**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**





**FORM
      10-Q**





**x**
            **Quarterly
                Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934**




For
      the
      quarterly period ended: February 28, 2007





**o**
            **Transition
                Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934**




For
      the
      transition period from ________ to _________




Commission
      File Number: 000-50477




**MANCHESTER
      INC.**


(Exact
      Name of Registrant as specified in its charter)




**NEVADA**
              **98-0380409**(State
                  or other jurisdiction of
              (IRS
                  Employerincorporation
                  or organization)
              Identification
                  Number)





**100
      Crescent Court, 7** **th** **Floor**


**Dallas,
      Texas 75201**


(Address
      of principal executive offices)





**(214)
      459-3230**


(Registrant’s
      telephone number, including area code)





**N/A**


(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
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


x
      Yes  o No





Indicate
      by check mark whether the registrant is a Large Accelerated Filer, an
      Accelerated Filer, or a Non-Accelerated Filer. See definitions of “Accelerated
      Filer and Large Accelerated Filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      Accelerated Filer o   Accelerated
      Filer x   Non-Accelerated
      Filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


o
      Yes x No





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      equity, as of the latest practicable date: 34,280,037 shares
      of $0.001 par value common stock outstanding as of April 12, 2007.





**PART
      I:**  **FINANCIAL
      INFORMATION**


**MANCHESTER,
                  INC AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS****(Stated
                  in U.S. Dollars)**
  **FEBRUARY
                  28,**
              
              **NOVEMBER
                  30,****2007**
              
              **2006**(unaudited)
              
              See
                  Note 1**ASSETS**Current
                  AssetsCash
                  and cash equivalents
              
              $
              2,133,017
              
              $
              621,609Short
                  term investments and refundable deposits
              
              
              463,748
              
              
              2,367,703Accounts
                  and contracts receivable, net
              
              
              82,459,426
              
              
              61,612,291Inventory
              
              
              2,645,687
              
              
              3,394,276Prepaids
                  and other assets
              
              
              747,908
              
              
              218,959Property,
                  plant and equipment, net
              
              
              2,043,253
              
              
              914,059Goodwill
              
              
              14,478,760
              
              
              9,479,356Deferred
                  loan costs, net
              
              
              14,340,976
              
              
              14,309,709Deferred
                  state income taxes
              
              
              133,989
              
              
              133,989Other
                  assets
              
              
              242,715
              
              
              -Total
                  Assets
              
              $
              119,689,477
              
              $
              93,051,951**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Accounts
                  payable
              
              $
              1,437,779
              
              $
              627,639Accrued
                  liabilities and expenses
              
              
              2,877,918
              
              
              534,798Revolving
                  line of credit
              
              
              75,284,646
              
              
              56,948,557Notes
                  payable
              
              
              6,205,804
              
              
              4,619,741Notes
                  payable stockholders
              
              
              13,254,986
              
              
              9,871,996Reserve
                  for repairs
              
              
              6,060,987
              
              
              6,060,987Deferred
                  revenue
              
              
              194,671
              
              
              -Capital
                  leases payable
              
              
              144,468
              
              
              251,743Total
                  Liabilities
              
              
              105,461,260
              
              
              78,915,460**STOCKHOLDERS’
                  EQUITY**Common
                  Stock Authorized:100,000,000
                  common shares, no par value $0.001 per share,32,726,500
                  and 34,280,037 shares issues and outstanding at November 30, 2006
                  and
                  February 28, 2007, respectively
              
              
              34,218
              
              
              32,726Additional
                  paid in capital
              
              
              20,731,755
              
              
              17,615,747Accumulated
                  deficit
              
              
              (6,537,755
              )
              
              (3,511,983
              )Total
                  Stockholders’ Equity
              
              
              14,228,217
              
              
              14,136,490Total
                  Liabilities and Stockholders Equity
              
              $
              119,689,477
              
              $
              93,051,951
  The
        accompanying notes are an integral part of these interim financial
        statements




2


**MANCHESTER,
                  INC AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF INCOME****(Stated
                  in U.S. Dollars)**
  **For
                  the Three Months**
                **Ended
                  February 28,****2007**
              
              **2006**(unaudited)Revenues:Net
                  vehicle sales
              
              $
              18,201,597
              
              $
              -Interest
                  income
              
              
              5,082,401
              
              
              -Total
                  income
              
              
              23,283,998
              
              
              -Cost
                  of sales
              
              
              10,244,500
              
              
              -Gross
                  profit
              
              
              13,039,498
              
              
              -Expenses:Selling,
                  general and administrative
              
              
              3,214,158
              
              
              104,489Provision
                  for credit losses
              
              
              8,022,793
              
              
              -Interest
                  expense
              
              
              3,218,829
              
              
              3,149Depreciation
                  and amortization
              
              
              161,589
              
              
              342Financing
                  and other fees
              
              
              241,693
              
              
              -Total
                  expenses
              
              
              14,859,062
              
              
              107,980Operating
                  loss
              
              
              (1,819,564
              )
              
              (107,980
              )Other
                  Expense:Amortization
                  of warrants
              
              
              (1,088,708
              )
              
              -Stock
                  option for service
              
              
              (117,500
              )
              
              -Loss
                  before taxes
              
              
              (3,025,772
              )
              
              (107,980
              )Income
                  tax provision (benefit)
              
              
              -
              
              
              -Net
                  loss
              
              $
              (3,025,772
              )
              $
              (107,980
              )Net
                  loss per share applicable to common shareholdersBasic
                  and diluted
              
              $
              (0.09
              )
              $
              (0.00
              )Weighted
                  average number of common shares and common share equivalent outstanding
              
              
              33,762,025
              
              
              33,137,500
  The
          accompanying notes are an integral part of these interim financial
          statements


3


**MANCHESTER,
                INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENT OF CASH FLOW**




**For
                the Three Months**
              **Ended
                February 28,****2007**
            
            **2006**(unaudited)Net
                Loss
            
            $
            (3,025,772
            )
            $
            (107,980
            )Adjustments
                to reconcile net income (loss) tonet
                cash used in operating activities:Provision
                for credit losses
            
            
            3,256,619
            
            
            -Depreciation
                and amortization
            
            
            160,412
            
            
            342Amortization
                deferred financing
            
            
            1,338,734
            
            
            -Changes
                in assets and liabilities:Decrease
                (increase) in refundable deposits
            
            
            436,252
            
            
            (250,000
            )Increase
                in accounts and contracts receivable, net
            
            
            (1,008,068
            )
            
            -Decease
                in inventory
            
            
            1,143,875
            
            
            -Increase
                in prepaids and other current assets
            
            
            (324,720
            )
            
            -Decrease
                in accounts payable
            
            
            (234,844
            )
            
            -Increase
                in accrued interest
            
            
            1,002,485
            
            
            3,192Increase
                in accrued expenses and liabilities
            
            
            712,196
            
            
            20,418Net
                cash in operating activities
            
            
            3,457,167
            
            
            (334,028
            )Cash
                flows from investing activites:Acquisition
                of business, net of cash acquired
            
            
            
            
            
            -Purchase
                of property, plant and equipment
            
            
            (68,122
            )
            
            (6,088
            )Net
                cash used in investing activities
            
            
            (68,122
            )
            
            (6,088
            )Cash
                flows from financing activitesDeferred
                loan costs incurred
            
            
            (1,370,000
            )
            
            -Decrease
                in deferred revenue
            
            
            (69,625
            )
            
            -Payments
                on notes payable
            
            
            (22,567,147
            )
            
            -Proceeds
                from loans
            
            
            22,151,519
            
            
            349,204Payments
                on capital leases
            
            
            (107,275
            )
            
            -Proceeds
                from stockholder loans, net of repayments
            
            
            84,889
            
            
            -Net
                cash in financing activities
            
            
            (1,877,638
            )
            
            349,204Increase
                in cash and cash equivalents
            
            
            1,511,408
            
            
            9,088Cash
                and cash equivalents at beginning of year
            
            
            621,609
            
            
            777Cash
                and cash equivalents at end of period
            
            $
            2,133,017
            
            $
            9,865Supplemental
                Disclosure of Cash Flow InformationCash
                paid during the period for interest
            
            $
            2,345,991
            
            $
            -Cash
                paid during the period for income taxes
            
            $
            -
            
            $
            -




The
      accompanying notes are an integral part of these interim financial
      statements


4


**MANCHESTER,
                INC AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS — (Continued)**




**For
                the Three Months**
              **Ended
                February 28,****2007**
            
            **2006**(unaudited)Supplemental
                disclosures of non-cash investing and financing
                activities:Stock
                issued to acquire business
            
            $
            3,000,000
            
            $
            -Notes
                issued to acquire business
            
            $
            3,150,000
            
            $
            -Amortization
                of common stock warrants beneficial conversion
                feature
            
            $
            1,088,708
            
            $
            -Relative
                fair value of common stock options issued for
                services
            
            $
            117,500
            
            $
            -


5




**MANCHESTER,
      INC. AND SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**February
      28, 2007 (Unaudited)**





**NOTE
                1.****ORGANIZATION,
                OPERATION AND BASIS OF
                PRESENTATION**




The
      Company was incorporated on August 27, 2002 under the laws of the state of
      Nevada. The Company commenced business as an exploration stage mining and
      mineral resources company. During that time, the Company had been determined
      to
      be a development stage company under the definition of SFAS 7. The mining
      exploration activities ceased on April 30, 2004 and subsequently the Company
      began seeking an alternative line of business. In 2006 the Company began
      principal operations and ended its status as an exploration stage
      company.





On
      October 4, 2006, the Company acquired a Buy-Here/Pay-Here used car sales
      enterprise. The transaction consisted of the acquisition of Nice Cars, Inc.,
      car
      sales company and Nice Cars Capital Acceptance Corporation, an affiliate credit
      acceptance company (collectively, the “Nice Cars Acquisition”) by two of the
      Company’s wholly-owned subsidiaries Nice Cars Operations Acquisition Co, Inc.
      and Nice Cars Acceptance Acquisition Co, Inc. (collectively, the “Manchester
      Nice Cars Acquisition Subsidiaries”). Nice Cars, Inc. was incorporated under the
      laws of the state of Georgia on May 21, 1998. Nice Cars Capital Acceptance
      Corporation was incorporated under the laws of the state of Georgia on May
      10,
      2000. The operations for the two months ended November 30, 2006 are included
      in
      the consolidated statement of income.




The
      Company paid $18,051,054, incurred $9,372,095 in notes payable to the prior
      stockholders and issued 6.25 million shares of the Company’s common stock to
      acquire Nice Cars, Inc. and Nice Cars Capital Acceptance Corporation. As part
      of
      the purchase price, the Company also agreed to the assumption of certain
      obligations and liabilities. The Company acquired Nice Cars, Inc. and Nice
      Cars
      Capital Acceptance Corporation pursuant to the terms of two share purchase
      and
      exchange agreements.




For
      federal income tax reporting, the company will file consolidated income tax
      returns. For state income and franchise tax reporting, Manchester, Inc. and
      Nice
      Cars are separate legal entities with each company filing separate state tax
      returns.





Nice
      Cars
      has operating locations in Tennessee and Georgia. The Nice Cars corporate and
      administrative offices are located in Fort Oglethorpe, Georgia. The corporate
      and administrative offices of Manchester, Inc. are located in Dallas,
      Texas.





On
      December 29, 2006, the Company acquired a second Buy-Here/Pay-Here used car
      sales enterprise. The transaction consisted of the acquisition of F.S.
      English, Inc., a Buy-Here/Pay Here car sales company, and GNAC, Inc., its
      affiliated credit acceptance company ,
      by two
      special purpose wholly-owned acquisition subsidiaries of the Company that were
      incorporated under the laws of the state of Delaware on November 21, 2006.
      Following the acquisition, F.S. English, Inc. and GNAC were merged into the
      Company’s subsidiaries and now operate under the names “Freedom Auto Sales” and
“Freedom Auto Acceptance” (collectively, the “Freedom Companies”). The
      operations of the Freedom Companies the two months ended February 28, 2007
      are
      included in the consolidated statement of income.





The
      Freedom Companies’ corporate predecessors’ financial statements for the calendar
      years ended December 31, 2005 and 2004, respectively, were audited by Katz,
      Sapper & Miller, LLP, a large audit, accounting and professional services
      firm in Indianapolis, Indiana. Manchester Inc. has engaged its public accounting
      firm of Rodefer Moss & Co, PLLC (“Rodefer Moss”) to perform the audit for
      the year ended December 31, 2006, the results of which will be incorporated
      on
      Form 8-K to be filed in the second quarter. The consolidated financial
      statements of Manchester, Inc. for the three months ended February 28, 2007
      were
      prepared on the basis that no material misstatements would result from the
      audit
      of the Freedom Companies corporate predecessors’ financial statements for their
      respective fiscal-year ended December 31, 2006.





6




**NOTE
                2.****SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of Manchester, Inc.
      and
      its subsidiaries. The Consolidated Statements of Income include Manchester,
      Inc
      and Nice Cars for the three months ended February 28, 2007 and the operations
      of
      Freedom Auto Sales for the two months ended February 28, 2007. All intercompany
      accounts and transactions have been eliminated.




**Reclassifications**
 
 Certain
        previously reported amounts have been reclassified to
        conform to the February 28, 2007 financial statement
        presentation.





**Revenue,
      Costs and Expense Recognition**





The
      Company recognizes revenues from vehicle sales, and the related cost of sales,
      upon delivery to the customer.




Interest
      and discount income are recognized using the effective interest method, as
      payments are received on the sales contracts. Interest and discount income
      are
      suspended when a contract is two payment periods (weekly, bi-weekly or monthly)
      delinquent. Recognition of interest and discount income resumes if the contract
      becomes contractually current. Past-due interest and discount income are also
      recognized at that time. In addition, a detailed review of contract receivables
      will cause earlier suspension of recognition of interest and discount income
      if
      collection is doubtful, or if other related facts detrimental to the contracts
      become known.




Contracts
      receivable are reported at their outstanding principal balances, net of amounts
      estimated to be uncollectible, deferred interest on the purchased contracts,
      and
      sales taxes due from customers but not payable to the applicable states until
      collected.





Allowance
      for uncollectible contracts is increased by charges to income, and decreased
      by
      charge-offs, net of recoveries. Management’s periodic evaluation of the adequacy
      of the allowance is based upon the Company’s past loss experience, known and
      inherent risk, adverse situations that may affect the customer’s ability to make
      payments as agreed, the estimated fair market value of the underlying
      collateral, and current economic conditions. Contracts receivable are classified
      as delinquent after one missed payment. After two missed payments, repossession
      proceedings of the collateral underlying the contract are commenced. Upon
      repossession of the collateral, the contract is charged off.





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid investments purchased with a maturity at
      the
      date of purchase of three months or less to be cash equivalents.





**Inventory**





Inventory
      is stated at the lower of cost or market on a specific identification
      basis.





**Property,
      Plant and Equipment**





Property
      and equipment are recorded at cost. Expenditures for repairs and maintenance
      are
      charged to expense as incurred. Expenditures for additions and improvements
      that
      significantly extend the lives of assets are capitalized. Upon the sale or
      other
      retirement of depreciable property, the cost and accumulated depreciation are
      eliminated from the related accounts and any gain or loss is reflected in
      operations. Depreciation is computed on the straight line and accelerated
      methods over the estimated useful lives of the depreciable assets, which range
      from 3-10 years.




**Per
      Share Amounts**





The
      basic
      net income (loss) per common share has been computed based upon the weighted
      average number of shares of Common Stock outstanding. Diluted net income (loss)
      per common share has been computed based upon the weighted average number of
      shares of Common Stock outstanding and shares that would have been outstanding
      assuming the issuance of Common Stock for all potentially dilutive securities
      outstanding. The Company’s outstanding stock options and warrants represent the
      only potentially dilutive securities outstanding. Diluted net loss per common
      share is equal to the basic net loss per common share for the three months
      ended
      February 28, 2007 and 2006 as common equivalent shares from stock options and
      stock warrants would have an anti-dilutive effect because of the loss from
      continuing operations. As of February 28, 2007, there were 4,050,000 shares
      of
      potentially dilutive securities from vested options and warrants.




7




**Stock
      Based Compensation**





Statement
      of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for
      Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for
      Stock-Based Compensation — Transition and Disclosure,” prescribes
      accounting and reporting standards for all stock-based compensation plans,
      including employee stock option plans. As allowed by SFAS No. 123, the
      Company has chosen to continue to account for stock-based compensation using
      the
      intrinsic value method prescribed in Accounting Principles Board Opinion
      No. 25, “Accounting for Stock Issued To Employees,” and related
      interpretations. This method does not require compensation to be recorded if
      the
      consideration to be received is at least equal to the fair value of the Common
      Stock to be received at the measurement date. Under the requirements of
      SFAS No. 123, non-employee stock-based transactions require
      compensation to be recorded based upon the fair value of the securities issued
      or the services received, whichever is more reliably measurable.





Had
      compensation cost for the stock option plans been determined consistent with
      Statement of Financial Accounting Standards No. 123, “Accounting for
      Stock-Based Compensation,” the pro forma basic and diluted net loss per common
      share would have been as follows:




**Three
                  Months Ended February 28, 2007**Net
                  loss applicable to common shareholders
              
              $
              (3,025,772
              )Deduct:
                  Stock based employee compensation expense determined under fair
                  value
                  method
              
              
              117,500Pro
                  forma net loss applicable to common shareholders
              
              $
              (2,908,272
              )Basic
                  and diluted net loss:As
                  reported
              
              $
              (0.09
              )Pro
                  forma
              
              $
              (0.09
              )





**Income
      Taxes**





Income
      taxes are accounted for under the liability method. Under this method, deferred
      tax assets and liabilities are determined based on the differences between
      the
      financial reporting and tax basis of the assets and liabilities and are measured
      using the enacted rates expected to be apply in the years in which these
      temporary differences are to be recovered or settled.




Income
      taxes are provided for the tax effects of transactions reported in the
      consolidated financial statements and consist of any taxes currently due, plus
      deferred taxes. Deferred taxes are derived primarily from timing differences
      in
      the deductibility of bad debts for financial and income tax reporting, and
      operating losses that are available to offset future state taxable
      income. If it is more likely than not that some portion or all of a
      deferred tax asset will not be realized, a valuation allowance is recognized.
      The Company may be audited by taxing authorities. These audits could result
      in
      proposed assessments of additional taxes. The Company believes that its tax
      positions comply in all material aspects with the applicable tax law. However,
      tax law is subject to interpretation, and interpretations by taxing authorities
      could be different from those of the Company, which could result in the
      imposition of additional taxes.




**Advertising**





The
      Company expenses advertising production and communication costs as they are
      incurred. The total advertising expense for the three months ended February
      28,
      2007 was $472,228.





**Deferred
      loan costs**




Loan
      and
      debt issuance costs related to financings are stated at cost and are amortized
      over the life of the obligation using the interest method. Upon retirement
      of
      the related debt, any unamortized loan costs are charged to
      expense.





**Estimates**





The
      preparation of the consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities, the disclosure of contingent assets and
      liabilities, and the reported revenues and expenses. Actual results could vary
      from the estimates that were used.




8





**New
      Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board ("FASB") revised
      Statement of Financial Accounting Standard No. 123, ACCOUNTING FOR STOCK-BASED
      COMPENSATION ("SFAS No. 123"), by issuing SHARE-BASED PAYMENT ("SFAS 123(R)").
      SFAS 123(R) requires us to recognize, in the determination of income, the grant
      date fair value of all stock options and other equity based compensation issued
      to employees. In April 2006, the Securities and Exchange Commission announced
      that it would provide for a phased-in implementation process for SFAS No.
      123(R), which required the Company to adopt SFAS No. 123(R) no later than
      January 1, 2006. The statement applies to all awards granted after the required
      effective date and to awards modified, repurchased, or cancelled after that
      date. The adoption of SFAS 123(R) in the second quarter of our fiscal year
      ended
      November 30, 2006, had no material effect on the Company's financial
      statements.




Statement
      of Financial Accounting Standards No. 151, INVENTORY COSTS, an amendment of
      ARB
      No. 43, Chapter 4 (SFAS 151) was issued in November 2004 and becomes effective
      for inventory costs incurred during fiscal years beginning after June 15, 2006.
      The statement clarifies the accounting for abnormal amounts of idle facility
      expense, freight, handling costs, and wasted material. The adoption of SFAS
      151 did not have any material effect on the
      Company's financial statements.





Statement
      of Financial Accounting Standards No. 154, ACCOUNTING CHANGES AND ERROR
      CORRECTIONS, a replacement of APB Opinion No. 20 and FASB Statement No. 3
      ( SFAS
      154)
      was issued in May 2006 and becomes effective for accounting changes and
      corrections of errors made in fiscal years beginning after December 15, 2006.
      The Company does not expect that SFAS
      154
      will have any significant effect on future financial
      statements.





Statement
      of Financial Accounting Standards No. 155, ACCOUNTING FOR CERTAIN HYBRID
      FINANCIAL INSTRUMENTS--AN AMENDMENT OF FASB STATEMENTS NO. 133 AND 140, was
      issued in February 2006 and is effective for all financial instruments acquired
      or issued after the beginning of an entity's first fiscal year that begins
      after
      September 15, 2006. Certain parts of this Statement may be applied prior to
      the
      adoption of this Statement. Earlier adoption is permitted as of the beginning
      of
      an entity's fiscal year, provided the entity has not yet issued financial
      statements, including financial statements for any interim period for that
      fiscal year. Provisions of this Statement may be applied to instruments that
      an
      entity holds at the date of adoption on an instrument-by-instrument basis.
      The
      adoption of SFAS 155 did not have any significant effect on the
      Company's financial statements.




In
        February 2007, the FASB issued Statement of Financial Standards No. 159 (“SFAS
        No. 159”), “The Fair Value Option for Financial Assets and Financial
        Liabilities,” which permits entities to choose to measure many financial
        instruments and certain other items at fair value. SFAS No. 159 is effective
        for
        fiscal years beginning after November 15, 2007. The Company is currently
        assessing the impact of SFAS No. 159 on its consolidated financial
        statements.





9




**NOTE
                2.****SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES-continued**





**New
      Accounting Pronouncements - continued**





In
      March
      2006, the FASB issued SFAS No. 156, ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS
      - AN AMENDMENT OF FASB STATEMENT NO. 140, with respect to the accounting for
      separately recognized servicing assets and servicing liabilities. SFAS 156
      permits the choice of the amortization method or the fair value measurement
      method, with changes in fair value recorded in income, for the subsequent
      measurement for each class of separately recognized servicing assets and
      servicing liabilities. The statement is effective for years beginning after
      September 15, 2006, with earlier adoption permitted. The Company is currently
      evaluating the effect that adopting this statement will have on the Company's
      financial position and results of operations.





**NOTE
                3.****ACCOUNTS
                RECEIVABLE AND CONTRACTS
                RECEIVABLE**





Contracts
      receivable are recorded at their outstanding principal balances, reduced by
      any
      charge-offs or specific valuation accounts, deferred interest and sale taxes
      due
      from customers. The Company finances vehicle sales to selected customers over
      periods ranging from 12 to 54 months, with interest
      at 26% in Georgia and Tennessee and
      ranging from 16% to 21% in Indiana and Illinois. The allowance for uncollectible
      accounts is based upon the Company’s historical loss percentage relative to the
      fair value of the contracts’ underlying collateral





The
      estimated future maturities of contracts receivable at February 28, 2007 using
      forty-eight months as the average contract term remaining, are as
      follows:




**February
                  28, 2007**
              
              **Gross
                  contracts**
                **receivable**
              
              **Unearned**
                **finance
                  charges**
                **and
                  sales taxes**
              
              **Principal**
                **balance**1st
                  year
              
              $
              81,727,434
              
              $
              (22,825,200
              )
              $
              58,902,2342nd
                  year
              
              
              52,809,228
              
              
              (14,570,889
              )
              
              38,238,3393rd
                  year
              
              
              21,571,253
              
              
              (6,083,611
              )
              
              15,487,6424th
                  year
              
              
              4,772,461
              
              
              (846,966
              )
              
              3,925,4955th
                  year
              
              
              2,088,333
              
              
              (250,486
              )
              
              1,837,847**Total**
              
              $
              162,968,709
              
              $
              (48,579,144
              )
              $
              114,389,566Allowance
                  for credit losses
              
              
              
              
              
              
              
              
              (31,930,140
              )**Total**
              
              
              
              
              
              
              
              $
              82,459,426


The
      above
      tabulation should not be regarded as a forecast of future cash collections.





The
      provision for credit losses at February 28, 2007 was $31,930,140 and represents
      27.9% of the net principal balance.





10





**NOTE
                4.****PROPERTY,
                PLANT AND EQUIPMENT**





Property,
      plant and equipment at February 28, 2007 and November 30, 2006 consisted of
      the
      following:


**February
                  28,**
              
              **November
                  30,****2007**
              
              **2006**Furniture
                  and fixtures
              
              $
              475,086
              
              $
              67,211Equipment
              
              
              2,954,378
              
              
              2,167,903Leasehold
                  improvements
              
              
              1,274,288
              
              
              440,551Buildings
              
              
              703,706
              
              
              108,3495,407,459
              
              
              2,784,014Less:
                  accumulated depreciation
              
              
              (3,364,206
              )
              
              (1,869,955
              )Property,
                  plant and equipment, net
              
              $
              2,043,253
              
              $
              914,059





**NOTE
                5.****DEFERRED
                LOAN COSTS AND COMMON STOCK
                WARRANTS**





Deferred
      Loan Costs at February 28, 2007 consists of common stock warrants that were
      issued to the lender, Palm Beach Multi-Strategy Fund, LLP on October 4, 2006
      and
      attendant fees and expenses associated with the credit facility. The 4,000,000
      warrants were valued using the Black-Scholes pricing model with an exercise
      price of $3.00 and a weighted average common per share price of $3.27. The
      amortization period is 36 months, the length of the loan duration per
      share.


**February
                  28,**
              
              **November
                  30,****2007**
              
              **2006**Gross
                  value of warrants issued
              
              $
              13,064,499
              
              $
              13,064,499Loan
                  expenses
              
              
              3,456,961
              
              
              2,086,961Total
              
              
              16,521,460
              
              
              15,151,460Less:
                  amortization expense
              
              
              (2,180,484
              )
              
              (841,751
              )Balance
                  of deferred loan costs
              
              $
              14,340,976
              
              $
              14,309,709





11





**NOTE
                6.****REVOLVING
                LINE OF CREDIT**





The
      Company has two lines of credit with Palm Beach Multi-Strategy Fund L.P. with
      a
      total outstanding balance of $75,086,864 at February 28, 2007. The lines of
      credit are secured by accounts receivable, inventory and all assets of the
      Company.


**February
                  28,**
              
              **November
                  30,****2007**
              
              **2006**Revolving
                      line of credit with Palm Beach Multi-Strategy Fund L.P. dated
                      September
                      28, 2006, as amended December 28, 2006 , consisting of a term
                      note payable
                      in full September 28, 2009, secured by accounts receivable,
                      inventory and
                      all assets of the Company, with interest at the lower of 17%
                      or the
                      Federal Reserve Fund's published prime lending interest rate
                      + 9% and a
                      revolving credit line with interest at the Federal Reserve
                      Fund's
                      published prime lending interest rate + 5%.
              
              $
              53,975,645
              (1)
              $
              56,948,557
              
              
              (*****)Revolving
                    line of credit with Palm Beach Multi-Strategy Fund L.P. dated
                    December 28,
                    2006,, consisting of a term note payable in full December 28,
                    2009,
                    secured by accounts receivable, inventory and all assets of the
                    Company,
                    with interest at the lower of 16.25% or the Federal Reserve Fund's
                    published prime lending interest rate + 8% and a revolving credit
                    line
                    with interest at the Federal Reserve Fund's published prime lending
                    interest rate + 4%.
              
              
              21,111,219
              (2)
              
              -Total
              
              $
              75,086,864
              
              $
              56,948,557
  (*)
                  Certain prior year amounts have been reclassified to conform to
                  the
                  February 28, 2007 financial statement
                  presentation.




1
        - The outstanding revolving credit line balance and term note payable at
        February 28, 2007 was $5,218,007 and $48,757,638,
        respectively.




2
        - The outstanding revolving credit line balance and term note payable at
        February 28, 2007 was $320,000 and $20,791,219,
        respectively.


12





**NOTE
                7.****NOTES
                PAYABLE**





Notes
      payable at February 28, 2007 and November 30, 2006 were outstanding as
      follows:


**February
                  28,**
              
              **November
                  30,****2007**
              
              **2006**Note
                  Payable to a bank in monthly installments of $26,678 including
                  interest at
                  8.19%, through February 2012. Secured by certain property and
                   equipment.
              
              $
              718,642
              
              
              -Note
                  Payable to a bank in monthly installments of $432.35 including
                  interest at
                  5.95% through April 2009.  Secured by certain property and
                  equipment.
              
              
              10,353
              
              
              -Unsecured
                  promissory demand note with one lender with interest of
                  6%.
              
              
              10,200
              
              
              -Unsecured
                  promissory demand notes with one lender, dated from December 2005
                  through
                  February 28, 2007 with interest of 6%.
              
              
              5,367,304
              
              
              4,437,204Unsecured
                  financing agreement with 1st. Insurance Funding payable in two
                  remaining
                  installments due by January 10, 2007.
              
              
              -
              
              
              83,233Unsecured
                  promissory note with one lender, amended June 1, 2006, payable
                  June 1,
                  2007 with interest of 8%.
              
              
              99,304
              
              
              99,304Total
              
              $
              6,205,804
              
              $
              4,619,741





13





**NOTE
                8.****NOTES
                PAYABLE TO STOCKHOLDERS**





The
      stockholder notes payable balances at February 28, 2007 and November 30, 2006
      are detailed below. The notes payable to stockholders consists of various notes
      issued by the Company in the acquisition of the Nice Car’s companies on October
      4, 2006 and Freedom Auto Sale’s companies on December 29, 2006. The notes are
      subordinated to the note of the revolving line of credit as described at Note
      6.


**February
                  28,**
              
              **November
                  30,****2007**
              
              **2006**Unsecured
                  promissory note to shareholders dated October 4, 2006, payable
                  in full
                  October 4, 2007, with interest rate of 10%.
              
              $
              6,930,000
              
              $
              6,930,000Unsecured
                  promissory note to shareholders dated October 4, 2006, payable
                  in full
                  November 1, 2006, with interest rate of 10%.
              
              
              -
              
              
              627,543Unsecured
                  demand note to shareholder dated November 1, 2006, with interest
                  rate of
                  10%.
              
              
              500,000
              
              
              500,000Unsecured
                  promissory note to shareholders dated October 4, 2006, payable
                  in full
                  January 2, 2007, with interest rate of 10%.
              
              
              1,605,884
              
              
              1,814,453Unsecured
                  promissory note to shareholder,  with an interest rate of 8%, payable
                  on demand.
              
              
              113,192
              
              
              -Unsecured
                  promissory note to shareholder, with an interest rate of 8%,  payable
                  on demand.
              
              
              34,910
              
              
              -Cash
                  advances by shareholder, with remaining liability at March 23,
                  2007
                  converted to unsecured promissory note payable in monthly installments
                  through July, 2007, with interest rate of 10%.
              
              
              921,000
              
              
              -Unsecured
                  promissory note to shareholders dated December 29, 2006, payable
                  in full
                  December 29, 2007, with interest rate of 5%.
              
              
              3,000,000
              
              
              -Unsecured
                  promissory note to shareholders dated December 29, 2006, payable
                  in two
                  equal installments due on or before June 29, 2007 and September
                  29, 2007,
                  respectively with interest rate of 5%.
              
              
              150,000
              
              
              -Total
              
              $
              13,254,986
              
              $
              9,871,996





14





**NOTE
                9.****RESERVE
                FOR REPAIRS**





The
      Company incurs costs as a result of additional service primarily related to
      customer service actions. Estimated additional service costs for each vehicle
      sold by the Company are accrued at the time of sale. Accruals for estimated
      additional service costs are based on historical experience and subject to
      adjustment from time to time depending on actual experience. The balance at
      February 28, 2007 was $6,060,987.




**NOTE
                10.****COMMON
                STOCK OPTIONS**




The
      Company has an incentive stock option plan for employees whereby options to
      purchase Common Stock are granted at no less than the stock’s estimated fair
      market value at the date of the grant and may be exercised during specified
      future periods.




In
      December 2004, the FASB issued SFAS No. 123 (Revised 2004)
“Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R
      addresses all forms of share-based payment (“SBP”) awards, including shares
      issued under certain employee stock purchase plans, stock options, restricted
      stock and stock appreciation rights. SFAS No. 123R will require the
      Company to expense SBP awards over the period during which an employee is
      required to provide service in exchange for the award, usually the vesting
      period. Compensation cost for SBP transactions will be measured at fair value
      using a Black-Scholes or similar bi-nomial model. SFAS No. 123R
      required us to adopt the new accounting provisions beginning in our second
      quarter of 2006.


**Three
                  Months Ended**
              
              **Year
                  Ended****February 28,
                  2007**
              
              **November 30,
                  2006****Shares**
              
              **Weighted-
                    Average Exercise Price**
              
              **Shares**
              
              **Weighted-
                    Average Exercise Price**Outstanding
                  at beginning of year
              
              
              550,000
              
              $
              4.46
              
              
              -
              
              $
              -Granted
              
              
              -
              
              
              -
              
              
              550,000
              
              
              4.46Exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -Forfeited
              
              
              (350,000
              )
              
              (2.60
              )
              
              -
              
              
              -Expired
              
              
              -
              
              
              -
              
              
              -
              
              
              -Outstanding
                  at end of period
              
              
              200,000
              
              $
              2.70
              
              
              550,000
              
              $
              4.46





15





**NOTE
                11.****INCOME
                TAXES**




The
      income tax provision charged (benefit credited) for the three months ended
      February 28, 2007 was as follows:


BenefitProvision
                  for income taxes related to operations
              
              $
              (1,028,700
              )Less
                  tax effects of non-deductible expenses:Provision
                  for credit losses
              
              
              454,400Amortization
                  of deferred loan costs
              
              
              370,200Charitable
                  contribution carry forward
              
              
              2,300Total
                  provision for Federal income taxes
              
              $
              (201,800
              )Net
                  provision for income taxes from Indiana operations
              
              
              (136,900
              )Net
                  provision for income taxes from Tennessee and Georgia
                  operations
              
              
              (74,300
              )Provision
                  for income tax benefit related to operations
              
              
              (413,000
              )Valuation
                  allowance
              
              
              413,000Net
                  current year provision
              
              $
              -
  The
                    differences between the Statutory Federal income tax rate and
                    the
                    effective tax rateare
                    as follows:Statutory
                  Federal income tax rate
              
              
              -34.0
              %Increase
                  (decrease) in rate resulting from:State
                  and local taxes, net of Federal Benefit
              
              
              -7.0
              %Provision
                  for credit losses
              
              
              15.0
              %Amortization
                  of deferred loan costs
              
              
              12.2
              %Charitable
                  contribution carry forward
              
              
              0.1
              %Effective
                  tax rate before valuation allowance
              
              
              -13.6
              %
  Temporary
                    differences which give rise to a significant portion of deferred
                    tax
                    assets and liabilitieswere
                    as follows:Provision
                  for credit losses
              
              $
              12,627,700Reserve
                  for repairs
              
              
              2,303,200Amortization
                  of deferred loan costs
              
              
              689,500Charitable
                  contribution carry forward
              
              
              67,400Total
                  deferred tax benefit
              
              
              15,687,800Valuation
                  allowance
              
              
              (15,553,811
              )Total
                  deferred tax benefit net of valuation allowance
              
              $
              133,989





Prior
      year tax benefit provisions caused by losses incurred by operations are not
      material and have been eliminated by valuation allowances.





16




**NOTE
                12.****CONCENTRATION
                OF CREDIT RISK**





The
      Company’s customer base is concentrated in the Northwest Georgia, Southeast
      Tennessee and Northern Indiana geographical areas. Due to the nature of the
      Company’s business, many of its customers are considered substandard credit
      risks.





The
      Company has concentrated cash deposits in multiple high credit quality financial
      institutions. The amounts on deposit at February 28, 2007 (unaudited) and during
      various periods during the year were lower than the federally insured deposit
      limit.





The
      Company is exposed to various risks of loss related to torts, theft of, damage
      to and destruction of assets, errors and omissions and natural disasters. The
      Company has purchased third party liability and property damage insurance to
      protect against these claims and losses.





**NOTE
                13.****FAIR
                VALUE OF FINANCIAL INSTRUMENTS**





The
      Company’s financial instruments, none of which are held for trading, include
      cash, contracts receivable, accounts payable, accrued expenses, floor plan
      notes
      payable and capital leases payable. The Company estimates that the fair value
      of
      all financial instruments at February 28, 2007 (Unaudited) and November 30,
      2006
      (Audited) does not differ materially from the aggregate carrying values of
      the
      financial instruments recorded in the accompanying combined financial
      statements. The estimated fair value amounts have been determined by using
      available market information and appropriate data to develop the estimates
      of
      fair value, and accordingly, the estimates are not necessarily indicative of
      the
      amounts that could be realized in a current market exchange. The use of
      different market assumptions or methodologies could have a material effect
      on
      the estimated fair value amounts.


**NOTE
                  14.****PURCHASE
                  PRICE**
 
 On
        December 29, 2006, Manchester, Inc. acquired F.S. English, Inc. and GNAC,
        Inc.
        The transaction was consummated through two special purpose wholly-owned
        acquisition subsidiaries of the Company. Following the acquisition, F.S.
        English, Inc. and GNAC, Inc. were merged into the Company’s subsidiaries and now
        conduct business as Freedom Auto Sales and Freedom Auto Acceptance
        (collectively, the “Freedom Companies”).
 
 The
        transaction was accounted for as a purchase in accordance with SFAS 141, *Business
        Combinations* ,
        and
        Emerging Issues Task Force (EITF) Issue 88-16, *Basis
        in Leveraged Buyout Transactions* .
        As
        such, the acquired assets and assumed liabilities have been recorded at fair
        market value for the interests acquired and preliminary estimates of assumed
        liabilities by new investors and at the carryover basis for continuing
        investors.




17





The
      purchase price of Freedom Auto Sales is as follows:


Total
                  purchase price of Freedom Auto Sales:Cash
              
              $
              -Notes
                  ro seller
              
              
              3,150,000Common
                  stock par value
              
              
              3,000,000Total
                  purchase price
              
              $
              6,150,000Net
                  assets acquired:Cash
              
              $
              (222,146
              )Tangible
                  assets, net
              
              
              25,172,974Total
                  assets acquired
              
              
              24,950,828Liabilities
                  assumed
              
              
              (23,800,233
              )Total
                  liabilities assumed
              
              
              (23,800,233
              )Net
                  assets acquired
              
              $
              1,150,596Goodwill
              
              $
              4,999,404





Tangible
      assets acquired of $25.2 million includes trade accounts receivable, net
      (customer contracts), inventory and net fixed assets.




Liabilities
      assumed of $23.8 million include trade accounts payable, credit line and
      equipment financing notes, and notes to a shareholder.





$5.0 million
      was allocated to goodwill. Goodwill represents the excess of the purchase price
      over the fair market value of the net tangible assets acquired. Goodwill will
      not be amortized and will be tested for impairment at least annually.




**NOTE
        15.**  **UNAUDITED
        PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (Unaudited)**
 
 The
        following unaudited pro forma combined condensed consolidated statement of
        income has been prepared to give effect to the acquisition of the Freedom
        Companies using the purchase method of accounting and the assumptions and
        adjustments described below. This pro forma statement was prepared as if
        the
        merger had been completed as of December 1, 2006.
 
 This
        unaudited pro forma combined condensed statement of income for the three
        months
        ended February 28, 2007 was prepared by combining the actual statements of
        operations for Manchester, Inc., Nice Cars Companies, Inc. and the Freedom
        Companies to give effect to Company’s completed acquisition of the Freedom Cars
        Companies on December 1, 2006. For the three months ended February 28, 2006,
        the
        unaudited actual statement of operations of the Nice Cars Companies for the
        three months ended March 31, 2006 was combined with the actual unaudited
        statement of income of Manchester, Inc. for the three months ended February
        28,
        2006. The Nice Cars Companies prior to the acquisition in October 2006 were
        on a
        calendar year basis of accounting and as a result thereof, it was management’s
        opinion that the results would not be materially different than using the
        actual
        results for the three months ended February 28, 2006.


18


The
        unaudited pro forma combined condensed consolidated statement of income is
        presented for illustrative purposes only and is not necessarily indicative
        of
        the financial position or results of operations that would have actually
        been
        reported had the merger occurred on December 1, 2006.
 
 This
        unaudited pro forma combined condensed consolidated statement of income is
        based
        upon the respective unaudited historical consolidated and pro forma combined
        condensed consolidated statement of operations of the Company, the Nice Cars
        Companies, and Manchester Indiana and should be read in conjunction with
        the
        historical consolidated and pro forma combined condensed financial statements
        of
        Manchester, Inc. and the Nice Cars Companies and related notes and "Management's
        Discussion and Analysis of Financial Condition and Results of Operations"
        incorporated by reference herein and contained in the reports and other
        information Manchester has filed with the U.S. Securities and Exchange
        Commission including the Manchester Form 10-K filed on March 9 ,
        2007.


**For
                  the three months endedFebruary 28, 2007**
              
              **For
                  the three months endedFebruary 28, 2006****As
                  Reported (unaudited)**
              
              **Pro
                  forma Adjustments**
              
              
              
              **Total**
              
              **Nice
                  Cars Companies, Manchester, Inc. and Freedom Companies
                  (unaudited)**
              
              **Pro
                  forma Adjustments**
              
              
              
              **Total**Revenues:Net
                  vehicle sales
              
              $
              18,201,597
              
              $
              2,960,000
              
              1
              
              $
              21,161,597
              
              $
              24,130,000
              
              $
              -
              
              
              
              
              $
              24,130,000Interest
                  income
              
              
              5,082,401
              
              
              -
              
              
              
              
              
              5,082,401
              
              
              5,570,000
              
              
              -
              
              
              
              
              
              5,570,000Total
                  income
              
              
              23,283,998
              
              
              2,960,000
              
              
              
              
              
              26,243,998
              
              
              29,700,000
              
              
              -
              
              
              
              
              
              29,700,000Cost
                  of sales
              
              
              10,244,500
              
              
              1,650,000
              
              1
              
              
              11,894,500
              
              
              14,680,000
              
              
              -
              
              
              
              
              
              14,680,000Gross
                  profit
              
              
              13,039,498
              
              
              1,310,000
              
              
              
              
              
              14,349,498
              
              
              15,020,000
              
              
              -
              
              
              
              
              
              15,020,000Expenses:Selling,
                  general and administrative
              
              
              3,214,158
              
              
              80,000
              
              1
              
              
              3,294,158
              
              
              3,860,000
              
              
              130,000
              
              3
              
              
              3,990,000Provision
                  for credit losses
              
              
              8,022,793
              
              
              
              
              
              
              
              
              8,022,793
              
              
              7,820,000
              
              
              -
              
              
              
              
              
              7,820,000Interest
                  expense
              
              
              3,218,829
              
              
              90,000
              
              2
              
              
              3,308,829
              
              
              1,210,000
              
              
              1,290,000
              
              2
              
              
              2,500,000Depreciation
                  and amortization
              
              
              161,589
              
              
              
              
              
              
              
              
              161,589
              
              
              270,000
              
              
              -
              
              
              
              
              
              270,000Financing
                  and other fees
              
              
              241,693
              
              
              
              
              
              
              
              
              241,693
              
              
              -
              
              
              175,000
              
              4
              
              
              175,000Total
                  expenses
              
              
              14,859,062
              
              
              170,000
              
              
              
              
              
              15,029,062
              
              
              13,160,000
              
              
              1,595,000
              
              
              
              
              
              14,755,000Operating
                  Income (loss) before taxes
              
              $
              (1,819,564
              )
              $
              1,140,000
              
              
              
              
              $
              (679,564
              )
              $
              1,860,000
              
              $
              (1,595,000
              )
              
              
              
              $
              265,000Net
                  loss per share applicable to common shareholdersBasic
                  and diluted
              
              $
              (0.05
              )
              $
              0.03
              
              
              
              
              $
              (0.02
              )
              $
              0.06
              
              $
              (0.05
              )
              
              
              
              $
              0.01Weighted
                  average number of common shares and common share equivalent outstanding
              
              
              33,103,167
              
              
              33,137,500
              
              
              
              
              
              33,137,500
              
              
              33,137,500
              
              
              33,137,500
              
              
              
              
              
              33,137,500


Notes:
 1
              increase
                  in sales, cost of sales and commission expense at the Freedom Companies
                  due to operating a complete quarter with A\R and floor plan financing
                  in
                  place


2
              additional
                  interest expense on higher interest credit line
                  debt


3
              additional
                  personnel and expenses of corporate office
 4
              additional
                  asset management fees of lender


**NOTE
                16.****GOODWILL**





The
      Company has recorded goodwill in connection with its acquisition of the Nice
      Cars and Freedom Auto Sales companies.





Goodwill
      is not amortized, but is tested annually for impairment or more frequently
      if
      events or changes in circumstances indicate that the assets might be impaired.
      Absent unexpected circumstances, management has determined the Company does
      not
      have to assess or test for impairment until fiscal year ending November 30,
      2007. In assessing the recoverability of goodwill, the Company must make
      assumptions about the estimated future cash flows and other factors to determine
      the fair value of these assets.






19




Assumptions
        about future sales and cash flows require significant judgment because of
        the
        current state of the economy, the fluctuation of actual sales, and the timing
        of
        expenses. The Company’s management develops future sales estimates based upon
        sales trends and other available data. Unless there is evidence to the contrary,
        estimates of future cash flows assume that expenses will grow at rates
        consistent with historical rates. If the expected cash flows are not realized,
        or if market conditions result in lower valuation multiples, impairment losses
        may be recorded in the future.
 
 For
        goodwill, the impairment evaluation will include a comparison of the carrying
        value of our Buy-Here/Pay-Here acquisitions (including goodwill) to their
        fair value on
        a
        reporting unit level. Generally, a reporting unit is an operating segment
        or one
        level below an operating segment (referred to as a component).A
        component of an operating segment is a reporting unit if the component
        constitutes a businessfor
        which
        discrete financial information is available and segment managementregularly
        reviews the operating results of that component. If the estimated fair
        value exceeds the reporting unit’s carrying value, no impairment of
        goodwill exists. If the fair value of the reporting unit does not exceed
        the unit’s carrying value, then an additional analysis will be performed to
        allocate the fair value of the reporting unit to all of the assets and
        liabilities of that unit. If the implied fair value of the reporting unit
        goodwill is less than the carrying value of the unit’s goodwill, an impairment
        charge is recorded for the difference. To date, management has not made any
        determination if impairment of goodwill exists or not.
  **NOTE
                  17.****LEGAL
                  PROCEEDINGS**
  The
        Company is party to various legal disputes and proceedings arising from the
        ordinary course of general business activities. While, in the opinion of
        management, resolution of these matters is not expected to have a material
        adverse effect on the Company’s consolidated financial position, results of
        operations or cash flows, the ultimate outcome of any litigation is uncertain.
        In particular, On November 29, 2006, Lancelot Investors Fund, LP d/b/a Surge
        Capital (“Surge”) filed a complaint (the “Surge Complaint”) against Manchester
        Inc. in the Cook County, Illinois, Circuit Court. Through this action, Surge
        seeks more than $1.8 million in damages from Manchester for an alleged breach
        of
        contract. The Surge Complaint states that in early 2006, Manchester and Surge
        signed an agreement that summarized the terms under which Surge was prepared
        to
        provide Manchester with a $300,000,000 secured loan facility (the “Surge Loan
        Agreement”). The Surge Complaint further alleges that as part of the Surge Loan
        Agreement, Manchester was required to pay Surge a “break-up fee” of $2,000,000
        in the event that Manchester elected to pursue a financing with another party
        while Surge was prepared to close the loan facility upon terms and conditions
        substantially similar to those described in the Surge Loan Agreement. The
        Surge
        Complaint states that although Surge was prepared to close the loan facility,
        Manchester obtained financing from another source. Surge is demanding a net
        payment of $2,000,000, to be reduced by a $175,010.94 deposit Manchester
        currently holds (for a total of $1,824,989.06). On November 29, 2006, the
        Company filed a countersuit against Surge. The Company believes that Surge’s
        allegations and claims are without merit. The Company is vigorously contesting
        this action and pursuing all available avenues to resolve this controversy.




During
      the first quarter 2007, a legal proceeding was commenced against the Company
      and
      a separate legal proceeding was commenced against F.S. English, Inc. (the shares
      of which were acquired by one of the Company’s wholly-owned subsidiaries) and
      against Rick Stanley, the Chief Executive Officer of two of the Company’s
      subsidiaries, and formerly a stockholder and Chief Executive Officer of F.S.
      English, Inc. Prior to the acquisition of F.S. English, Inc. by a wholly-owned
      subsidiary of the Company and its merger into such subsidiary, F.S. English,
      Inc. was a franchisee of Byrider Franchising, Inc. (“Byrider”). Byrider alleges
      that it had certain rights that were breached under its franchise agreements
      with F.S. English, Inc. Byrider has filed a Complaint against the Company in
      the
      United States District Court for the Southern District of Indiana, claiming
      tortious interference with contract and seeking damages to be determined at
      trial. Byrider has demanded $2,115,167.16 in amounts allegedly owed under the
      franchise agreements, plus $212,539.82 in back amounts allegedly owed by F.S.
      English, Inc.. Byrider has demanded that F.S. English, Inc. and Rick Stanley
      submit the dispute to arbitration. The Company and its subsidiary dispute
      Byrider’s allegations and believe that the Byrider legal actions are without
      merit. The Company and its subsidiary intend to vigorously defend their position
      that Byrider waived any and all rights under the franchise agreement and the
      Company and its subsidiary intend to pursue all rights of recourse and legal
      remedies against Byrider.





Additionally,
      the Company is involved in litigation arising in the normal course of business.
      After consultation with legal counsel, management estimates that these matters
      will be resolved without material adverse effect on the Company’s future
      financial position or results from operations, and accordingly, has not recorded
      a liability in conjunction with them.





**NOTE
                18.****SUBSEQUENT
                EVENTS**





On
      March
      14, 2007 the Board of Directors the Company appointed Lawrence Taylor as its
      Chief Financial Officer. Mr. Taylor will be responsible for all aspects of
      Manchester's financial reporting and treasury and involved in strategic planning
      and business management functions. Mr. Taylor received his bachelor's degree
      in
      accounting from Wayne State University in Detroit, MI. He is a member of the
      American Institute of Certified Public Accountants, the Texas Society of
      Certified Public Accountants and both the Texas and National branches of
      Financial Executives International. Prior to joining the Company, Mr. Taylor
      served as Vice President and Chief Financial Officer for Digital Recorders,
      Inc., a NASDAQ-listed company serving the mass transit industry in the U.S.,
      Europe, South America and Australia, where he was responsible for negotiating
      significant revolving credit lines in Sweden and the U.S. to fund acquisitions
      and working capital. Mr. Taylor previously entered into a two year consulting
      agreement with the Company in April of 2006 which contemplated his future
      appointment as Chief Financial Officer of the Company and such agreement remains
      in effect.




On
      March
      16, 2007, the Board appointed Mr. Stephen R. Scorgie as a director of the
      Company, effective as of March 19, 2007. Mr. Scorgie received his bachelor's
      degree in finance and accounting from the McIntire School of Commerce and his
      MBA, Finance from the Darden School of Business Administration, both of which
      are located at the University of Virginia. Mr. Scorgie is currently the Managing
      Director of The Carlton Group, where he is responsible for finding and selling
      sub-performing and non-performing debt from financial institutions throughout
      the United States through an extensive secondary market network. The Carlton
      Group is a real estate investment banking firm prominent in equity and debt
      placement, investment sales, and commercial and residential loan sales. The
      Carlton Group has consummated in excess of $30 billion of transactions since
      1998. During the past five years, Mr. Scorgie's division has arranged the sale
      of over $7 billion of loan assets. The Carlton Group has received total payments
      for services rendered of approximately $75,000 from the Company in 2006 and
      2007. The Company and The Carlton Group are currently in discussions to renew
      their agreements for additional services to be rendered. No determinations
      have
      been made as of the date of this Quarterly Report concerning the committees
      of
      the Board on which Mr. Scorgie will serve.




20


**Item
      2.****Management’s
      Discussion and Analysis of Financial Conditions and Results of
      Operations**





This
      Quarterly Report contains certain forward-looking statements and our
      Company’s future operating results could differ materially from those
      discussed herein.  Such forward-looking statements involve known and
      unknown risks, uncertainties and other factors which may cause the
      actual results, performance or achievements of the Company to be
      materially different from any future results, performance or achievements
      expressed or implied by such forward-looking statements.  Given these
      uncertainties, readers are cautioned not to place undue reliance on such
      forward-looking statements. We disclaim any obligation to update any such
      factors or to announce publicly the results of any revisions of the
      forward-looking statements contained or incorporated by reference herein to
      reflect future events or developments. The Company suggests that the following
      discussion and analysis be read in conjunction with the Consolidated Financial
      Statements and Management’s Discussion and Analysis of Financial Condition and
      Results of Operations included in our Annual Report on Form 10-K for the year
      ended November 30, 2006. Unless otherwise provided in this Quarterly Report,
      references to the “Company,” the “Registrant,” the “Issuer,” “we,” “us,” and
“our” refer to Manchester Inc. and its subsidiaries.





The
      following discussion of the financial condition and results of operations of
      Manchester Inc. should be read in conjunction with the financial
      statements and the related notes thereto included elsewhere in this
      Quarterly Report.




**Overview**




Our
      Company was incorporated on August 27, 2002 under the laws of the state of
      Nevada. On October 4, 2006 we entered into two agreements for the acquisition
      of
      a Buy-Here/Pay-Here enterprise consisting of Nice Cars, Inc. and Nice Cars
      Capital Acceptance Corporation (collectively, the “Nice Cars Companies”).
      O n
      December 29, 2006, the Company acquired F.S.
      English, Inc. ,
      a
      Buy-Here/Pay Here car sales company, and
      GNAC,
      Inc., its affiliated credit accepta nce
      company, which now operate under the names “Freedom Auto Sales and “Freedom Auto
      Acceptance” (collectively,
      the “Freedom Companies”) . Each
      Buy-Here/Pay Here enterprise is referred to as a "dealership". Our operations
      during the period covered by this Quarterly Report were principally in Georgia,
      Tennessee and Indiana. We intend to make additional acquisitions during the
      foreseeable future and expand our Buy-Here/Pay-Here operations into other
      geographic areas.





As
      of the
      end of the period covered by this Quarterly Report, the Company served as the
      holding company for (i) the Nice Cars Companies, (ii) Nice Cars Funding LLC,
      (iii) the Freedom Companies ,
      and
      (iv) Manchester
      Indiana Funding, LLC (collectively, Manchester’s six subsidiaries are referred
      to herein as the “Subsidiaries”). Our financial statements for the period
      covered by this Report describe the financial condition and results of
      operations for Manchester Inc. and its Subsidiaries on a consolidated historical
      basis (unaudited). During the first fiscal quarter ended February 28, 2007,
      the
      Company had no other operations other than those conducted by the Subsidiaries.
      As part of its planning to operate as a holding company for the Subsidiaries,
      the Company has hired professional accounting and financial personnel to
      administer the Subsidiaries, manage the loans, prepare financial statements
      and
      perform other functions and duties as a centralized corporate office.





The
      Company’s Subsidiaries operate as separate sales and finance companies in order
      to distinguish vehicle sales operations from financing activities. Our finance
      subsidiaries purchase the retail sales contracts from affiliated sales
      subsidiaries and assume all rights and responsibilities with respect to the
      acquired contracts. These contracts have varying terms, generally ranging from
      36 months to 60 months, with interest charges of up to 26%. The Company
      primarily sells used vehicles and provides financing for substantially all
      of
      its customers. Many of the Company’s customers have limited financial resources
      and would not qualify for conventional financing as a result of limited credit
      histories or impaired credit. As of February 28, 2007, the Company’s
      Subsidiaries operated two dealerships that sold used vehicles from 9 different
      sales lots.





The
      Company’s primary focus is on sales and collections. Each Subsidiary handles its
      own sales and collections with supervisory involvement of the corporate office.
      Hiring, training and retaining qualified sales personnel are critical to the
      Company’s success.  The Company intends to add resources to train and
      develop personnel. In fiscal 2007 and for the foreseeable future, the Company
      expects to acquire additional dealerships and to continue to invest in the
      acquisition of new dealerships and the development of its own dealerships and
      workforce.




21






**RESULTS
        OF OPERATIONS**
 
 The
        financial statements (unaudited) contained herein have been prepared on a
        historical basis to give effect to the acquisition of our Subsidiaries
        using the purchase method of accounting with assumptions and adjustments
        as
        described in the accompanying notes to the combined condensed consolidated
        financial statements (unaudited) for the first quarter ended February 28,
        2007.
 
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 (Unaudited)
        (Stated in U.S. Dollars)
 **For
                    the Three Months Ended February 28,****2007**
                
                **%
                    to Sales**
                
                **2006**(unaudited)Revenues:Net
                    vehicle sales
                
                $
                18,201,597
                
                
                78.2
                %
                $
                -Interest
                    income
                
                
                5,082,401
                
                
                21.8
                %
                
                -Total
                    income
                
                
                23,283,998
                
                
                100.0
                %
                
                -Cost
                    of sales
                
                
                10,244,500
                
                
                44.0
                %
                
                -Gross
                    profit
                
                
                13,039,498
                
                
                56.0
                %
                
                -Expenses:Selling,
                    general and administrative
                
                
                3,214,158
                
                
                13.8
                %
                
                104,489Provision
                    for credit losses
                
                
                8,022,793
                
                
                34.5
                %
                
                -Interest
                    expense
                
                
                3,218,829
                
                
                13.8
                %
                
                3,149Depreciation
                    and amortization
                
                
                161,589
                
                
                0.7
                %
                
                342Financing
                    and other fees
                
                
                241,693
                
                
                1.0
                %
                
                -Total
                    expenses
                
                
                14,859,062
                
                
                63.8
                %
                
                107,980Operating
                    loss
                
                
                (1,819,564
                )
                
                -7.8
                %
                
                (107,980
                )-Other
                    Expense:
                
                
                
                
                
                -Amortization
                    of warrants
                
                
                (1,088,708
                )
                
                -4.7
                %
                
                -Stock
                    option for service
                
                
                (117,500
                )
                
                -0.5
                %
                
                -Loss
                    before taxes
                
                $
                (3,025,772
                )
                
                -13.0
                %
                $
                (107,980
                )
 **Three
        Months Ended February 28, 2007**
 
 The
        Company’s Subsidiaries consist of the Nice Cars Companies and the Freedom
        Companies and their respective finance subsidiaries. The Nice Cars Companies
        were acquired during the prior fiscal year on October 4, 2006. The Freedom
        Companies were acquired during the period covered by this Quarterly Report
        on
        December 29, 2006. The results of operations reflected in this Quarterly
        Report
        do not include financial information with respect to results of operations
        of
        our Subsidiaries prior to the date of their respective acquisition by our
        Company. Our Company was not actively conducting business prior to the
        acquisition of the Nice Cars Companies in October 2006. As such, Company
        performance between the three months ended February 28, 2007 and the three
        months ended February 28, 2006 are not indicative of comparable operations
        with
        respect to such quarterly periods.
 
 Consolidated
        revenues increased $23.3million, or 100%, for the three months ended February
        28, 2007 as compared to the same period in the prior fiscal year.
 
 Cost
        of
        sales as a percentage of sales was 44% for the three months ended February
        28,
        2007 from 0% in the same period of the prior fiscal year in which the Company
        had no material operations. The Company’s gross margins are negatively affected
        by operating costs and vehicle repair costs, and to the purchase price of
        vehicles the Company sells. The Company’s selling prices are based upon the cost
        of the vehicle purchased, with lower-priced vehicles generally having higher
        gross margin percentages. Discretionary adjustments to the Company’s retail
        pricing policies may be made by sales managers.
 
 Selling,
        general and administrative expense as a percentage of sales was 13.8% for
        the
        three months ended February 28, 2007. Selling, general and administrative
        expenses are, for the most part, more fixed in nature. The increase was due
        to
        the acquisition of the Company’s operating Subsidiaries subsequent to the date
        of the corresponding reporting period in 2006. The Company expects to see
        increases in selling, general and administrative expenses related to increasing
        personnel, advertising, higher insurance costs and repossession activity.
        The
        Company also intends to make selling, general and administrative expenditures
        to
        strengthen controls and procedures, improve efficiencies in the corporate
        infrastructure as well as transitional costs associated with future
        acquisitions. Also, approximately $117,500 of non-cash stock-based compensation
        expense was recorded during the current quarter. Deferred financing expense
        for
        the amortization of common stock warrants for the three months ended February
        28, 2007 was a non-cash amount of $1,088,708.
 
 Cost
        of
        credit losses during the first quarter 2007 were approximately 34.5% of sales.
        Company management believes that credit losses were higher in the first quarter
        as a percentage of revenues than anticipated performance in subsequent quarterly
        periods due primarily to (i) seasonality with respect to cash allocation
        decisions by customers during the end of the calendar year holiday season,
        and
        (ii) Freedom Auto Sales’ transistion from a Byrider franchisee and operational
        disputes with J.D. Byrider which temporarily depressed the sales of Freedom
        Auto
        Sales during the calendar quarter following the acquisition. Company management
        believes that the foregoing factors coupled with higher energy and fuel costs,
        increasing interest rates, general inflation and personal discretionary spending
        levels affecting its customers have had a negative impact on collection
        results.  At February 28, 2007, 6.8% of the Company’s finance receivable
        balances were over 30 days past due.
  22
 
 Interest
        expense as a percentage of sales was 13.8% for the three months ended February
        28, 2007. The increase was attributable to borrowings made for servicing
        the
        loans made for the acquisition of the Subsidiaries and loans made against
        the
        Company’s portfolio of customer contract notes. During the three months ended
        February 28, 2007 the aggregate of all interest costs was approximately $3.2
        million with an average rate charged during the quarter of approximately
        16% per
        annum. Company management expects borrowings to increase in anticipation
        of
        growth in accounts receivable, inventory and fixed assets. Interest rates
        may
        increase as a function of interest rates charged by the Company’s lender.
 
 **Financial
        Condition**
 
 The
        following table sets forth the major balance sheet accounts of the Company
        as of
        the dates specified:
 **FEBRUARY
                    28,**
                
                **NOVEMBER
                    30,****2007**
                
                **2006****ASSETS**Accounts
                    and contracts receivable, net
                
                $
                82,459,426
                
                $
                61,612,291Inventory
                
                
                2,645,687
                
                
                3,394,276Prepaids
                    and other assets
                
                
                747,908
                
                
                218,959Property,
                    plant and equipment, net
                
                
                2,043,253
                
                
                914,059**LIABILITIES**Accounts
                    payable
                
                $
                1,437,779
                
                $
                627,639Accrued
                    liabilities and expenses
                
                
                2,877,918
                
                
                534,798Debt
                    Facilities
                
                
                94,745,436
                
                
                71,440,294
  In
        the
        first three months of fiscal 2007, inventory was 14% as compared to vehicle
        sales revenues.
 
 Net
        property and equipment was approximately $2.04 million during the three months
        ended February 28, 2007 as the Company acquired the Freedom Companies.
 
 Accounts
        payable and accrued liabilities were approximately $4.3 million at February
        28,
        2007. Income
        taxes payable were $0 and deferred income tax liabilities were approximately
        $134,000 at February 28, 2007.
 
 Borrowings
        on the Company’s credit facilities fluctuate based upon a number of factors
        including (i) net income, (ii) finance receivables growth, (iii) capital
        expenditures, and (iv) income tax liabilities.
  **Liquidity
        and Capital Resources**
 
 The
        following table sets forth certain summarized historical information with
        respect to the combined Manchester Inc. and Subsidiaries statements of cash
        flows.
  **CONSOLIDATED
        CONDENSED CASH FLOW STATEMENT**
 **Stated
        in U.S. Dollars**
 
 **For
                  the Three Months Ended February 28,****2007**
              
              **2006**(unaudited)Net
                  Loss
              
              $
              (3,025,772
              )
              $
              (107,980
              )Adjustments
                  to reconcile net income (loss) tonet
                  cash used in operating activities:Provision
                  for credit losses
              
              
              3,256,619
              
              
              -Depreciation
                  and amortization
              
              
              160,412
              
              
              342Amortization
                  deferred financing
              
              
              1,338,734
              
              
              -Changes
                  in assets and liabilities
              
              
              1,727,175
              
              
              (226,390
              )Net
                  cash provided (used) in operating activities
              
              
              3,457,167
              
              
              (334,028
              )Net
                  cash used in investing activities
              
              
              (68,122
              )
              
              (6,088
              )Net
                  cash provided (used) in financing activities
              
              
              (1,877,638
              )
              
              349,204Increase
                  in cash and cash equivalents
              
              
              1,511,408
              
              
              9,088Cash
                  and cash equivalents at beginning of year
              
              
              621,609
              
              
              777Cash
                  and cash equivalents at end of period
              
              $
              2,133,017
              
              $
              9,865


(1)
        The
        Company Subsidiaries consist of the Nice Cars Companies and the Freedom
        Companies and their respective finance subsidiaries. The Nice Cars Companies
        were acquired during the prior fiscal year on October 4, 2006. The Freedom
        Companies were acquired during the first fiscal quarter covered by this Report
        on December 29, 2006. The results of operations reflected in this Quarterly
        Report do not include financial information with respect to results of
        operations of our Subsidiaries prior to the date of their respective acquisition
        by our Company. Our Company was not actively conducting business prior to
        the
        acquisition of the Nice Cars Companies in October 2006. As such, Company
        performance between the three months ended February 28, 2007 and the three
        months ended February 28, 2006 are not indicative of comparable operations
        with
        respect to such quarterly periods.
 
 The
        Company generates cash flow from net income from operations. Most or all
        of this
        cash is used to fund finance receivables growth. To the extent finance
        receivables growth exceeds net income from operations, the Company generally
        will increase borrowings from its credit facility.
 
 The
        Company’s credit facilities are provided by Palm Beach Multi-Strategy Fund L.P.
        (the “Lender”) pursuant to a commitment letter dated September 28, 2006 under
        which the Lender committed to provide up to $300 million in revolving warehouse
        financings for a roll up strategy to acquire captive subprime Buy-Here/Pay-Here
        auto receivables origination and collection businesses nationwide (each,
        a
“Financing”). There is no limit to the number of Financings, provided that no
        Financing shall be in an amount in excess of $100 million, unless approved
        by
        the Lender. Each Acquisition and Financing pursuant to the Commitment shall
        be
        subject to the Lender’s approval. The Company has drawn two loans from the
        credit commitment, one in the amount of $75 million for the acquisition and
        operation of the Nice Cars Companies during fiscal 2006 and the other in
        the
        amount of $30 million for the acquisition and operation of the Freedom Companies
        during the first quarter 2007, discussed in further detail below.
  23
 
 At
        February 28, 2007, the Company’s assets consisted of $2.1
        million in cash, $6.3
        million in other tangible net assets and $82.4 million in receivables. The
        Company is limited in the amount of dividends or other distributions it can
        make
        to its shareholders without the consent of the Lender. The Company believes
        that
        it is currently in material compliance under the terms of all of its
        agreements.
 
 At
        February 28, 2007, the Company had $2.1 million in cash on hand. On a short-term
        basis, the Company’s principal sources of liquidity include income from
        operations and borrowings under the revolving credit facilities which may
        be
        drawn against delivery of qualified collateralized customer contract
        receivables. On a longer-term basis, the Company expects its principal sources
        of liquidity to consist of income from continuing operations and sales of
        securitized customer contract receivables. While the Company has no present
        plans to issue debt or equity securities, the Company believes, if necessary,
        it
        could raise additional capital through the issuance of such
        securities.
 
 The
        Company expects to use cash to grow its finance receivables portfolio and
        to
        grow its business through acquisitions during the next 12 months.
 
 The
        Company expects that it will be able to renew or refinance its credit facilities
        on or before the date they mature. The Company believes it will have adequate
        liquidity to satisfy its capital needs for the foreseeable future.
 
 The
        Company leases the properties where its dealerships are located and expects
        to
        continue to do so for the foreseeable future.
 
 ***Nice
        Cars $75 Million Loan Agreement***
 
 The
        Company’s first use of the $300 Million Credit Commitment was a $75 million loan
        facility which was established through the Company’s special purpose
        wholly-owned subsidiary, Nice Cars Funding, LLC, referred to as the “Nice Cars
        Borrower” under the terms of the Loan Agreement. Under the terms of the $75
        million loan facility, the Lender, upon request, will from time to time,
        until
        maturity at September 28, 2009, make advances to the Nice Cars Borrower.
        The Interest on the Loan will accrue at an interest rate equal to the lesser
        of:
        (i) the greater of (x) Prime Rate (as determined daily) plus 9% (unless for
        any
        day on which the principal amount of the Term Loan is equal to or less than
        sixty percent (60%) of outstanding principle then the Prime Rate shall be
        plus
        5% per annum) or (y) 17% per annum (unless for any day on which the principal
        amount of the Term Loan is equal to or less than sixty percent (60%) of the
        net
        term pool balance, the amount will be 13%); or (ii) the maximum rate which
        may
        be legally charged under applicable usury law. The Company drew down
        approximately $54 million of the Loan to fund the acquisition and initial
        operations of Nice Cars, Inc. and Nice Cars Capital Acceptance Corporation.
 
 The
        Company believes that the advances drawn on the Loan on the basis of
        collateralized receivables will be sufficient to fund the growth of the
        Company’s operations as well as cover all payments due on the Loan for the
        foreseeable future.
 
 The
        maximum amount that may be drawn under the Loan may not, in aggregate amount,
        exceed at any time the outstanding amount equal to the lesser of: (a) $75
        million; or (b) the Availability on Eligible Receivables. Such Availability
        on
        Eligible Receivables will be generally determined as an amount equal to (i)
        80%
        under the initial advance made under the Loan Agreement, and thereafter 60%;
        multiplied by (ii) the Net Pool Balance as of such date. The Net Pool Balance
        is
        calculated as the sum of (a) the outstanding principal balance of all Eligible
        Receivables; minus (b) all other matured and unpaid amounts due to the Nice
        Cars
        Borrower relating to the Eligible Receivables (including, without limitation,
        unearned finance charges, time price differentials, insurance fees and other
        fees and charges related thereto. Eligible Receivables are generally defined
        as
        receivables which have not more than 60 days past due, have an interest rate
        of
        at least 25% per annum payable no less frequently than monthly along with
        additional qualification attributes; will not cause the weighted average
        age (by
        unpaid principal balance, based on model year) of all Eligible Receivables
        to
        exceed eight (8) years; and the contribution of the Receivable will not cause
        the weighted average mileage (by unpaid principal balance, at the time of
        sale)
        of all Eligible Receivables to exceed 95,000 miles.
  24
 
 The
        Company must make payments on the Loan if at any time the amount advanced
        by
        Lender to the Nice Cars Borrower exceeds the maximum amount that may draw
        on the
        Loan. In such event, the Nice Cars Borrower must immediately and without
        notice,
        repay to Lender an amount sufficient to eliminate the excess, or, at Lender’s
        option, assign and deliver additional Eligible Receivables sufficient to
        cover
        the deficiency.
 
 The
        Nice
        Cars Borrower may, at any time, terminate financing under the Loan Agreement
        and
        prepay the indebtedness in full by providing the Lender with written notice
        at
        least ninety (90) calendar days prior to the specific date upon which Nice
        Cars
        Borrower intends to cease financing and prepay the indebtedness in full.
        In the
        event of termination of the Loan prior to September 28, 2009, the Nice Cars
        Borrower will pay Liquidated Damages in amount equal to the product of (i)
        the
“minimum interest charge under the Loan" multiplied by (ii) the number of
        months
        remaining from the date of the Lender's receipt of the termination notice
        until
        September 28, 2009. The “minimum interest charge under the Loan” shall
        equal the product of (i) the average principal balance of the Loan during
        the
        six (6) months immediately preceding the Lender's receipt of the termination
        notice multiplied by (ii) 1.50%.
 
 In
        the
        event of a default of performance of the Loan Agreement by the Nice Cars
        Borrower, the Nice Cars Borrower shall pay Lender interest on the daily
        outstanding balance of the Loan at the Default Rate, which will be determined
        as
        5% in excess of the greater of: (x) the prime rate plus 9% (unless for any
        day
        on which the principal amount of the Term Loan is equal to or less than sixty
        percent (60%) of outstanding principle then the rate shall be plus 5% per
        annum); or (y) 17% per annum (unless for any day on which the principal amount
        of the Term Loan is equal to or less than sixty percent (60%) of the net
        term
        pool balance, the amount will be 13%). An event of default will occur if
        (a) the
        Nice Cars Borrower fails to pay the principal component of the Loan or any
        interest thereon when due and payable, (b) the Nice Cars Borrower fails to
        pay
        any indebtedness when due and payable within five (5) calendar days after
        the
        same becomes due and payable; (c) any default occurs by the Nice Cars Borrower,
        the Company or any related party under any ancillary documentation executed
        in
        connection with the Loan; (d) any default occurs by any related party to
        Nice
        Cars Borrower in respect of indebtedness; (e) any material adverse effect;
        and
        (f) other customary conditions of default. Upon an event of default, all
        Indebtedness shall immediately be due and payable and interest will accrue
        at
        the Default Rate. The Lender will have several rights and remedies in the
        event
        of a default, including the sale of collateral Receivables.
 
 As
        inducement for the Lender to enter into the Loan, the Nice Cars Borrower
        has
        irrevocably granted to a collateral agent acting on behalf of the Lender
        and
        affiliates, a first and continuing security interest in all of the Nice Cars
        Borrower’s right, title and interest in and to all receivables, property and
        assets of Nice Cars Borrower. The Company and the Nice Cars Borrower have
        established customary receivables custody, collateral agency, and servicing
        arrangements for payments of receivables to be deposited into blocked accounts
        and the return of paid-up receivables to the Company. The Company has guaranteed
        all of the obligations of the Nice Cars Borrower. The Nice Cars Borrower
        has
        also agreed to customary covenants and negative covenants, which include,
        among
        other requirements, to protect the first priority security interest in the
        receivables as collateral for the Lender and maintain the corporate good
        standing of the Nice Cars Borrower. The Nice Cars Borrower has agreed to
        pay all
        costs and expenses of the Lender and its affiliates in connection with the
        Loan.
        The Nice Cars Borrower has also granted indemnification to the Lender and
        the
        Collateral Agent in respect of all claims and losses incurred or asserted
        in
        connection with the Loan against the Lender, its affiliates or the Collateral
        Agent, except in the case of gross negligence or willful
        misconduct.
 
 The
        Company and its subsidiaries have each agreed to guaranty Loans made under
        the
        Loan Agreement up to an amount not exceeding ten percent of the amount of
        the
        Loan outstanding from time to time, pursuant to the terms of a Guaranty which
        closed September 28, 2006. The Guarantors have also entered into a Security
        Agreement with the Lender and the Collateral Agent pursuant to which each
        Guarantor has granted to the Collateral Agent and its successors and assigns,
        for the security and benefit of the Lender, a first priority security interest
        in and mortgage lien on all of the property of the Guarantors.
 
 In
        connection with the Loan Agreement, the Nice Cars Borrower, the Company and
        certain of its other subsidiaries have entered into a Sale and Servicing
        Agreement (the “Nice Cars Sale and Servicing Agreement”), pursuant to which a
        subsidiary of the Company has agreed to sell all of its rights to receivables
        (the “Nice Cars Receivables”) to the Nice Cars Borrower. Pursuant to the Nice
        Cars Sale and Servicing Agreement, the Company shall serve as the servicer
        for
        all Nice Cars Receivables, acting as agent, and shall manage service and
        make
        collections on the Nice Cars Receivables. The Company has agreed to comply
        with
        the terms and conditions of a servicing guideline and a credit and collection
        policy provided by the Lender.
 
 25


***Freedom
      Companies $30 Million Loan Agreement***





During
      the period covered by this Quarterly Report, on December 29, 2006 the Company
      acquired F.S. English, Inc., a privately held Buy-Here/Pay Here car sales
      company which operates three retail locations in the Indianapolis area, and
      GNAC, Inc., its affiliated credit acceptance company. These Company subsidiaries
      now operate under the trade names “Freedom Auto Sales” and “Freedom Auto
      Acceptance”. Under the terms of the agreement, the Company paid an aggregate of
      approximately $8 million and refinanced the acquired $26 million portfolio
      of
      receivables through a drawdown on the Company's $300 million credit
      commitment.





The
      acquisition of the Freedom Companies closed pursuant to the terms and conditions
      of a Stock Purchase Agreement, dated December 2, 2006, and a First Amendment
      thereto, dated December 29, 2006 (collectively, the “Stock Purchase Agreement”),
      by and between the Company, Manchester Indiana Operations, Inc., a Delaware
      corporation and wholly owned acquisition subsidiary of the Company (“Indiana
      Operations”), Manchester Indiana Acceptance, Inc., a Delaware corporation and
      wholly owned acquisition subsidiary of the Company (“Indiana Acceptance”), the
      ten shareholders of each of F.S. English, Inc. and GNAC, Inc. (the “Indiana
      Sellers,” and each an “Indiana Seller”), and Rick Stanley, as the Indiana
      Sellers’ representative. Under the Stock Purchase Agreement, Indiana Operations
      acquired all of the issued and outstanding capital stock of F.S. English, Inc.
      (the “F.S. English Shares”) and Indiana Acceptance acquired all of the issued
      and outstanding capital stock of GNAC, Inc. (the “GNAC Shares,” and together
      with the F.S. English Shares, the “Shares”). In connection with the acquisition,
      the Company refinanced the GNAC, Inc. $26 million portfolio of receivables
      with
      the proceeds of the Indiana Term Loan (as described below). The aggregate
      consideration paid to the Indiana Sellers in exchange for the Shares was: (i)
      $3,000,000 in the form of a promissory note (the “Seller Note”); (ii) 1,492,537
      shares of the common stock of the Company (the “Manchester Shares”),
      representing an amount equal to $3,000,000 as determined by reference to the
      average of the closing prices of the Company common stock on the five (5)
      business days immediately preceding December 29, 2006. In addition, the Company
      (i) repaid approximately $2 million to certain creditors of the Freedom
      Companies on behalf of the Indiana Sellers; and (ii) caused each personal
      guarantee of the Indiana Sellers to be released in regard to obligations of
      the
      Freedom Companies. The indebtedness of the Freedom Companies held by Rick
      Stanley was only partially repaid and a subordinated note was issued to Mr.
      Stanley in the amount of $150,000. The Company has provided limited piggy-back
      registration rights to the Indiana Sellers with respect to the Manchester Shares
      issued to them.





The
      Company is continuing operations of the respective businesses of the Freedom
      Companies as managed by Mr. Rick L. Stanley, who served as president of the
      Freedom Companies prior to the date of their acquisition by the Company.
      Subsequent to the date of acquisition by the Company, the Freedom Companies
      entered into an employment agreement with Mr. Rick L. Stanley, who is now
      serving as CEO of the Freedom Companies. Mr. Stanley has worked extensively
      in
      the Buy-Here/Pay-Here auto market for the past 18 years.





Manchester
      Indiana Funding LLC, a wholly-owned subsidiary of the Company entered into
      a
      loan agreement with the Lender, to provide financing for the acquisition of
      the
      Freedom Companies. This acquisition loan constitutes the second financing that
      the Company has entered into with the Lender. Pursuant to a Loan and Security
      Agreement which closed on December 29, 2006 (the “Indiana Loan Agreement”),
      between Manchester Indiana Funding LLC, the Lender and The Bank of New York
      Trust Company, N.A., as Collateral Agent (the “Collateral Agent”), the Lender
      agreed to loan Manchester Indiana Funding LLC up to $30 million. The Company
      has
      initially drawn approximately $21.1 million (the “Indiana Term Loan”) and may
      request additional draws under the terms of the Indiana Loan Agreement (the
      “Revolving Loan,” and together with the Indiana Term Loan, the “Indiana Loan”).
      The Indiana Loan Agreement expires on December 28, 2009 unless terminated
      earlier in accordance with its terms.





Interest
      on the Indiana Term Loan will accrue at an interest rate equal to the lesser
      of:
      (i) the greater of (x) prime rate (as determined daily) plus the Term Applicable
      Margin (as defined below) or (y) the Indiana Term Loan Floor (as defined below);
      or (ii) the maximum rate which may be legally charged under applicable usury
      law. Interest on the Revolving Loan will accrue at an interest rate equal to
      the
      lesser of: (i) the greater of (x) prime rate (as determined daily) plus five
      percent (5%) per annum or (y) thirteen percent (13%) per annum; or (ii) the
      maximum rate which may be legally charged under applicable usury law. The term
      “Term Applicable Margin” means eight percent (8%) per annum, provided that, for
      any day on which the principal amount of the Indiana Term Loan is equal to
      or
      less than sixty-five percent (65%) of the Net Term Pool Balance (the Net Term
      Pool Balance being the total balance of certain outstanding receivables), the
      term “Term Applicable Margin” means five percent (5%) per annum. The term
“Indiana Term Loan Floor” means sixteen percent (16%) per annum, provided that,
      for any day on which the principal amount of the Indiana Term Loan is equal
      to
      or less than sixty-five percent (65%) of the Net Term Pool Balance, the “Indiana
      Term Loan Floor” shall be thirteen percent (13%) per annum. The Company has paid
      all fees, costs, expenses and disbursements of the Lender in connection with
      legal services, origination costs, due diligence, closing of the Indiana Loan
      and initial interest, which in the aggregate was approximately $120,000 dollars.
      All other terms and conditions of the Indiana Term Loan are substantially
      similar to the same terms and conditions as the Nice Cars Loan, as described
      above.




26





The
      Company, the Freedom Companies and Manchester Indiana Funding LLC (collectively,
      the “Indiana Guarantors”) have each agreed to guaranty the loans up to an amount
      not exceeding ten percent of the amount of the Indiana Loan outstanding from
      time to time, pursuant to the terms of a Guaranty. The Indiana Guarantors have
      also entered into a Security Agreement with the Lender and the Collateral Agent
      pursuant to which each of the Indiana Guarantors has granted to the Collateral
      Agent and its successors and assigns, for the security and benefit of the
      Lender, a first priority security interest in and mortgage lien on all of the
      respective assets of the Indiana Guarantors.





In
      connection with the Indiana Loan Agreement, the Company, the Freedom Companies
      and Manchester Indiana Funding LLC, have entered into a Sale and Servicing
      Agreement, pursuant to which Indiana Acceptance has agreed to sell all of its
      rights to car sales contract receivables (the “Receivables”) to Manchester
      Indiana Funding LLC. Pursuant to this Sale and Servicing Agreement, the Company
      shall serve as the servicer for all Receivables, acting as agent, and shall
      manage, service and make collections on the Receivables. The Company has
      delegated its duties as servicer to Indiana Acceptance, as sub-servicer. The
      Company and Indiana Acceptance have agreed to comply with the terms and
      conditions of a servicing guideline and a credit and collection policy provided
      by the Lender.





***Litigation***





The
      Company is party to various legal disputes and proceedings arising from the
      ordinary course of general business activities. While, in the opinion of
      management, resolution of these matters is not expected to have a material
      adverse effect on the Company’s consolidated financial position, results of
      operations or cash flows, the ultimate outcome of any litigation is uncertain.
      In particular, On November 29, 2006, Lancelot Investors Fund, LP d/b/a Surge
      Capital (“Surge”) filed a complaint (the “Surge Complaint”) against Manchester
      Inc. in the Cook County, Illinois, Circuit Court. Through this action, Surge
      seeks more than $1.8 million in damages from Manchester for an alleged breach
      of
      contract. The Surge Complaint states that in early 2006, Manchester and Surge
      signed an agreement that summarized the terms under which Surge was prepared
      to
      provide Manchester with a $300,000,000 secured loan facility (the “Surge Loan
      Agreement”). The Surge Complaint further alleges that as part of the Surge Loan
      Agreement, Manchester was required to pay Surge a “break-up fee” of $2,000,000
      in the event that Manchester elected to pursue a financing with another party
      while Surge was prepared to close the loan facility upon terms and conditions
      substantially similar to those described in the Surge Loan Agreement. The Surge
      Complaint states that although Surge was prepared to close the loan facility,
      Manchester obtained financing from another source. Surge is demanding a net
      payment of $2,000,000, to be reduced by a $175,010.94 deposit Manchester
      currently holds (for a total of $1,824,989.06). On November 29, 2006, the
      Company filed a countersuit against Surge. The Company believes that Surge’s
      allegations and claims are without merit. The Company is vigorously contesting
      this action and pursuing all available avenues to resolve this controversy.




During
      the first quarter 2007, a legal proceeding was commenced against the Company
      and
      a separate legal proceeding was commenced against F.S. English, Inc. (the shares
      of which were acquired by one of the Company’s wholly-owned subsidiaries) and
      against Rick Stanley, the Chief Executive Officer of two of the Company’s
      subsidiaries, and formerly a stockholder and Chief Executive Officer of F.S.
      English, Inc. Prior to the acquisition of F.S. English, Inc. securities by
      a
      subsidiary of the Company and its merger into such subsidiary, F.S. English,
      Inc. was a franchisee of Byrider Franchising, Inc. (“Byrider”). Byrider alleges
      that it had certain rights that were breached under its franchise agreements
      with F.S. English, Inc. Byrider has filed a Complaint against the Company in
      the
      United States District Court for the Southern District of Indiana, claiming
      tortious interference with contract and seeking damages to be determined at
      trial. Byrider has demanded $2,115,167.16 in amounts allegedly owed under the
      franchise agreements, plus $212,539.82 in back amounts allegedly owed by F.S.
      English, Inc.. Byrider has demanded that F.S. English, Inc. and Rick Stanley
      submit the dispute to arbitration. The Company and its subsidiary dispute
      Byrider’s allegations and believe that the Byrider legal actions are without
      merit. The Company and its subsidiary intend to vigorously defend their position
      that Byrider waived any and all rights under the franchise agreement and the
      Company and its subsidiary intend to pursue all rights of recourse and legal
      remedies against Byrider.




27





Additionally,
      the Company is involved in litigation arising in the normal course of business.
      After consultation with legal counsel, management estimates that these matters
      will be resolved without material adverse effect on the Company’s future
      financial position or results from operations, and accordingly, has not recorded
      a liability in conjunction with them.





**Effect
      of Inflation**




Inflation
      has not been a significant factor affecting the Company’s results.




**Seasonality**





The
      Company’s automobile sales and finance business is seasonal in nature, with
      sales slowing towards the end of the calendar year. Many of the Company’s
      operating expenses such as administrative personnel, rent and insurance are
      fixed and cannot be reduced during periods of decreased sales. Further, the
      Company experiences seasonal fluctuations in its finance receivable credit
      losses.





**Off-Balance
      Sheet Arrangements**





As
      of the
      end of the period covered by this Quarterly Report, the Company was not a party
      to any off-balance sheet arrangements.





**Contractual
      Payment Obligations**





There
      have been no material changes outside of the ordinary course of business in
      the
      Company’s contractual payment obligations from those reported at November 30,
      2006 in the Company’s Annual Report on Form 10-K.




**Item
      3.**  **Quantitative
      and Qualitative Disclosing About Market Risk**





The
      Company is exposed to market risk on its financial instruments from changes
      in
      interest rates. In particular, the Company has exposure to changes in the prime
      rate. The Company does not use financial instruments for trading purposes or
      to
      manage interest rate risk. The Company’s earnings are determined by its net
      interest income, which is the difference between the income earned on
      interest-bearing assets and the interest paid on interest-bearing notes payable.
      A change in market interest rates could have an adverse effect on the Company’s
      profitability.





Interest
      on the Company’s $75 million loan borrowed in connection with its October 4,
      2006 acquisitions of Nice Cars, Inc. and Nice Cars Capital Acceptance
      Corporation will accrue on drawn principal at an interest rate equal to the
      lesser of: (i) the greater of (x) prime rate (as determined daily) plus 9%
      (unless for any day on which the principal amount of the Term Loan is equal
      to
      or less than sixty percent (60%) of outstanding principle then the Prime Rate
      shall be plus 5% per annum) or (y) 17% per annum (unless for any day on which
      the principal amount of the Term Loan is equal to or less than sixty percent
      (60%) of the net term pool balance, the amount will be 13% per annum); or (ii)
      the maximum rate which may be legally charged under applicable usury law.





Interest
      on the $30 million Indiana Term Loan borrowed in connection with the
      acquisitions of the Freedom Companies, will accrue at an interest rate equal
      to
      the lesser of: (i) the greater of (x) prime rate (as determined daily) plus
      the
      Term Applicable Margin or (y) the Indiana Term Loan Floor; or (ii) the maximum
      rate which may be legally charged under applicable usury law. Interest on the
      Revolving Loan will accrue at an interest rate equal to the lesser of: (i)
      the
      greater of (x) prime rate (as determined daily) plus five percent (5%) per
      annum
      or (y) thirteen percent (13%) per annum; or (ii) the maximum rate which may
      be
      legally charged under applicable usury law. The term “Term Applicable Margin”
means eight percent (8%) per annum, provided that, for any day on which the
      principal amount of the Indiana Term Loan is equal to or less than sixty-five
      percent (65%) of the Net Term Pool Balance (the Net Term Pool Balance being
      the
      total balance of certain outstanding receivables), the term “Term Applicable
      Margin” means five percent (5%) per annum. The term “Indiana Term Loan Floor”
means sixteen percent (16%) per annum, provided that, for any day on which
      the
      principal amount of the Indiana Term Loan is equal to or less than sixty-five
      percent (65%) of the Net Term Pool Balance, the “Indiana Term Loan Floor” shall
      be thirteen percent (13%) per annum.




28





The
      Company intends to charge the highest legally permissible interest rates on
      the
      notes issued in connection with the sales of its automobiles, however, if the
      foregoing formulation for the calculation of interest applicable to the
      Company’s Loan equals or exceeds the rate of interest that the Company may
      legally charge its customers, the Company may incur net interest losses. The
      applicable rates of interest will also vary state-by-state in accordance with
      applicable usury laws which could adversely affect the Company’s ability to
      maintain profitable operations in respect of the differential in rates which
      the
      Company may charge its customers and service interest payments on the Loan.
      An
      increase in prime rate will generally reduce Company net revenues. However,
      a
      decrease in prime rate will not necessarily increase Company net revenues as
      the
      applicable interest rate on the Company’s Loan indebtedness will be subject to
      the rate adjustments discussed above which could be applied under the component
      of the formulation which does not include prime rate.





**Item
      4.**  **Controls
      and Procedures**





As
      of the
      end of the period covered by this Quarterly Report, an evaluation was carried
      out under the supervision and with the participation of the Company’s
      management, including the Company’s Acting Chief Executive Officer and Chief
      Financial Officer, of the effectiveness of the Company’s disclosure controls and
      procedures, as defined in Rule 13a-15(e) promulgated under the Securities and
      Exchange Act of 1934 (the “Exchange Act”). Based on their evaluation, the
      Company’s Acting Chief Executive Officer and Chief Financial Officer have
      concluded that the Company’s disclosure controls and procedures were deficient
      with respect to assurance that information required to be disclosed by the
      Company in reports that it files or submits under the Exchange Act is
      accumulated and communicated to the Company’s management, including the
      Company’s Acting Chief Executive Officer and Chief Financial Officer, to allow
      timely decisions on required disclosures and is recorded, processed, summarized
      and reported within the time periods specified in Securities and Exchange
      Commission rules and forms.





The
      Company has made changes in the Company’s internal controls over financial
      reporting during the Company’s most recently completed fiscal quarter that have
      materially affected, or are reasonably likely to materially affect, our internal
      controls over financial reporting. The
      Board
      of Directors of the Company has made a commitment to revise the Company’s
      controls and procedures relative to the acquisition of the Nice Cars Companies
      and the acquisition of the Freedom Companies, as well as all subsequent
      Buy-Here/Pay-Here operations. The implementation of the new internal controls
      over financial reporting have commenced during the first quarter of 2007 and
      will continue subsequent to the period covered by this Quarterly Report. The
      new
      systems, controls and procedures are designed specifically for the
      Buy-Here/Pay-Here business, including, without limitation, implementation of
      the
      AutoStar Solutions operations software and Account Mate, a fully integrated
      accounting system with the AutoStar software. This system was placed into
      service in both the Nice Cars Companies and the Freedom Companies during the
      first quarter of 2007 and is currently processing such Companies’ Accounts.
      Company management expects the remediation of its internal controls over
      financial reporting to be completed during the course of the second and third
      quarters of 2007.





29


**PART
      II:**  **OTHER
      INFORMATION**





**Item
      1.**  **Legal
      Proceedings**





During
      the period covered by this Quarterly Report, legal proceedings were commenced
      against the Company, one of its subsidiaries, and Rick Stanley, the Chief
      Executive Officer of two of the Company’s subsidiaries. See “Management’s
      Discussion and Analysis of Financial Conditions and Results of Operations -
      Legal Matters” which is incorporated herein by reference thereto.





**Item
      1A.**  **Risk
      Factors**





For
      a
      discussion of the risk factors affecting the Company, see “Risk Factors” in Part
      I, Item 1A of the Form 10-K filed with respect to the Company’s fiscal year
      end on November 30, 2006.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





On
      December 29, 2006, the Company acquired F.S. English, Inc. (“F.S.
      English”), a privately held Buy-Here/Pay Here car sales company and
      GNAC,
      Inc. (“GNAC,” and together with F.S. English, the “Freedom Companies”). The
      acquisition of the Freedom Companies closed pursuant to the terms and conditions
      of a Stock
      Purchase Agreement dated December 2, 2006 and a First Amendment thereto, dated
      December 29, 2006 (collectively, the “Stock Purchase Agreement”), by and between
      the Company, two of its subsidiaries, the ten shareholders of each of the
      Freedom Companies (the “Sellers,” and each a “Seller”), and Rick
      Stanley, as the Sellers’ representative .
      The
      aggregate consideration paid to the Sellers pursuant to the Stock Purchase
      Agreement included 1,492,537 shares of the common stock of the Company,
      representing an amount equal to $3,000,000 as determined by reference to the
      average of the closing prices of the Company common stock on the five (5)
      business days immediately preceding December
      29, 2006 . On
      December 29, 2006, the Company issued these 1,492,537
      shares of the common stock of the Company to the
      Sellers.  The issuance of the Company’s shares was exempt from registration
      with the U.S. Securities and Exchange Commission in reliance on Section 4(2)
      of
      the Securities Act of 1933, as amended (the “Securities Act”). All of the shares
      issued in connection acquisition of the Freedom Companies are restricted and
      may
      not be publicly traded or sold until such shares are registered under the
      Securities Act or an exemption from registration is available; however the
      Company has provided limited piggy-back registration rights to the Sellers
      with
      respect to the shares issued to them.





**Item
      3.**  **Defaults
      Upon Senior Securities**





None.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





None.





**Item
      5.**  **Other
      Information**





None.





**Item
      6.**  **Exhibits
      and Reports on Form 8-K**





**Reports
      on Form 8-K**





January
      8, 2007





The
      Company filed a Report on Form 8-K on January 8, 2007 disclosing (i) the
      acquisition of F.S. English, Inc. and GNAC, Inc. on December 29, 2006; (ii)
      a
      draw $30 million on the Company’s $300 million credit facility and (iii) resignation
      of Mr. James Worosz, the Company’s Senior Vice President of
      Finance.




30





**Subsequent
      Events**





March
      20, 2007





The
      Company filed a Report on Form 8-K on March 20, 2007 disclosing (i)
      on
      March 14, 2007 the Board of
      Directors of
      the
      Company named Lawrence Taylor as its Chief Financial Officer; and (ii) on March
      16, 2007, the Board of Directors appointed Mr. Stephen R. Scorgie as a director
      of the Company, effective as of March 19, 2007.





**Exhibits**





An
      Exhibit List has been filed as part of this Report on page E-1.




31




**SIGNATURES**




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




**MANCHESTER
                INC.**
              (Registrant)Date: April 16, 2007
            By:
            /s/ Richard D. GainesName:Richard
              D. GainesTitle:Acting
              Principal Executive OfficerSecretary
                and
                Director




Date: April 16, 2007
            By:
            /s/ Lawrence TaylorName:Lawrence
              TaylorTitle:Principal
              Financial OfficerChief
                Accounting
                Officer





32




**EXHIBIT
      INDEX**




**Manchester
      Inc.**





**Quarter
      Ended February 28, 2007**





Exhibit
                No.
            
            Description
                of ExhibitsExhibit
                10.44
            
            Loan
                and Security Agreement, dated as of December 28, 2006, between Manchester
                Indiana Funding, LLC, Palm Beach Multi-Strategy Fund, L.P., and the
                Bank
                of New York.Exhibit
                10.45
            
            Sale
                and Servicing Agreement, dated as of December 28, 2006, between Manchester
                Indiana Funding, LLC, Manchester Inc., Manchester Indiana Acceptance,
                Inc.
                and Manchester Indiana Operations, Inc.Exhibit
                10.46
            
            Guaranty,
                dated as of December 28, 2006, by Manchester Inc., Manchester Indiana
                Acceptance, Inc. and Manchester Indiana Operations, Inc., to Palm
                Beach
                Multi-Strategy Fund, L.P.Exhibit
                10.47
            
            Security
                Agreement, dated as of December 28, 2006, between Manchester Inc.,
                Manchester Indiana Acceptance, Inc., Manchester Indiana Operations,
                Inc.,
                the Bank of New York, and Palm Beach Multi-Strategy Fund,
                L.P.Exhibit
                10.48
            
            Funding
                Agreement, dated as of December 28, 2006, among the Bank of New York,
                Palm
                Beach Multi-Strategy Fund, L.P., Manchester Indiana Funding, LLC,
                and
                Manchester, Inc.Exhibit
                10.49
            
            Stock
                Purchase Agreement, dated as of December 2, 2006, by and among Manchester
                Indiana Operations, Inc., Manchester Indiana Acceptance, Inc., Manchester
                Inc., the Shareholders of each of F.S. English, Inc. and GNAC, Inc.
                and
                Rick Stanley, as Seller's Representative.Exhibit
                10.50
            
            First
                Amendment to Stock Purchase Agreement, dated as of December 29, 2006,
                by
                and amongManchester
                Indiana Operations, Inc., Manchester Indiana Acceptance, Inc., Manchester
                Inc., the Sellers and Rick Stanley, on behalf of himself and each
                Seller.Exhibit
                10.51
            
            Promissory
                Note, dated as of December 29, 2006, byManchester
                Indiana Acceptance, Inc. to Rick Stanley.Exhibit
                10.52
            
            Subordinated
                Promissory Note, dated as of December 29, 2006, byManchester
                Indiana Acceptance, Inc. to Rick Stanley.Exhibit
                10.53
            
            Unconditional
                Continuing Guaranty, dated as of December 29, 2006, byManchester
                Inc. in favor of Rick Stanley, as Shareholders’Representative, and Rick Stanley, individually.Exhibit
                10.54
            
            Security
                Agreement, dated as of December 29, 2006, by and between Manchester
                Indiana Acceptance, Inc. and Manchester Inc., in favor of Rick Stanley,
                as
                Sellers’ Representative, and Rick Stanley,
                individually.Exhibit
                10.55
            
            Plan
                and Agreement of Merger of Foreign Corporation into Delaware Corporation,
                dated as of December 29, 2006, between GNAC, Inc. and Manchester
                Indiana
                Acceptance, Inc.Exhibit
                10.56
            
            Plan
                and Agreement of Merger of Foreign Corporation into Delaware Corporation,
                dated as of December 29, 2006, between F.S. English, Inc. and Manchester
                Indiana Operations, Inc.Exhibit
                10.57
            
            Employment
                Agreement, dated as of December 29, 2006, between Manchester Indiana
                Operations, Inc. and Rick L.
                Stanley.






E-1






Exhibit
                31.1
            
            Certification
                of Acting Principal Executive Officer pursuant to Section 302 of
                the
                Sarbanes-Oxley Act of 2002.Exhibit
                31.2
            
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.Exhibit
                32.1
            
            Certification
                of the Acting Principal Executive Officer pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.Exhibit
                32.2
            
            Certification
                of the Principal Financial Officer pursuant to 18 U.S.C. Section
                1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




E-2