UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)





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


For the
quarterly period ended March 31, 2009





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





For the
transition period from _____________ to ______________


Commission
file number __________________________________





FREEDOM FINANCIAL GROUP,
      INC.(Exact
      name of registrant as specified in its
charter)





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





3058 East Elm Street, Springfield,
      Missouri  65802(Address
      of principal executive offices) (Zip
Code)





(417) 886-6600(Registrant’s  telephone
      number, including area code)





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





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes xNo  ̈





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


Yes  ̈No x





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


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





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





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





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





As of
May
12, 2009 20,462,543 shares of Common Stock, $0.0001 par value were
outstanding.





TABLE
OF CONTENTS




PART
      I. - FINANCIAL INFORMATION
                                  3ITEM
      1.
                                  Financial
      Statements
                                  3ITEM
      2.
                                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                  15ITEM
      3.
                                  Quantitative
      and Qualitative Disclosures About Market Risk
                                  27ITEM
      4.
                                  Controls
      and Procedures
                                  27ITEM 4T.
                                  Controls and
      Procedures
                                  28PART
      II. – OTHER INFORMATION
                                  29ITEM
      6.
                                  Exhibits
                                  29INDEX
      TO EXHIBITS
                                  29


2


PART I.-FINANCIAL
INFORMATION





ITEM
1.  Financial
Statements





Report
of Independent Registered Public Accounting Firm





Audit
Committee, Board of Directors and Stockholders


Freedom
Financial Group, Inc.


Springfield,
Missouri





We have
reviewed the accompanying consolidated balance sheet of Freedom Financial Group,
Inc. as of March 31, 2009, and the related consolidated statement of operations
for the three-month period ended March 31, 2009 and stockholders’ equity and
cash flows for the three-month period ended March 31, 2009.  These
interim financial statements are the responsibility of the Company’s
management.





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





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





We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as of
December 31, 2008 and the related consolidated statements of operations,
stockholders’ equity and cash flows for the year then ended (not presented
herein); and in our report dated March 10, 2009, we expressed an unqualified
opinion on those consolidated financial statements.  In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 2008 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.





/s/
Weaver & Martin, LLC





Kansas
City, Missouri


May 12,
2009


3


FREEDOM
FINANCIAL GROUP, INC.


Consolidated
Balance Sheets




March
      31,
                                    
                                    
                                    December
      31,2009
                                    
                                    
                                    2008AssetsCash
      and cash equivalents
                                    
                                    $
                                    1,872,804
                                    
                                    
                                    $
                                    2,145,436Finance
      receivables, net
                                    
                                    
                                    17,144,528
                                    
                                    
                                    
                                    15,938,361Accrued
      interest receivable
                                    
                                    
                                    179,003
                                    
                                    
                                    
                                    184,807Property
      and equipment, net
                                    
                                    
                                    43,529
                                    
                                    
                                    
                                    52,064Deferred
      financing fees
                                    
                                    
                                    227,952
                                    
                                    
                                    
                                    296,337Deferred
      origination costs
                                    
                                    
                                    163,276
                                    
                                    
                                    
                                    138,013Other
      assets
                                    
                                    
                                    380,682
                                    
                                    
                                    
                                    351,647Total
      assets
                                    
                                    $
                                    20,011,774
                                    
                                    
                                    $
                                    19,106,665Liabilities
      and Stockholders' Equity LiabilitiesBank
      line of credit
                                    
                                    $
                                    11,229,600
                                    
                                    
                                    $
                                    9,975,734Accounts
      payable
                                    
                                    
                                    31,999
                                    
                                    
                                    
                                    34,914Accrued
      expenses
                                    
                                    
                                    134,899
                                    
                                    
                                    
                                    147,756Accrued
      compensation costs
                                    
                                    
                                    49,734
                                    
                                    
                                    
                                    61,262Other
      liabilities
                                    
                                    
                                    21,058
                                    
                                    
                                    
                                    22,126Total
      liabilities
                                    
                                    
                                    11,467,290
                                    
                                    
                                    
                                    10,241,792Commitments
      and ContingenciesStockholders'
      EquityCommon
      stock, $0.0001 par value; 36,000,000 shares authorized; 20,467,001 issued
      at March 31, 2009 and December 31, 2008; 20,462,543 outstanding at March
      31, 2009 and December 31, 2008
                                    
                                    
                                    2,047
                                    
                                    
                                    
                                    2,047Additional
      paid-in capital
                                    
                                    
                                    13,882,347
                                    
                                    
                                    
                                    13,882,347Retained
      earnings (deficit)
                                    
                                    
                                    (5,031,085
                                    )
                                    
                                    
                                    (4,738,477
                                    )Accumulated
      other comprehensive loss
                                    
                                    
                                    (308,432
                                    )
                                    
                                    
                                    (280,651
                                    )Treasury
      stock, at cost; 4,458 shares
                                    
                                    
                                    (393
                                    )
                                    
                                    
                                    (393
                                    )Total
      stockholders' equity
                                    
                                    
                                    8,544,484
                                    
                                    
                                    
                                    8,864,873Total
      liabilities and stockholders' equity
                                    
                                    $
                                    20,011,774
                                    
                                    
                                    $
                                    19,106,665





See
Notes to Consolidated Financial Statements.


4


FREEDOM
FINANCIAL GROUP, INC.


Consolidated
Statements of Operations


Unaudited




Three
      Months EndedMarch
      31,
                      2009
                    
                    
                    March
      31,
                      2008RevenuesInterest
      income
                    
                    $
                    973,791
                    
                    
                    $
                    622,922Other
      income
                    
                    
                    40,006
                    
                    
                    
                    40,128Total
      revenues
                    
                    
                    1,013,797
                    
                    
                    
                    663,050Interest
      Expense
                    
                    
                    285,063
                    
                    
                    
                    103,205Revenues
      after Interest Expense
                    
                    
                    728,734
                    
                    
                    
                    559,845Provision
      for Credit Losses
                    
                    
                    356,856
                    
                    
                    
                    31,620Net
      Revenues After Provision for Credit Losses
                    
                    
                    371,878
                    
                    
                    
                    528,225Operating
      Expenses
                    
                    
                    664,486
                    
                    
                    
                    702,554Operating
      Loss
                    
                    
                    (292,608
                    )
                    
                    
                    (174,329
                    )Nonoperating
      Income, Other
                    
                    
                    -
                    
                    
                    
                    -Net
      Loss Before Income Taxes
                    
                    
                    (292,608
                    )
                    
                    
                    (174,329
                    )Provision
      for Income Taxes
                    
                    
                    -
                    
                    
                    
                    -Net
      Loss
                    
                    $
                    (292,608
                    )
                    
                    $
                    (174,329
                    )Basic
      and Diluted Loss Per Share
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.01
                    )





See
Notes to Consolidated Financial Statements.


5


FREEDOM
FINANCIAL GROUP, INC.


Consolidated
Statements of Stockholders’ Equity


Unaudited





Common
                                              Stock
      Shares
                                            
                                            
                                            Common
                                              Stock
                                              Amount
                                            
                                            
                                            Additional
                                              Paid-in
                                              Capital
                                            
                                            
                                            Retained
                                              Earnings
                                            
                                            
                                            Accumulated
                                              Other
                                              Comprehensive
                                              Income
                                            
                                            
                                            Treasury
                                              Stock
                                            
                                            
                                            TotalBalance,
      December 31, 2007
                                            
                                            
                                            19,922,543
                                            
                                            
                                            $
                                            1,993
                                            
                                            
                                            $
                                            13,802,873
                                            
                                            
                                            $
                                            (5,041,509
                                            )
                                            
                                            $
                                            1,599,791
                                            
                                            
                                            $
                                            (393
                                            )
                                            
                                            $
                                            10,362,755Net
      income
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            303,032
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            303,032Foreign
      currency translation adjustment
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (280,651
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (280,651
                                            )Comprehensive
      income
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            22,381Liquidation
      of subsidiary
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (1,599,791
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (1,599,791
                                            )Stock
      warrants issued
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            30,928
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            30,928Stock
      Grant
                                            
                                            
                                            540,000
                                            
                                            
                                            
                                            54
                                            
                                            
                                            
                                            48,546
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            48,600Balance,
      December 31, 2008
                                            
                                            
                                            20,462,543
                                            
                                            
                                            $
                                            2,047
                                            
                                            
                                            $
                                            13,882,347
                                            
                                            
                                            $
                                            (4,738,477
                                            )
                                            
                                            $
                                            (280,651
                                            )
                                            
                                            $
                                            (393
                                            )
                                            
                                            $
                                            8,864,873Net
      loss
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (292,608
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (292,608
                                            )Foreign
      currency translation adjustment
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (27,781
                                            )
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (27,781
                                            )Comprehensive
      loss
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —
                                            
                                            
                                            
                                            (320,389
                                            )Balance,
      March 31, 2009
                                            
                                            
                                            20,462,543
                                            
                                            
                                            $
                                            2,047
                                            
                                            
                                            $
                                            13,882,347
                                            
                                            
                                            $
                                            (5,031,085
                                            )
                                            
                                            $
                                            (308,432
                                            )
                                            
                                            $
                                            (393
                                            )
                                            
                                            $
                                            8,544,484





See
Notes to Consolidated Financial Statements.


6


FREEDOM
FINANCIAL GROUP, INC.


Consolidated
Statements of Cash Flows


Unaudited





For
      the Three Months EndedMarch
      31,2009
                    
                    
                    2008Operating
      ActivitiesNet
      loss
                    
                    $
                    (292,608
                    )
                    
                    $
                    (174,329
                    )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
                    
                    
                    8,535
                    
                    
                    
                    12,494Provision
      for credit losses
                    
                    
                    356,856
                    
                    
                    
                    31,620Accretion
      of deferred contract purchase discounts
                    
                    
                    (99,426
                    )
                    
                    
                    (80,347
                    )Recovery
      of charged-off finance receivables
                    
                    
                    242,758
                    
                    
                    
                    355,383Deferral
      of origination costs
                    
                    
                    (63,217
                    )
                    
                    
                    (19,747
                    )Amortization
      of deferred financing fees
                    
                    
                    72,252
                    
                    
                    
                    49,796Amortization
      of deferred origination costs
                    
                    
                    37,954
                    
                    
                    
                    3,602Changes
      inOther
      assets
                    
                    
                    (31,921
                    )
                    
                    
                    (22,151
                    )Accounts
      payable and accrued expenses
                    
                    
                    (27,300
                    )
                    
                    
                    (36,249
                    )Foreign
      exchange loss
                    
                    
                    (27,781
                    )
                    
                    
                    -Net
      cash provided by operating activities
                    
                    
                    176,102
                    
                    
                    
                    120,072Investing
      ActivitiesPurchase
      of finance receivables
                    
                    
                    (3,243,787
                    )
                    
                    
                    (1,926,285
                    )Principal
      collected on finance receivables
                    
                    
                    1,522,692
                    
                    
                    
                    1,594,762Purchase
      of property and equipment
                    
                    
                    -
                    
                    
                    
                    (46,548
                    )Net
      cash used in investing activities
                    
                    
                    (1,721,095
                    )
                    
                    
                    (378,071
                    )Financing
      ActivitiesDeferred
      financing costs
                    
                    
                    -
                    
                    
                    
                    (469,426
                    )Line
      of credit advances, net
                    
                    
                    1,250,000
                    
                    
                    
                    1,576,433Net
      cash provided by financing activities
                    
                    
                    1,250,000
                    
                    
                    
                    1,107,007Effect
      of Exchange Rate Changes on Cash and Cash Equivalents
                    
                    
                    22,361
                    
                    
                    
                    (56,660
                    )Net
      Increase (Decrease) in Cash and Cash Equivalents
                    
                    
                    (272,632
                    )
                    
                    
                    792,348Cash
      and Cash Equivalents, Beginning of Period
                    
                    
                    2,145,436
                    
                    
                    
                    1,857,694Cash
      and Cash Equivalents, End of Period
                    
                    $
                    1,872,804
                    
                    
                    $
                    2,650,042





See
Notes to Consolidated Financial Statements.


7


FREEDOM
FINANCIAL GROUP, INC.


Notes
to Consolidated Financial Statements


Unaudited




Note
      1:
            General




The
accompanying unaudited consolidated financial statements of Freedom Financial
Group, Inc. (“FFG” or the “Company”) have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (the “SEC”) for
reporting on Form 10-Q.  Accordingly, certain information and
footnotes required by generally accepted accounting principles for complete
financial statements have been omitted.  The consolidated balance
sheet of the Company as of December 31, 2008 has been derived from the audited
consolidated balance sheet of the Company as of that date.  These
interim statements should be read in conjunction with the audited consolidated
financial statements for the year ended December 31, 2008 and notes thereto
included in the Company’s Form 10-K filed with the SEC on March 10,
2009.




The
information contained herein reflects all adjustments that, in the opinion of
management, are necessary to make the financial statements not
misleading.  The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full
year.




Note
      2:
            Basis
      of Presentation




The
consolidated financial statements include the accounts of FFG, and FFG’s wholly
owned Canadian subsidiary, T.C.G. – The Credit Group Inc. (TCG), which
collectively comprised a single reporting segment, the “Company.” The Company’s
investment in TCG was liquidated in May 2008.  See Note 10, Discontinued Foreign
Operations, for further discussion of the liquidation of TCG. All
significant intercompany transactions have been eliminated in
consolidation.




Note
      3:
            Finance
      Receivables and Allowance for Credit
Losses




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




2009
                            
                            
                            2008Automobiles
                            
                            $
                            18,324,586
                            
                            
                            $
                            16,841,865Other
                            
                            
                            337,648
                            
                            
                            
                            466,626Total
      finance receivables
                            
                            
                            18,662,234
                            
                            
                            
                            17,308,491LessUnearned
      discount
                            
                            
                            832,489
                            
                            
                            
                            730,331Allowance
      for credit losses
                            
                            
                            685,217
                            
                            
                            
                            639,7991,517,706
                            
                            
                            
                            1,370,130Net
      finance receivables
                            
                            $
                            17,144,528
                            
                            
                            $
                            15,938,361




Approximately
4% and 6% of the above finance receivables as of March 31, 2009 and December 31,
2008, respectively, are Canadian in origin.


8


Amounts
contractually receivable (including principal and interest) under our finance
receivables at March 31, 2009, were as shown in the following
table.  The Company expects our actual collections to differ
significantly from the amounts presented below as a result of prepayments,
delinquent payments, partial payments and nonpayments.




2009
                  
                  
                  6,165,9742010
                  
                  
                  7,536,1032011
                  
                  
                  6,369,5502012
                  
                  
                  4,324,2172013
                  
                  
                  1,207,3102014
                  
                  
                  16,536Total
                  
                  $
                  25,619,690





Activity
in the allowance for credit losses related to finance receivables for the three
months ended March 31, 2009 and 2008 was as follows:




2009
                          
                          
                          2008Balance,
      beginning of period
                          
                          $
                          639,799
                          
                          
                          $
                          811,376Provision
      charged to expense
                          
                          
                          356,856
                          
                          
                          
                          31,620Losses
      charged off
                          
                          
                          (551,601
                          )
                          
                          
                          (541,583
                          )Recoveries
      of previously charged-off amounts
                          
                          
                          242,758
                          
                          
                          
                          355,383Effect
      of foreign currency translation
                          
                          
                          (2,595
                          )
                          
                          
                          (6,583
                          )Balance,
      end of period
                          
                          $
                          685,217
                          
                          
                          $
                          650,213




The
Company’s nonearning finance receivables totaled $157,582 at March 31,
2009.  The Company provided an allowance for credit losses related to
these receivables of $141,824.




Note
      4:
            Bank
      Line of Credit




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




The loan
agreement contains covenants, among others, that 1) require the Company to
maintain a minimum net worth of $7,500,000 as of the end of each fiscal quarter,
2) restrict the Company’s ability to declare or pay dividends, and 3) limit the
amount of capital expenditures the Company can incur in any fiscal
year.  The Company was not in violation of any of the loan agreement
covenants as of March 31, 2009.




The
Company incurred fees payable to its investment banking firm, its attorneys, and
ReMark totaling $546,704 in connection with consummating the line of credit loan
agreement.  These fees were recorded as deferred financing fees when
paid and are being amortized to interest expense over the 24 month term of the
loan agreement on a straight-line basis.


9


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




Note
      5:
            Income
      Taxes




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




Based on
our evaluation, we have concluded that there are no significant uncertain tax
positions requiring recognition in our consolidated financial
statements.  Our evaluation was performed for the tax years ended
December 31, 2005, 2006, 2007 and 2008, the tax years which remain subject to
examination by major tax jurisdictions as of March 31, 2009.




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




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




Note
      6:
            Commitments
      and Contingencies




The
Company had outstanding commitments to purchase finance receivables totaling
approximately $1,394,506 as of March 31, 2009.  These commitments
generally expire 20 days after they are issued if unused.  Typically,
the Company funds between 20% and 30% of its outstanding
commitments.




The
Company is obligated under a noncancelable lease for its principal office with a
term of five years.  Future minimum payments under this operating
lease as of March 31, 2009 are as follows:




2009
                  
                  
                  36,6562010
                  
                  
                  48,8752011
                  
                  
                  48,8752012
                  
                  
                  48,8752013
                  
                  
                  28,512Total
                  
                  $
                  211,793


10


Certain
officers of the Company hold a total of 1,529,583 shares of the Company’s common
stock, all or a portion of which, the Company may be required to repurchase, at
the option of an officer whose employment is terminated due to a permanent
disability, or after death, at the option of the officer’s estate, at a price
per share ranging from 90% to 100% of the common stock’s fair market
value.  The specific terms concerning these options and the repurchase
of the common stock are set forth in the Management Shareholders Agreement filed
as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on August 17, 2007
and the Management Shareholder Agreement filed as Exhibit 1 to the Company’s
Form 8-K filed with the SEC on December 20, 2007.




The
Company had no other commitments as of March 31, 2009.




Note
      7:
            Earnings
      Per Share




Basic
earnings per share is computed by dividing net income (loss) by the weighted
average number of common shares outstanding during the
period.  Diluted earnings per share is computed similar to basic
earnings per share except the denominator is increased to include the number of
additional common shares that would have been outstanding if dilutive potential
common shares had been issued.  Since the effect of converting the
common stock warrants would be anti-dilutive for the three months ended March
31, 2009 and March 31, 2008, basic and diluted loss per share amounts are based
on the weighted average number of common shares outstanding.




Earnings
per share for the three months ended March 31, 2009 and 2008, was computed as
follows:




2009
                                
                                
                                2008Net
      income (loss)
                                
                                $
                                (292,608
                                )
                                
                                $
                                (174,329
                                )Weighted
      average shares
                                
                                
                                20,462,543
                                
                                
                                
                                19,922,543Basic
      and diluted loss per share
                                
                                $
                                (0.01
                                )
                                
                                $
                                (0.01
                                )




Note
      8:
            Operating
      Expenses




The
components of operating expenses for the three months ended March 31, 2009 and
2008, respectively, are as follows:




2009
                                      
                                      
                                      2008Salaries
      and benefits
                                      
                                      $
                                      373,746
                                      
                                      
                                      $
                                      417,420Professional
      fees
                                      
                                      
                                      91,801
                                      
                                      
                                      
                                      113,168Information
      services
                                      
                                      
                                      74,261
                                      
                                      
                                      
                                      18,286Insurance
                                      
                                      
                                      41,914
                                      
                                      
                                      
                                      44,221Stockholder
      relations
                                      
                                      
                                      19,906
                                      
                                      
                                      
                                      4,748Deferral
      of origination costs
                                      
                                      
                                      (63,217
                                      )
                                      
                                      
                                      (19,747
                                      )Other
                                      
                                      
                                      126,075
                                      
                                      
                                      
                                      124,458$
                                      664,486
                                      
                                      
                                      $
                                      702,554




Note
      9:
            Stock
      Based Compensation




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


11


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




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




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




Note
      10:
            Discontinued
      Foreign Operations




Prior to
May 2008, the Company’s foreign operations, all of which are in Canada, had been
conducted through its wholly owned subsidiary, T.C.G. – The Credit Group Inc.
(“TCG”), based in Winnipeg, Manitoba. In May 2008, TCG ceased originating new
loan purchases and the Company purchased the outstanding receivables of TCG. The
Company began servicing the Canadian receivables from its location in the United
States, and intends to service them until they are fully collected. The
remaining assets of TCG were sold and the Company’s investment in the subsidiary
and accumulated foreign exchange gains were liquidated.  As a result
of the liquidation the Company recognized a $1,380,250 gain in the quarter ended
June 30, 2008. Total revenues, loss before taxes, and net loss from foreign
operations for the three months ended March 31, 2009 and 2008, respectively,
were as shown below.




2009
                                
                                
                                2008Total
      revenues
                                
                                $
                                56,766
                                
                                
                                $
                                175,362Income
      (loss) before income taxes
                                
                                $
                                23,004
                                
                                
                                $
                                (69,377
                                )Net
      income (loss)
                                
                                $
                                23,004
                                
                                
                                $
                                (69,377
                                )Basic
      and diluted earnings (loss) per share
                                
                                $
                                -
                                
                                
                                $
                                -




Note
      11:
            Additional
      Cash Flow Information




The
Company made cash interest payments totaling $211,200 and $43,578 during the
three month periods ended March 31, 2009 and 2008, respectively.




The
Company made no cash payments for income taxes during the three month periods
ended March 31, 2009 and 2008.


12


Note
      12:
            Recently
      Issued Accounting Pronouncements




In
September 2006, the Financial Accounting Standards Board (the “FASB”) issued
Statement of Financial Accounting Standards No. 157 (“SFAS 157”), Fair Value
Measurements.  SFAS 157 clarifies the principle that fair value should
be based on the assumptions market participants would use when pricing an asset
or liability and establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions.  Under SFAS 157, fair
value measurements would be separately disclosed by level within the fair value
hierarchy.  SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years, with early adoption permitted.  The adoption of this
statement did not have a material effect on our financial position or results of
operations.




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





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of SFAS No.
115”.  This statement permits entities to choose to measure many
financial instruments and certain other items at fair value.  The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions.  This statement is expected to expand the use
of fair value measurement, which is consistent with the FASB’s long-term
objectives for accounting for financial instruments.  SFAS No. 159 is
effective for our fiscal year beginning January 1, 2008.  We did not
elect to report additional assets and liabilities at fair value other than those
required to be accounted for at fair value prior to the adoption of SFAS No.
159, therefore there was no material effect of the adoption of this standard on
our financial statements.




In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51(“SFAS
160”). SFAS 160 (a) amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and the
deconsolidation of a subsidiary; (b) changes the way the consolidated income
statement is presented; (c) establishes a single method of accounting for
changes in a parent’s ownership interest in a subsidiary that do not result in
deconsolidation; (d) requires that a parent recognize a gain or loss in net
income when a subsidiary is deconsolidated; and (e) requires expanded
disclosures in the consolidated financial statements that clearly identify and
distinguish between the interests of the parent’s owners and the interests of
the noncontrolling owners of a subsidiary.  The accounting provisions
of SFAS 160 must be applied prospectively, but the presentation and disclosure
requirements must be applied retrospectively to provide comparability in the
financial statements.  Early adoption is prohibited.  SFAS
160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  The adoption of this
statement did not have a material effect on our financial position or results of
operations.




In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations—a replacement
of FASB No. 141(“SFAS 141(R)”).  SFAS 141(R) requires (a) a
company to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at fair value as of the acquisition
date; and (b) an acquirer in preacquisition periods to expense all
acquisition-related costs, among various other modifications to SFAS No.
141.  SFAS 141(R) requires that any adjustments to an acquired
entity’s deferred tax asset and liability balance that occur after the
measurement period be recorded as a component of income tax
expense.  This accounting treatment is required for business
combinations consummated before the effective date of SFAS No. 141(R)
(non-prospective), otherwise SFAS 141(R) must be applied prospectively. The
presentation and disclosure requirements must be applied retrospectively to
provide comparability in the financial statements.  Early adoption is
prohibited.   SFAS 141(R) is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008.  The Company has not entered into any transactions requiring
disclosure under SFAS 141(R). The impact of this standard is dependent upon the
level of future acquisitions, if any.


13


In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement
No. 133 (“SFAS 161”).  SFAS 161 requires companies to
provide qualitative disclosures about the objectives and strategies for using
derivatives, quantitative data about the fair value of gains and losses on
derivative contracts, and details of credit-risk-related contingent features in
their hedged positions.  The statement also requires companies to disclose
more information about the location and amounts of derivative instruments in
financial statements; how derivatives and related hedges are accounted for under
SFAS 133, Accounting for
Derivative Instruments and Hedging Activities; and how the hedges affect
the entity’s financial position, financial performance and cash
flows.  SFAS 161 is effective for periods beginning after
November 15, 2008.  The Company has not entered into any
transactions requiring disclosure under SFAS 161.




In
April 2008, the FASB issued Staff Position FAS No. 142-3, Determination of the Useful Life of
Intangible Assets (“FAS 142-3”).  FAS 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under
SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS 142”).  The objective of the FSP is to
improve the consistency between the useful life of a recognized intangible asset
under SFAS 142 and the period of expected cash flows used to measure the
fair value of the asset under SFAS No. 141(R).  FAS 142-3 is
effective for fiscal years beginning after December 15,
2008.  Early application is not permitted.  The Company is
evaluating the impact of adopting this new accounting principle on its
consolidated financial position, results of operations and cash
flows.




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




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




14




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





SPECIAL
CAUTIONARY NOTICE REGARDING


FORWARD-LOOKING
STATEMENTS





The
information included or incorporated by reference in this quarterly report on
Form 10-Q contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995.  Words such as “intend,”
“anticipate,” “believe,” “estimate,” “plan,” “expect,” “may,” “will,” “should,”
“could,” and variations of these words and similar expressions are intended to
identify these forward-looking statements.  All statements other than
statements of historical facts contained in this report, including statements
regarding our future financial position or performance, business strategy,
budgets, capital commitments and resources, projected costs and plans and
objectives of management for future operations, are considered to be
forward-looking statements.  Freedom Financial Group, Inc. (the
“Company” or “FFG”) cautions that, by their nature, forward-looking statements
are not guarantees of future performance or results.  They involve
risks, uncertainties and contingencies, both known and unknown, and actual
results may differ materially from those expressed, contemplated or implied by
the forward looking statements, or such risks, uncertainties or contingencies
could affect the extent to which a certain plan, objective, projection, estimate
or prediction is realized.  We express our expectations, beliefs or
projections in good faith and believe our expectations reflected in these
forward-looking statements are based on reasonable assumptions; however, we
cannot assure you that these expectations, beliefs or projections will prove to
have been correct.  These forward-looking statements involve risks and
uncertainties including, but not limited to, the following:


(i)
            the
      risks associated with business
expansion;


(ii)
            our
      ability to achieve profitable
operations;


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


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


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


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


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


(viii)
            the
      adequacy of our loss reserves


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


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


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


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


(xiii)
            inflation/deflation.





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


15





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





WHERE YOU CAN FIND
ADDITIONAL INFORMATION





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





Overview





We are a
consumer finance company specializing in the acquisition, collection and
servicing of sub-prime automobile loans purchased primarily from independent
used car dealers.  We invest significant amounts of cash to acquire
motor vehicle installment contracts. We generate cash over the terms of those
installment contracts in the form of interest and principal payments we
collect.





Our
primary source of revenue is interest income generated from our portfolio of
installment contracts.





In the
past, the Company’s former Canadian subsidiary, T.C.G. – The Credit Group, Inc.
(TCG”), acquired a variety of consumer installment contracts, including small
ticket leases, loans secured by home appliances and other consumer goods, and
loans for bulk food purchases.  During 2008, the subsidiary was
liquidated and the Company purchased TCG’s outstanding portfolio of installment
contracts. The Company intends to service the Canadian portfolio until the
remaining balances are fully collected or liquidated in some other manner. The
Company’s portfolio of outstanding installment contracts has been increasingly
comprised of sub-prime automobile loans.  As of March 31, 2009, the
Company’s loan portfolio consisted of over 98% sub-prime automobile
loans.




The
Company plans to continue to devote the majority of its marketing resources and
efforts to acquiring sub-prime automobile loans. The Company’s management
intends to focus on the following:





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





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





(3)
            Minimizing
      the credit losses in the installment contracts portfolio;
    and


16


(4)
            Monitoring
      key performance measures, including cost per loan acquired, book to look
      ratio (computed as the number of contracts acquired compared to the number
      of credit applications received/reviewed), turnaround time for responding
      to credit applications submitted by dealers, and turnaround time for
      funding a loan package submitted by a
dealer.





In
addition, the Company’s management continues to monitor the impact of current
economic conditions on the Company. We continuously scrutinize delinquency
rates, vehicle repossessions, bankruptcies, and other data for trends that may
require us to update our underwriting standards, increase our reserve for bad
debts, or take some other action.  We regularly observe unemployment
statistics and information regarding worker layoffs for major employers in areas
we offer our financing programs that would necessitate an appropriate action,
such as offering extensions or loan modifications, on a case by case basis, to
borrowers who have suffered temporary income disruptions.  Currently,
less than 5% of the Company’s installment contracts have been modified or
extended. We do not expect loan modifications or extensions to increase
significantly as a percent of the total loan portfolio during 2009. A prolonged
economic recession could adversely affect our ability to acquire suitable
installment contracts.  Continued weakness in the economy could
adversely affect our business and that of the dealers from which we purchase
contracts and result in reductions in our revenues.





Critical Accounting
Policies, Judgments and Estimates





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





The
Company considers the determination of the allowance for credit losses to
involve a higher degree of subjective judgment and complexity than its other
significant accounting policies.  The allowance for credit losses is
calculated with the objective of maintaining an allowance for credit losses that
management believes is adequate to absorb reasonably estimable probable losses
in the Company’s portfolio of installment contracts.  Management’s
determination of the adequacy of the allowance for credit losses is based on
periodic evaluations of the Company’s portfolio of finance receivables, credit
loss history, and other relevant factors.  This evaluation is
inherently subjective as it requires material estimates, including, among
others, expected default probabilities, value of collateral, the amount and
timing of expected future cash flows on delinquent loans, estimated losses and
general amounts for historical loss experience.  The process also
considers prevailing and expected future economic conditions, uncertainties in
estimating losses and inherent risks in the installment contracts
portfolio.  All of these factors may be subject to significant
change.  To the extent actual outcomes differ from management
estimates, additional provisions for credit losses may be required that would
adversely impact our earnings in future periods. See Item 2, MANAGEMENT’S DISCUSSION AND
ANALYSIS, under the headings Results
of Operations– Provision for
Credit Lossesand Financial
Condition– Asset
Quality.





This
evaluation is based on a review of various quantitative and qualitative
analyses.  Quantitative analyses include the review of all loans
charged-off by asset class, static pool analysis by month of acquisition and by
dealer, review of delinquency trends, and analysis of the historical cumulative
losses in the portfolio.  Other quantitative analyses include a review
of the current delinquency ratios and an analysis of the relative size of each
asset class in relation to historical amounts.  Qualitative analyses
include an assessment of prevailing and anticipated economic conditions, trends
in deficiency balance collections, trends in the number of loan modifications
and extensions, trends in average borrower credit scores and trends in the
percentage of balances recovered through sale of collateral.


17


Selected Portfolio
Statistics





The
following table presents selected unaudited portfolio statistics for the three
months ended March 31, 2009 and 2008.  This table should be read in
conjunction with the Condensed Consolidated Financial Statements and the notes
thereto, included herein.





2009
                        
                        
                        2008United
      States
                        
                        
                        Canada
      *
                        
                        
                        Total
                        
                        
                        United
      States
                        
                        
                        Canada
      *
                        
                        
                        TotalInstallment
      contracts acquired during the year (total principal
amount)
                        
                        $
                        3,465,008
                        
                        
                        $
                        0
                        
                        
                        $
                        3,465,008
                        
                        
                        $
                        1,703,711
                        
                        
                        $
                        334,722
                        
                        
                        $
                        2,038,433Purchase
      price of Installment contracts Acquired
                        
                        $
                        3,243,788
                        
                        
                        $
                        0
                        
                        
                        $
                        3,243,788
                        
                        
                        $
                        1,614,130
                        
                        
                        $
                        315,358
                        
                        
                        $
                        1,929,488Percentage
      of dollar amount paid to principal balance acquired
                        
                        
                        93.62
                        %
                        
                        
                        0.00
                        %
                        
                        
                        93.62
                        %
                        
                        
                        94.74
                        %
                        
                        
                        94.21
                        %
                        
                        
                        94.66
                        %Number
      of installment contracts acquired during the quarter
                        
                        
                        313
                        
                        
                        
                        0
                        
                        
                        
                        313
                        
                        
                        
                        159
                        
                        
                        
                        64
                        
                        
                        
                        223Average
      principal balance acquired
                        
                        $
                        11,070
                        
                        
                        $
                        0
                        
                        
                        $
                        11,070
                        
                        
                        $
                        10,715
                        
                        
                        $
                        5,230
                        
                        
                        $
                        9,141


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




Results of
Operations





Interest
Income





Our
interest income totaled $973,791 and $622,922 for the three months ended March
31, 2009 and 2008, respectively. The increase in interest income for the three
months ended March 31, 2009 as compared to 2008 is attributed primarily to the
increase in the installment contract portfolio in the United States, offset by a
decline in the outstanding balance of the Canadian installment loan portfolio
and lower yields on installment contracts experienced in 2009.





The
following tables present information relative to the average balances and
interest rates of our interest earning assets for the three months ended March
31, 2009 and 2008, respectively:





2009
                                          
                                          
                                          2008Average
                                          
                                          
                                          Interest
                                          
                                          
                                          
                                          
                                          
                                          Average
                                          
                                          
                                          InterestBalance
                                          
                                          
                                          Income
                                          
                                          
                                          Yield
                                          
                                          
                                          Balance
                                          
                                          
                                          Income
                                          
                                          
                                          YieldInstallment
      Contracts
                                          
                                          $
                                          17,253,245
                                          
                                          
                                          $
                                          972,180
                                          
                                          
                                          
                                          22.54%
                                          
                                          
                                          $
                                          10,359,194
                                          
                                          
                                          $
                                          611,596
                                          
                                          
                                          
                                          23.62%Cash
      and cash equivalents
                                          
                                          
                                          2,007,510
                                          
                                          
                                          
                                          1,611
                                          
                                          
                                          
                                          0.32%
                                          
                                          
                                          
                                          2,260,959
                                          
                                          
                                          
                                          11,326
                                          
                                          
                                          
                                          2.00%Total
                                          
                                          $
                                          19,260,755
                                          
                                          
                                          $
                                          973,791
                                          
                                          
                                          
                                          20.22%
                                          
                                          
                                          $
                                          12,620,153
                                          
                                          
                                          $
                                          622,922
                                          
                                          
                                          
                                          19.74%





The
decrease in yield on our installment contracts is primarily the result of an
increase in the amortization of deferred origination costs during 2009, lending
to borrowers with higher credit scores, and changes in the mix of our
portfolio.  Beginning January 1, 2008, the Company adopted Financial
Accounting Standard No. 91, Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases (“SFAS91”).  Loan costs deferred under SFAS 91 are amortized as
an offset to interest income over the expected outstanding terms of the loans.
Amortization of SFAS 91 costs amounted to $37,954 and $3,602 for the three
months ended March 31, 2009 and 2008, respectively.


18





Our
financing program utilizes the borrower’s credit score as one of the factors to
determine the contracted loan interest rate and acquisition fee to be charged.
Lower rates are offered to borrowers with higher credit
scores.  During the latter part of 2008 and the first quarter of 2009,
the average borrower’s credit scores for installment contracts purchased by the
Company increased as a result of the Company being more selective in purchasing
installment contracts. The majority of installment contracts purchased by the
Company have been entered into with borrowers with credit scores ranging from
475 to 620. In addition, throughout 2008 and 2009 our portfolio of installment
contracts has been increasingly comprised of contracts acquired through our
United States point-of-sale automobile financing programs.  These
contracts typically have lower yields than the other types of contracts in our
portfolio, among them, automobile contracts acquired in bulk purchase
transactions, and contracts purchased by our former Canadian subsidiary which
include small ticket leases, loans secured by home appliances and other consumer
goods, and loans for bulk food purchases.





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





For the Three Months Ended March 31, 2009 compared to
                                  the Three Months Ended March 31, 2008Volume
                                
                                
                                Rate
                                
                                
                                TotalIncrease
      (decrease) in interest income:Installment
      Contracts
                                
                                $
                                387,099
                                
                                
                                $
                                (26,516
                                )
                                
                                $
                                360,583Cash
      and cash equivalents
                                
                                
                                (1,144
                                )
                                
                                
                                (8,570
                                )
                                
                                
                                (9,714
                                )Total
      Interest Income
                                
                                $
                                385,955
                                
                                
                                $
                                (35,086
                                )
                                
                                $
                                350,869





Interest
Expense





We
incurred interest expense of $285,063, including $72,252 amortization of
deferred financing fees, and $103,205, including $49,796 amortization of
deferred financing fees, during the three months ended March 31, 2009 and 2008,
respectively.  Our interest expense increased as a result of the
increase in the outstanding balance of our line of credit from March 31, 2008 to
March 31, 2009, and the amortization of costs associated with obtaining the line
of credit.


19


Provision
for Credit Losses





Our
provision for credit losses totaled $356,856 and $31,620 for the three months
ended March 31, 2009 and 2008, respectively. The increase in the provision for
the three months ended March 31, 2009 compared to the three months ended March
31, 2008 is a result of a reduction of our reserve for credit losses in the
first quarter of 2008, and an increase in net charge-offs in 2009 as compared to
2008. The Company assigned senior management to its account servicing and
collection department in the fourth quarter of 2007, and, as a result of this,
the Company experienced an improvement in delinquencies during the first quarter
of 2008. Because of this improvement in delinquencies, the Company reduced its
reserve for credit losses through a lower charge to the provision during the
first quarter of 2008. Net charge-offs increased due to 1) an increase in
charge-offs experienced in the first quarter of 2009, which was a result of a
significant number of vehicles repossessed in late 2008, 2) approximately
$124,000 in recoveries received in the first quarter 2008 on receivables that
had been charged off in 2007, and 3) because of the overall increase in size of
the Company’s loan portfolio in 2009.  Net charge-offs increased to
$308,843 for the three months ended March 31, 2009, from $186,200 for the three
months ended March 31, 2008. As a percent of net contracts net charge-offs were
7.16% and 7.19% for the three months ended March 31, 2009 and 2008,
respectively. See Item 2,
MANAGEMENT’S DISCUSSION AND ANALYSIS,under the heading Financial
Condition– Asset Qualityfor a discussion of the Company’s delinquencies and actual credit loss
experience and its allowance for credit losses. As the Company continues to
acquire installment contracts, and our average contracts receivable outstanding
increases, we expect the charge to our earnings for credit losses will continue
to increase.





Operating
Expenses





Our
operating expenses totaled $664,486 and $702,554 for the three months ended
March 31, 2009 and 2008, respectively.  A summary of these expenses
follows:





2009
                                
                                
                                2008
                                
                                
                                Percent ChangeSalaries
      and benefits
                                
                                $
                                373,746
                                
                                
                                $
                                417,420
                                
                                
                                
                                -10.46%Professional
      fees
                                
                                
                                91,801
                                
                                
                                
                                113,168
                                
                                
                                
                                -18.88%Information
      services
                                
                                
                                74,261
                                
                                
                                
                                18,286
                                
                                
                                
                                306.11%Insurance
                                
                                
                                41,914
                                
                                
                                
                                44,221
                                
                                
                                
                                -5.22%Stockholder
      relations
                                
                                
                                19,906
                                
                                
                                
                                4,748
                                
                                
                                
                                319.25%Deferral
      of origination costs
                                
                                
                                (63,217
                                )
                                
                                
                                (19,747
                                )
                                
                                
                                220.13%Other
                                
                                
                                126,075
                                
                                
                                
                                124,458
                                
                                
                                
                                1.30%Total
                                
                                $
                                664,486
                                
                                
                                $
                                702,554
                                
                                
                                
                                -5.42%





Salaries
and benefits decreased for the three months ended March 31, 2009 as compared to
2008 because of a decrease in employee costs resulting from 18% fewer
individuals being employed by the Company as compared to the prior year, offset
by an increase in sales commissions paid in 2009 to individuals employed by the
Company to market our financing programs. As the Company continues to grow,
however, we expect our salaries and benefits costs to increase, but anticipate
that as a percentage of total revenues these costs will continue to decrease.
Professional fees decreased during the three months ended March 31, 2009
compared to the three months ended March 31, 2008 as a result of the December
31, 2008 accrual of fiscal 2008 audit fees, offset by examination fees billed by
our lender during the three month period ended March 31, 2009. Information
services increased for the three month period ended March 31, 2009 as compared
to 2008, as a result of the Company’s implementation of installment loan
origination and underwriting systems during the quarter ended June 30, 2008 and
ongoing costs incurred as a result of the use of these systems. Stockholder
relations increased for the three month period ended March 31, 2009, as compared
to 2008, because of the timing of the annual stockholders’ meeting, and the
accrual of related expenses. This event is scheduled to occur approximately
three months earlier in 2009 than it occurred in 2008. Insurance expense
decreased because of our premiums for Directors and Officers insurance
decreased, and because of the elimination of insurance premiums for coverage on
our former Canadian office building, which was sold in June
2008.  Deferred Origination Costs increased as a result of an increase
in the number of loans acquired during the three month period ended March 31,
2009 as compared to the three month period ended March 31,
2008.


20





Our
growth plan, if achieved, will cause our operating costs to increase over time,
but as a percent of revenues we expect these costs to continue to
decrease.





The
Company’s average cost to acquire an installment contract (which includes all
direct marketing, business development and underwriting expenses and an
allocation of certain overhead costs) during the three month period ended March
31, 2009 was approximately $796 per contract as compared to $679 for the three
month period ended March 31, 2008.  This increase in average
acquisition cost is a result of usage costs related to loan origination and
underwriting systems utilized during 2009 which were not utilized by the Company
during the same period in 2008. These increases have been offset by an
improvement in the Company’s book to look ratio during the three month period
ended March 31, 2009. For the three month period ended March 31, 2009, the
Company’s book to look ratio in the United States was 4.29% compared to 3.76%
for the three month period ended March 31, 2008.  Management is
attempting to further increase this ratio, and thereby reduce our average
acquisition cost, by training our customers to send the Company only those
credit applications that have a high probability of being approved and purchased
by us, and by following up on approved applications to encourage the placement
of the financing applied for with us instead of with a competitor.





The
Company’s average monthly cost to service an installment contract (which
includes all direct collections and servicing expenses and an allocation of
certain overhead costs) during the three month period ended March 31, 2009 was
$13.16 per serviced contract, as compared to $31.18 during the three month
period ended March 31, 2008. The decrease for the quarter ended March 31, 2009
reflects a restructure of the Company’s account servicing department which
resulted in gains in efficiency, and investments that have resulted in lower
delinquencies, fewer charge-offs and added capacity. Management anticipates that
this average servicing cost per contract will continue to decrease as the size
of the portfolio of installment contracts increases due to continued efficiency
gains and economies of scale.





The
Company formally tracks our response time for responding to credit applications
received and our response time for funding loan packages submitted by dealers,
and we monitor these statistics on a daily basis.  Our goal is to
reduce these response times to better serve the needs of our
customers.  We believe that reducing these response times will also
reduce our overall costs of underwriting and funding.





Financial
Condition





Installment
Contracts Portfolio





Finance
receivables consist of our portfolio of installment contracts. The Company
acquired installment contracts with outstanding principal balances totaling
$3,465,008 during the three months ended March 31, 2009.  We invested cash
of approximately $3,243,788 to acquire these contracts.  As a result of
these acquisitions, our portfolio of installment contracts increased from
$15,938,361, net of an allowance for credit losses of $639,799, at December 31,
2008 to $17,144,528, net of an allowance for credit losses of $685,217, at March
31, 2009.





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


21





March 31, 2009
                        
                        
                        December 31, 2008United States
                        
                        
                        Canada
                        
                        
                        Total
                        
                        
                        United States
                        
                        
                        Canada
                        
                        
                        TotalAutomobiles
                        
                        $
                        17,933,775
                        
                        
                        $
                        390,810
                        
                        
                        $
                        18,324,585
                        
                        
                        $
                        16,327,262
                        
                        
                        $
                        514,603
                        
                        
                        $
                        16,841,865Other
                        
                        
                        -
                        
                        
                        
                        337,649
                        
                        
                        
                        337,649
                        
                        
                        
                        -
                        
                        
                        
                        466,626
                        
                        
                        
                        466,626Total
                        
                        
                        17,933,775
                        
                        
                        
                        728,459
                        
                        
                        
                        18,662,234
                        
                        
                        
                        16,327,262
                        
                        
                        
                        981,229
                        
                        
                        
                        17,308,491LessUnearned
      discount
                        
                        
                        825,258
                        
                        
                        
                        7,231
                        
                        
                        
                        832,489
                        
                        
                        
                        718,717
                        
                        
                        
                        11,614
                        
                        
                        
                        730,331Allowance
      for credit losses
                        
                        
                        613,086
                        
                        
                        
                        72,131
                        
                        
                        
                        685,217
                        
                        
                        
                        569,794
                        
                        
                        
                        70,005
                        
                        
                        
                        639,799Net
                        
                        $
                        16,495,431
                        
                        
                        $
                        649,097
                        
                        
                        $
                        17,144,528
                        
                        
                        $
                        15,038,751
                        
                        
                        $
                        899,610
                        
                        
                        $
                        15,938,361





Asset
Quality





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





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





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


22





March 31, 2009United States
                        
                        
                        Canada
                        
                        
                        TotalAmount
                        
                        
                        Pct.
                        
                        
                        Amount
                        
                        
                        Pct.
                        
                        
                        Amount
                        
                        
                        Pct.Installment
      Contracts
                        
                        
                        17,933,775
                        
                        
                        
                        100%
                        
                        
                        
                        728,459
                        
                        
                        
                        100%
                        
                        
                        
                        18,662,234
                        
                        
                        
                        100%Period
      of delinquency:31
      - 60 days
                        
                        
                        182,540
                        
                        
                        
                        1.02%
                        
                        
                        
                        35,747
                        
                        
                        
                        4.91%
                        
                        
                        
                        218,287
                        
                        
                        
                        1.17%61
      - 90 days
                        
                        
                        147,534
                        
                        
                        
                        0.82%
                        
                        
                        
                        26,717
                        
                        
                        
                        3.67%
                        
                        
                        
                        174,251
                        
                        
                        
                        0.93%91
      - 120 days
                        
                        
                        47,500
                        
                        
                        
                        0.26%
                        
                        
                        
                        1,109
                        
                        
                        
                        0.15%
                        
                        
                        
                        48,609
                        
                        
                        
                        0.26%121+
      days
                        
                        
                        93,845
                        
                        
                        
                        0.52%
                        
                        
                        
                        15,129
                        
                        
                        
                        2.08%
                        
                        
                        
                        108,974
                        
                        
                        
                        0.58%Total
                        
                        
                        471,419
                        
                        
                        
                        2.63%
                        
                        
                        
                        78,702
                        
                        
                        
                        10.80%
                        
                        
                        
                        550,121
                        
                        
                        
                        2.95%
  December 31, 2008United States
                          
                          
                          Canada
                          
                          
                          TotalAmount
                          
                          
                          Pct.
                          
                          
                          Amount
                          
                          
                          Pct.
                          
                          
                          Amount
                          
                          
                          Pct.Installment
      Contracts
                          
                          
                          16,327,262
                          
                          
                          
                          100%
                          
                          
                          
                          981,228
                          
                          
                          
                          100%
                          
                          
                          
                          17,308,490
                          
                          
                          
                          100%Period
      of delinquency:31
      - 60 days
                          
                          
                          392,693
                          
                          
                          
                          2.40%
                          
                          
                          
                          70,388
                          
                          
                          
                          7.17%
                          
                          
                          
                          463,081
                          
                          
                          
                          2.68%61
      - 90 days
                          
                          
                          228,915
                          
                          
                          
                          1.40%
                          
                          
                          
                          33,887
                          
                          
                          
                          3.45%
                          
                          
                          
                          262,802
                          
                          
                          
                          1.52%91
      - 120 days
                          
                          
                          38,276
                          
                          
                          
                          0.23%
                          
                          
                          
                          34,230
                          
                          
                          
                          3.49%
                          
                          
                          
                          72,506
                          
                          
                          
                          0.42%121+
      days
                          
                          
                          51,720
                          
                          
                          
                          0.32%
                          
                          
                          
                          7,317
                          
                          
                          
                          0.75%
                          
                          
                          
                          59,037
                          
                          
                          
                          0.34%Total
                          
                          
                          711,604
                          
                          
                          
                          4.37%
                          
                          
                          
                          145,822
                          
                          
                          
                          14.87%
                          
                          
                          
                          857,426
                          
                          
                          
                          4.95%





At
December 31, 2008, delinquent accounts, defined as accounts more than 30 days
contractually past due, totaled 4.95% of our outstanding installment
contracts.  Delinquencies declined as of March 31, 2009 to 2.95% of
our outstanding installment contracts.  The decrease is attributable
to the Company’s devotion of senior management personnel to its account
servicing and collection efforts. New controls and systems were implemented by
management beginning in 2007 to better monitor delinquent accounts, resulting in
fewer delinquencies and credit losses. We expect delinquencies as a percent of
the total portfolio in the United States to remain constant throughout 2009,
unless continued adverse economic conditions cause higher unemployment or
underemployment, or an increase in consumer prices (such as fuel), or some other
significant event occurs that affects our borrowers’ ability to make their
payments.




23




The
following tables set forth information with respect to actual credit loss
experience in our portfolio of installment contracts for the three months ended
March 31, 2009 and 2008, respectively:





Three Months Ended March
      31,2009
                                        
                                        
                                        2008United
      States
                                        
                                        
                                        Canada
                                        
                                        
                                        Total
                                        
                                        
                                        United
      States
                                        
                                        
                                        Canada
                                        
                                        
                                        TotalInstallment
      Contracts, net of unearned discounts, end of period
                                        
                                        $
                                        17,108,516
                                        
                                        
                                        $
                                        721,228
                                        
                                        
                                        $
                                        17,829,744
                                        
                                        
                                        $
                                        8,125,560
                                        
                                        
                                        $
                                        2,148,327
                                        
                                        
                                        $
                                        10,273,887Installment
      Contracts, net of unearned discounts, average during the period
      (1)
                                        
                                        
                                        16,414,298
                                        
                                        
                                        
                                        838,947
                                        
                                        
                                        
                                        17,253,245
                                        
                                        
                                        
                                        8,012,106
                                        
                                        
                                        
                                        2,347,088
                                        
                                        
                                        
                                        10,359,194Gross
      charge-offs
                                        
                                        
                                        521,356
                                        
                                        
                                        
                                        30,245
                                        
                                        
                                        
                                        551,601
                                        
                                        
                                        
                                        490,862
                                        
                                        
                                        
                                        50,721
                                        
                                        
                                        
                                        541,583Recoveries
                                        
                                        
                                        237,592
                                        
                                        
                                        
                                        5,166
                                        
                                        
                                        
                                        242,758
                                        
                                        
                                        
                                        336,372
                                        
                                        
                                        
                                        19,011
                                        
                                        
                                        
                                        355,383Net
      charge-offs
                                        
                                        
                                        283,764
                                        
                                        
                                        
                                        25,079
                                        
                                        
                                        
                                        308,843
                                        
                                        
                                        
                                        154,490
                                        
                                        
                                        
                                        31,710
                                        
                                        
                                        
                                        186,200Net
      charge-offs as a % of avg. contracts during the period
      (annualized)
                                        
                                        
                                        6.92
                                        %
                                        
                                        
                                        11.96
                                        %
                                        
                                        
                                        7.16
                                        %
                                        
                                        
                                        7.71
                                        %
                                        
                                        
                                        5.40
                                        %
                                        
                                        
                                        7.19
                                        %




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


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





Our
allowance for credit losses was $685,217 at March 31, 2009 compared to $639,799
at December 31, 2008.  As a percentage of our outstanding net
installment contracts, our allowance for credit losses was 3.84% at March 31,
2009 and 3.86% at December 31, 2008. The allowance for credit losses was 17.24%
and 26.41% of past due accounts and 124.56% and 183.73% of accounts considered
delinquent as of March 31, 2009 and 2008 respectively.





During
the three months ended March 31, 2009, our net installment contracts increased
$1,251,585.  This increase was the result of a $1,377,512 increase in
automobile-secured contracts offset by a $125,927 decrease in all other
installment contracts.  The $1,377,512 increase in automobile-secured
installment contracts was comprised of a $1,501,081 increase in installment
contracts acquired through our U.S. point-of-sale program offset by a $122,458
decrease in installment contracts acquired through our Canadian point-of-sale
program, and a $1,111 decrease in installment contracts acquired through bulk
purchases.


24


The
Company’s loss history in its U.S. portfolio of installment contracts and in its
Canadian portfolio of automobile-secured installment contracts is
limited.  Due to this limited operating history, using historical loss
ratios to predict future probable losses is of limited
usefulness.  Additionally, uncertainty exists with respect to the
accuracy of our estimates of amounts we will recover through the sale of
repossessed collateral and with respect to anticipated future economic
conditions, both in the U.S. and Canada, and their effect on the performance of
our portfolio of installment contracts. For these reasons, our historical loss
ratios may not be relied upon as predictions of the future performance of our
portfolio or our future loss experience.





During
the three months ended March 31, 2009, we experienced net charge-offs of
$308,843, which represented 7.16% of our average outstanding installment
contracts during the period.  During the year ended December 31, 2008,
we experienced net charge-offs of $751,578, which represented 5.96% of our
average outstanding installment contracts during the year.





The
allowance for credit losses as of March 31, 2009 of $685,217 is 3.84% of our
outstanding net installment contracts. Based on the analyses we performed
related to our allowance for credit losses as described above and as described
in Item 2, MANAGEMENT’S
DISCUSSION AND ANALYSIS, under the heading Critical
Accounting Policies and Judgments, we believe that our allowance for
credit losses is adequate to cover probable losses that can be reasonably
estimated as of March 31, 2009.





The
following table sets forth the activity in the allowance for credit losses for
the three months ended March 31, 2009 and 2008, respectively:





Three Months Ended March
31,2009
                                        
                                        
                                        2008United States
                                        
                                        
                                        Canada
                                        
                                        
                                        Total
                                        
                                        
                                        United
                                          States
                                        
                                        
                                        Canada
                                        
                                        
                                        TotalBalance
      at beginning of period
                                        
                                        $
                                        569,794
                                        
                                        
                                        $
                                        70,005
                                        
                                        
                                        $
                                        639,799
                                        
                                        
                                        $
                                        670,222
                                        
                                        
                                        $
                                        141,154
                                        
                                        
                                        $
                                        811,376Charge-offs
                                        
                                        
                                        (521,356
                                        )
                                        
                                        
                                        (30,245
                                        )
                                        
                                        
                                        (551,601
                                        )
                                        
                                        
                                        (490,862
                                        )
                                        
                                        
                                        (50,721
                                        )
                                        
                                        
                                        (541,583
                                        )Recoveries
                                        
                                        
                                        237,593
                                        
                                        
                                        
                                        5,165
                                        
                                        
                                        
                                        242,758
                                        
                                        
                                        
                                        336,372
                                        
                                        
                                        
                                        19,011
                                        
                                        
                                        
                                        355,383Net
      charge-offs
                                        
                                        
                                        (283,763
                                        )
                                        
                                        
                                        (25,080
                                        )
                                        
                                        
                                        (308,843
                                        )
                                        
                                        
                                        (154,490
                                        )
                                        
                                        
                                        (31,710
                                        )
                                        
                                        
                                        (186,200
                                        )Provision
      for credit losses
                                        
                                        
                                        327,055
                                        
                                        
                                        
                                        29,801
                                        
                                        
                                        
                                        356,856
                                        
                                        
                                        
                                        12,021
                                        
                                        
                                        
                                        19,599
                                        
                                        
                                        
                                        31,620Effect
      of foreign currency translation
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,595
                                        )
                                        
                                        
                                        (2,595
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (6,583
                                        )
                                        
                                        
                                        (6,583
                                        )Balance
      at end of period
                                        
                                        $
                                        613,086
                                        
                                        
                                        $
                                        72,131
                                        
                                        
                                        $
                                        685,217
                                        
                                        
                                        $
                                        527,753
                                        
                                        
                                        $
                                        122,460
                                        
                                        
                                        $
                                        650,213




Liquidity and Capital
Resources





We
require substantial capital resources and cash to support our business strategy.
We use cash to make sub-prime used automobile loans and meet our cash needs for
operations.


25





The
Company’s growth strategy requires the Company to increase its acquisitions of
installment contracts.  We anticipate, however, to acquire installment
contracts during 2009 at a slower pace than recent months due to limited access
to credit resulting from the current economic situation.  We expect to
pay between 92% and 94% of the outstanding principal balance for installment
contracts that are purchased. We expect to fund these acquisitions from a
combination of internally generated cash flow and our line of credit. Our $15
million line of credit, which matures in January 2010, had an outstanding
balance of over $11 million as of March 31, 2009. We can give no assurance that
we will be able to secure additional financing on terms acceptable to us. If we
are unable to secure additional financing, we will be unable to meet our
installment contracts acquisition objectives.  Additionally, if the
current economic conditions and tight credit markets continue, it may be
difficult to refinance our bank line of credit when it matures in January, 2010,
and if we default under our bank line of credit our lender could assume
ownership of all of our assets and liquidate the assets in a manner the lender
deems satisfactory in order to satisfy the line of credit balance.





The
Company began 2009 with $2,145,436 cash on hand and had cash on hand of
$1,872,804 at March 31, 2009.  Operating activities provided cash of
$176,102 during the three month period ended March 31, 2009.





We
invested cash of approximately $3,244,000 to acquire installment contracts
during the three month period ended March 31, 2009.  We collected
principal payments on our installment contracts of approximately $1,523,000
during the three month period ended March 31, 2009.





During
the three months ended March 31, 2009 the Company received net advances on its
bank line of credit totaling $1,250,000 to fund the acquisition of installment
contracts. Total advances outstanding under the $15 million line of credit
agreement at March 31, 2009 totaled approximately $11,242,000.  Our
ability to continue to draw funds under the line of credit depends on our
ability to maintain a sufficient borrowing base by submitting  loan
documents purchased to our lender that are considered eligible assets by our
lender, and our continued compliance with the covenants in our line of credit
agreement.





We paid
financing fees totaling $472,347 during 2008 in connection with fund raising
activities performed by our investment banking firms and fees paid to our
lender. These financing fees have been deferred and are being amortized to
interest expense over the term of the line of credit.  The fees
amortized during the three month period ended March 31, 2009 amounted to
$72,252.





Our line
of credit agreement contains covenants, among others, that 1) require the
Company to maintain a minimum net worth of $7,500,000 as of the end of each
fiscal quarter, 2) restrict the Company’s ability to declare or pay dividends,
and 3) limit the amount of capital expenditures the Company can incur in any
fiscal year.  The Company was not in violation of any financial
covenants as of March 31, 2009.  If the Company experiences additional
net losses totaling $1 million, it would be at risk of defaulting under the
minimum net worth covenant.





The
Company spent approximately $35,000 upgrading its underwriting and loan
servicing systems during the fiscal year ended December 31, 2008.  The
Company had no additional material commitments for capital expenditures as of
March 31, 2009.  We believe these investments will serve to strengthen
our internal controls, allow us to quicken our response time to our customers,
provide management with improved reporting tools and fulfill our software needs
for the foreseeable future.


26


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





Off-Balance Sheet
Arrangements





The
Company, in its ordinary course of business, commits to purchase certain
installment contracts from its customers.  Each commitment is
essentially an “offer” by the Company to purchase a specific installment
contract that the Company has pre-approved, and customers generally have up to
20 days to “accept” the offer by selling to the Company the pre-approved
installment contract.  The Company had outstanding commitments to
acquire installment contracts totaling approximately $1,394,506 as of March 31,
2009.  Typically, the Company funds between 20% and 30% of its
outstanding commitments.





The
Company is also obligated under a noncancelable lease for its principal office
with a term of five years.  Future minimum payments under this lease
as of March 31, 2009 are
as follows:




2009
                  
                  
                  36,6562010
                  
                  
                  48,8752011
                  
                  
                  48,8752012
                  
                  
                  48,8752013
                  
                  
                  28,512Total
                  
                  $
                  211,793




Certain
officers of the Company hold a total of 1,529,583 shares of the Company’s common
stock, all or a portion of which, the Company may be required to repurchase, at
the option of an officer whose employment is terminated due to a permanent
disability, or after death, at the option of the officer’s estate, at a price
per share ranging from 90% to 100% of the common stock’s fair market
value.  The specific terms concerning these options and the repurchase
of the common stock are set forth in the Management Shareholders Agreement filed
as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on August 17, 2007
and the Management Shareholder Agreement filed as Exhibit 1 to the Company’s
Form 8-K filed with the SEC on December 20, 2007.




The
Company had no other off-balance sheet arrangements as of March 31,
2009.





ITEM
3.             Quantitative
and Qualitative Disclosures About Market Risk





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





ITEM
4.             
Controls and Procedures





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


27





The
Company carried out an evaluation, under the supervision and with the
participation of the Company’s management, including the Company’s Chief
Executive Officer and the Company’s Chief Financial Officer, of the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures.  Based on the foregoing, the Company’s Chief Executive
Officer and Chief Financial Officer concluded that the Company’s disclosure
controls and procedures were effective as of March 31, 2009.





There
have been no changes in the Company’s internal control over financial reporting
during the quarter ended March 31, 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.





ITEM
4T.            Controls
and Procedures





Not
applicable.


28


PART
II. - OTHER INFORMATION




ITEM
6. Exhibits





INDEX
TO EXHIBITS


ExhibitNumber
                    
                    Description2.1
                    
                    Corrected
      Trustee’s Amended Plan of Reorganization  (1)2.2
                    
                    Disclosure
      Statement for Trustee’s Amended Plan of
      Reorganization  (1)3.1
                    
                    First
      Amended and Restated Certificate of
      Incorporation  (1)3.1.1
                    
                    Certificate
      of Amendment of Certificate of
  Incorporation  (1)3.1.2
                    
                    Certificate
      of Amendment of Certificate of Incorporation (2)3.2
                    
                    Bylaws  (1)3.2.1
                    
                    Amendment
      to Bylaws  (1)3.2.2
                    
                    Amendment
      to Bylaws  (2)4.1
                    
                    Amended
      and Restated Trust Agreement of Freedom Financial Group I Statutory
      Trust  (1)31.1
                    
                    Certification
      of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
                    
                    Certification
      of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
                    
                    Certifications
      of Principal Executive Officer and Principal Financial Officer Pursuant to
      18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
      Act of
2002.





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





(2)           Filed
as an exhibit to the Company’s Form 10-Q on November 6, 2008, and incorporated
herein by reference.


29


SIGNATURES





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





FREEDOM
      FINANCIAL GROUP, INC.Date:
                  May
      12,
      2009
                  
                  By:
                  /s/ Jerald L.
  FenstermakerJerald
      L. FenstermakerPresident
      and Chief Executive Officer(Principal
      Executive Officer)Date:
                  May
      12,
      2009
                  
                  By:
                  /s/ J. Kevin MaxwellJ.
      Kevin MaxwellTreasurer
      and Chief Financial Officer(Principal
      Financial
Officer)


30