables at less than the price at which we can purchase new receivables from our independent dealer network, we announced on September 23, 2009 that we were suspending the purchase of new auto loan receivables from our network of independent used automobile dealerships. 

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The Lender has characterized the Asset Sale and our suspension of receivables purchases as a material adverse change in our business that constitutes an Event of Default and a Funding Termination Event under the Loan Agreement and that, as a consequence, the Lender asserts it is entitled to cease making further advances to us, declare the entire balance of the Remark Loan immediately due and payable, and enforce the Lender’s security interest in all of our assets.  We are not in default in the payment of any amount due under the Loan Agreement.  The Asset Sale and our suspension of purchasing new auto loan receivables were intended to enable us to pay off the ReMark Loan by the maturity date.  We were disappointed that the Lender elected to treat these events as an Event of Default and a Funding Termination Event under the Loan Agreement.  Nevertheless, we have agreed to the Amendment in order to avoid an acceleration of the ReMark Loan and the Lender’s sale of all of our assets that secure the ReMark Loan at this time.  Pursuant to the Amendment: 

· We agree that an uncured Event of Default exists and is continuing under the Loan Agreement

· The Lender has agreed to forbear from exercising certain default remedies under the Loan Agreement until November 9, 2009

· The Lender has the right to appoint a Supervisory Servicer to monitor or take over our receivables servicing function at our expense

· All funds coming into the lockbox account, after payment of interest and the fees provided under the Loan Agreement (including those of a Supervisory Servicer if one is appointed), will be applied by the Lender to reduce the principal balance of the ReMark Loan and will not be remitted to us as was the practice under the Loan Agreement before the Amendment.  This should result in a more rapid paydown of the ReMark Loan

· The Lender will not provide further advances under the ReMark Loan in excess of the $12,042,000 current balance.  We had not planned to request additional advances under the ReMark Loan

· The Lender will accrue Default Rate Interest equal to the existing rate plus 4.5% commencing September 23, 2009.  The existing Note Rate of interest will be payable prior to the expiration of the forbearance period, and the difference between the Note Rate and the Default Rate Interest will be payable after expiration of the forbearance period

· The forbearance period will automatically expire on the earlier of (i) November 9, 2009, (ii) any termination of the Asset Sale, (iii) any other Event of Default under the Loan Agreement, or (iv) any default in performance of the Amendment

On November 4, 2009, we entered into an Amendment No. 3 to our Revolving Loan and Security Agreement and Forbearance ("Amendment 3"). The Lender had determined that our pending Asset Sale and our decision on September 23, 2009 to suspend the purchase of new receivables represented a change in our business that constitutes an Event of Default under the Loan and Security Agreement. Pursuant to Amendment 3 and an accompanying letter agreement, the Lender has agreed (a) to consent to the Asset Sale to ACA, and (b) to forbear from exercising its default rights under the Loan Agreement until the earliest of (i) December 15, 2009, (ii) the date on which the ACA Purchase Agreement is terminated, and (iii) a breach of any of the conditions expressed in Amendment 3. Assuming the Asset Sale is approved by our stockholders at the special meeting to be held November 30, 2009, we intend to consummate the Asset Sale and pay off the ReMark Loan by December 15, 2009. Amendment 3 thus gives us the ability to close the Asset Sale and pay off the ReMark Loan before the forbearance period expires, thus avoiding an acceleration of the ReMark Loan and the foreclosure of our assets. 

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On October 6, 2009, our Board of Directors approved a Plan of Dissolution and Complete Liquidation of the Company (“Plan of Dissolution”). 

Pursuant to the Plan of Dissolution we plan to sell and reduce to cash all or substantially all of our non-cash assets (including the receivables being sold in the Asset Sale) and (i) pay or provide for all claims and obligations known to us (including the ReMark Loan), (ii) provide for any claim which is the subject of a pending action, suit or proceeding to which we are a party, (iii) provide for claims that have not been known to us but are likely to arise within 5 years after the Effective Date of our dissolution, (iv) create a contingency reserve to satisfy claims, obligations and expenses incurred in connection with the liquidation, and (vi) distribute any remaining funds to our stockholders. 

Our management, Board and financial adviser have tried without success to obtain alternative financing to refinance the ReMark Loan to support our continued operations.  To date, however, no such financing has been obtained.  Following the payoff of the ReMark Loan, without a substitute credit facility, the Board and management do not believe we will have sufficient capital and assets to operate profitably.

ITEM 3.          Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this item.

ITEM 4.          Controls and Procedures

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

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2009.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 4T.       Controls and Procedures

Not applicable.

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PART II. - OTHER INFORMATION

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 of Certificate of Incorporation  (1)
3.1.2	Certificate of Amendment of Certificate of Incorporation (2)
3.2	Bylaws  (1)
3.2.1	Amendment to Bylaws  (1)
3.2.2	Amendment to Bylaws  (2)
4.1	Amended and Restated Trust Agreement of Freedom Financial Group I Statutory Trust  (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 Form 10-Q on November 6, 2008, and incorporated herein by reference.

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SIGNATURES

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

		FREEDOM FINANCIAL GROUP, INC.
Date:	November 9, 2009		By:	/s/ Jerald L. Fenstermaker
			Jerald L. Fenstermaker
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	November 9, 2009		By:	/s/ J. Kevin Maxwell
			J. Kevin Maxwell
			Treasurer and Chief Financial Officer
			(Principal Financial Officer)

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