**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      One)





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


For
      the
      quarterly period ended June 30, 2007





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





For
      the
      transition period from _____________ to ______________


Commission
      file number __________________________________


**FREEDOM
                  FINANCIAL GROUP, INC.**(Exact
                  name of small business issuer as specified in its charter)Delaware
              43-1647559(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)3058
                  East Elm Street, Springfield, Missouri 65802(Address
                  of principal executive offices)(417)
                  886-6600(Issuer's
                  Telephone Number)(Former
                  name, former address and former fiscal year, if changed since last
                  report)





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





**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS**





Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court. Yes xNo
o




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





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





As
      of
      August 6, 2007 19,927,001 shares of Common Stock, $0.0001 par value were
      outstanding.





Transitional
      Small Business Disclosure Format: Yes oNo
x




1


**TABLE
      OF CONTENTS**


**PART
                  I. - FINANCIAL INFORMATION**
              **3******
              ******ITEM
                  1.**
              **Financial
                  Statements**
              **3******
              ****
              ******ITEM
                  2.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
              **16******
              ****
              ******ITEM
                  3.**
              **Controls
                  and Procedures**
              **31******
              ****
              ******PART
                  II. –
                  OTHER INFORMATION**
              **32******
              ******ITEM
                  1.**
              **Legal
                  Proceedings**
              **32******
              ****
              ******ITEM
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of Proceeds**
              **32******
              ****
              ******ITEM
                  3.**
              **Defaults
                  Upon Senior Securities**
              **32******
              ****
              ******ITEM
                  4.**
              **Submission
                  of Matters to a Vote of Security Holders**
              **32******
              ****
              ******ITEM
                  5.**
              **Other
                  Information**
              **32******
              ****
              ******ITEM
                  6.**
              **Exhibits**
              **33******
              ****
              ******INDEX
                  TO EXHIBITS**
              **33**




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 June 30, 2007, and the related consolidated statements of operations
      for the three-month and six-month periods ended June 30, 2007 and 2006 and
      stockholders’ equity and cash flows for the six-month periods ended June 30,
      2007 and 2006. These interim financial statements are the responsibility of
      the
      Company’s management.





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





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





We
      have
      previously audited, in accordance with the standards of the Public Company
      Accounting Oversight Board (United States), the consolidated balance sheet
      as of
      December 31, 2006 and the related consolidated statements of operations,
      stockholders’ equity and cash flows for the year then ended (not presented
      herein); and in our report dated March 15, 2007 we expressed an unqualified
      opinion on those consolidated financial statements. In our opinion, the
      information set forth in the accompanying consolidated balance sheet as of
      December 31, 2006 is fairly stated, in all material respects, in relation to
      the
      consolidated balance sheet from which it has been derived.





**/s/
      BKD,** **LLP**





Springfield,
      Missouri


August
      8,
      2007




3




**FREEDOM
      FINANCIAL GROUP, INC.**


**Consolidated
      Balance Sheets**


**Unaudited****June
                  30****,**
              
              **December
                  31,****2007**
              
              **2006****Assets**Cash
                  and cash equivalents
              
              $
              1,792,310
              
              $
              1,276,994Finance
                  receivables, net
              
              
              10,136,316
              
              
              9,676,164Repossessed
                  assets
              
              
              181,839
              
              
              326,185Accrued
                  interest receivable
              
              
              127,979
              
              
              131,428Property
                  and equipment, net
              
              
              275,248
              
              
              277,181Deferred
                  financing costs
              
              
              22,458
              
              
              112,290Other
                  assets
              
              
              62,029
              
              
              21,753Total
                  assets
              
              $
              12,598,179
              
              $
              11,821,995**Liabilities
                  and Stockholders’ Equity****Liabilities**Bank
                  line of credit
              
              $
              1,572,183
              
              $
              419,309Accounts
                  payable
              
              
              15,606
              
              
              15,867Accrued
                  expenses
              
              
              37,994
              
              
              107,147Accrued
                  compensation costs
              
              
              60,467
              
              
              53,903Dealer
                  holdbacks
              
              
              40,351
              
              
              48,895Dealer
                  reserves
              
              
              36,768
              
              
              37,873Total
                  liabilities
              
              
              1,763,369
              
              
              682,994**Stockholders’
                  Equity**Common
                  stock, $0.0001 par value; 36,000,000 shares authorized; 19,927,001
                  shares
                  issued and outstanding
              
              
              1,993
              
              
              1,993Additional
                  paid-in-capital
              
              
              13,802,633
              
              
              13,802,633Retained
                  earnings (deficit)
              
              
              (4,283,391
              )
              
              (3,596,479
              )Accumulated
                  other comprehensive income
              
              
              1,313,575
              
              
              930,854Total
                  stockholders’ equity
              
              
              10,834,810
              
              
              11,139,001Total
                  liabilities and stockholders’ equity
              
              $
              12,598,179
              
              $
              11,821,995




*See
      Notes to Consolidated Financial Statements.*





4




**FREEDOM
      FINANCIAL GROUP, INC.**


**Consolidated
      Statements of Operations**


**Unaudited**




**Three
                Months Ended**
            
            **Six
                Months Ended****June
                30,**
            
            **June
                30,**
            
            **June
                30,**
            
            **June
                30,****200****7**
            
            **2006**
            
            **2007**
            
            **2006****Revenues**Interest
                income
            
            $
            675,031
            
            $
            691,002
            
            $
            1,326,201
            
            $
            1,347,223Other
                income
            
            
            50,248
            
            
            36,348
            
            
            98,859
            
            
            75,203Total
                revenues
            
            
            725,279
            
            
            727,350
            
            
            1,425,060
            
            
            1,422,426**Interest
                Expense**
            
            
            83,729
            
            
            —
            
            
            150,195
            
            
            —**Revenues
                After Interest Expense**
            
            
            641,550
            
            
            727,350
            
            
            1,274,865
            
            
            1,422,426**Provision
                for Credit Losses**
            
            
            376,891
            
            
            244,672
            
            
            741,214
            
            
            542,160**Net
                Revenues After Provision for Credit Losses**
            
            
            264,659
            
            
            482,678
            
            
            533,651
            
            
            880,266**Operating
                Expenses**
            
            
            588,405
            
            
            675,356
            
            
            1,220,563
            
            
            1,453,649**Operating
                Loss**
            
            
            (323,746
            )
            
            (192,678
            )
            
            (686,912
            )
            
            (573,383
            )**Provision
                for Income Taxes**
            
            
            —
            
            
            —
            
            
            —
            
            
            —**Net
                Loss**
            
            $
            (323,746
            )
            $
            (192,678
            )
            $
            (686,912
            )
            $
            (573,383
            )**Basic
                and Diluted Loss Per Share**
            
            $
            (0.02
            )
            $
            (0.02
            )
            $
            (0.03
            )
            $
            (0.05
            )





*See
      Notes to Consolidated Financial Statements.*





5


**FREEDOM
      FINANCIAL GROUP, INC.**


**Consolidated
      Statements of Stockholders’ Equity**


**Unaudited**


**Redeemable**
              
              
              
              
              
              
              
              
              
              **Accumulated****Convertible**
              
              
              
              
              
              **Additional**
              
              **Retained**
              
              **Other****Preferred**
              
              **Common
                  Stock**
              
              **Paid-in**
              
              **Earnings**
              
              **Comprehensive****Stock**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **(Deficit)**
              
              **Income**
              
              **Total****Balance,
                  December 31, 2006**
              
              $
              0
              
              
              19,927,001
              
              $
              1,993
              
              $
              13,802,633
              
              $
              (3,596,479
              )
              $
              930,854
              
              $
              11,139,001Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (686,912
              )
              
              —
              
              
              (686,912
              )Foreign
                  currency translation adjustment
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              382,721
              
              
              382,721Comprehensive
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (304,191
              )**Balance,****June 30, 2007**
              
              $
              0
              
              
              19,927,001
              
              $
              1,993
              
              $
              13,802,633
              
              $
              (4,283,391
              )
              $
              1,313,575
              
              $
              10,834,810**Balance,
                  December 31, 2005**
              
              $
              13,798,817
              
              
              9,965,759
              
              $
              997
              
              $
              0
              
              $
              (2,446,970
              )
              $
              947,188
              
              $
              12,300,032Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (573,383
              )
              
              —
              
              
              (573,383
              )Foreign
                  currency translation adjustment
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              169,599
              
              
              169,599Comprehensive
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (403,784
              )Stock
                  grant
              
              
              —
              
              
              962,493
              
              
              96
              
              
              4,716
              
              
              —
              
              
              —
              
              
              4,812**Balance,
                  June 30, 2006**
              
              $
              13,798,817
              
              
              10,928,252
              
              $
              1,093
              
              $
              4,716
              
              $
              (3,020,353
              )
              $
              1,116,787
              
              $
              11,901,060





*See
      Notes to Consolidated Financial Statements.*




6




**FREEDOM
      FINANCIAL GROUP, INC.**


**Consolidated
      Statements of Cash Flows**


**Unaudited**




**For
                the Six Months Ended**
              **June
                30,****200****7**
            
            **2006****Operating
                Activities**Net
                loss
            
            $
            (686,912
            )
            $
            (573,383
            )Adjustments
                to reconcile net loss to net cash provided by (used in) operating
                activitiesDepreciation
            
            
            24,774
            
            
            20,291Provision
                for credit losses
            
            
            741,214
            
            
            542,160Deferred
                discount income
            
            
            (192,329
            )
            
            (288,611
            )Recovery
                of charged-off finance receivables
            
            
            337,772
            
            
            247,493Stock
                grant expense
            
            
            —
            
            
            4,812Amortization
                of deferred financing fees
            
            
            89,832
            
            
            —Changes
                inOther
                assets
            
            
            (31,815
            )
            
            (20,764
            )Accounts
                payable and accrued expenses
            
            
            (65,599
            )
            
            (7,949
            )Net
                cash provided by (used in) operating activities
            
            
            216,937
            
            
            (75,951
            )**Investing
                Activities**Purchase
                of finance receivables
            
            
            (3,981,398
            )
            
            (4,185,270
            )Principal
                collected on finance receivables
            
            
            3,038,805
            
            
            3,189,602Payments
                of dealer reserves
            
            
            (7,440
            )
            
            (6,600
            )Payments
                of dealer holdbacks
            
            
            (35,804
            )
            
            (93,103
            )Purchase
                of property and equipment
            
            
            (1,770
            )
            
            (1,308
            )Net
                cash used in investing activities
            
            
            (987,607
            )
            
            (1,096,679
            )**Financing
                Activities**Payment
                of deferred financing fees
            
            
            —
            
            
            (25,532
            )Line
                of credit advances, net
            
            
            1,152,874
            
            
            —Net
                cash provided by (used in) financing activities
            
            
            1,152,874
            
            
            (25,532
            )**Effect
                of Exchange Rate Changes on Cash and Cash
                Equivalents**
            
            
            133,112
            
            
            20,216**Net****Increase
                (Decrease) in Cash and Cash Equivalents**
            
            
            515,316
            
            
            (1,177,946
            )**Cash
                and Cash Equivalents, Beginning of Period**
            
            
            1,276,994
            
            
            2,192,075**Cash
                and Cash Equivalents, End of Period**
            
            $
            1,792,310
            
            $
            1,014,129





*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. (the “Company”) have been prepared pursuant to the rules and
      regulations of the Securities and Exchange Commission (the “SEC”) for reporting
      on Form 10-QSB. Accordingly, certain information and footnotes required by
      generally accepted accounting principles for complete financial statements
      have
      been omitted. The consolidated balance sheet of the Company as of December
      31,
      2006 has been derived from the audited consolidated balance sheet of the Company
      as of that date. These interim statements should be read in conjunction with
      the
      audited consolidated financial statements for the year ended December 31, 2006
      and notes thereto included in the Company’s Form 10-KSB filed with the SEC on
      March 27, 2007.




The
      information contained herein reflects all normal and recurring adjustments,
      which, in the opinion of management, are necessary for a fair presentation
      of
      the results of operations and financial position. The results of operations
      for
      the interim periods are not necessarily indicative of the results to be expected
      for the full year.




**Note
                2:**
            **Basis
                of Presentation**




The
      consolidated financial statements include the accounts of Freedom Financial
      Group, Inc. (FFG), and FFG’s wholly owned Canadian subsidiary, T.C.G. - The
      Credit Group Inc. (TCG), which collectively comprise a single reporting segment,
      the “Company.” All significant intercompany transactions have been eliminated in
      consolidation.




In
      accordance with the American Institute of Certified Public Accountants’
Statement of Position 90-7, *Financial
      Reporting by Entities in Reorganization Under the Bankruptcy
      Code* (SOP
      90-7), the Company adopted fresh start reporting as of January 1, 2003, the
      effective date of the Plan of Reorganization.




**Note
                3:**
            **Finance
                Receivables and Allowance for Credit
                Losses**




Finance
      receivables consist of the following at June 30, 2007 and December 31, 2006,
      respectively:




**2007**
            
            **2006**Automobiles
            
            $
            9,803,305
            
            $
            9,110,368Bulk
                food
            
            
            353,561
            
            
            420,208Equipment
                leases
            
            
            280,677
            
            
            379,003Other
            
            
            943,557
            
            
            875,745Total
                finance receivables
            
            
            11,381,100
            
            
            10,785,324LessUnearned
                discount
            
            
            421,780
            
            
            388,193Allowance
                for credit losses
            
            
            823,004
            
            
            720,9671,244,784
            
            
            1,109,160Net
                finance receivables
            
            $
            10,136,316
            
            $
            9,676,164




8




Approximately
      25% and 29% of the above finance receivables as of June 30, 2007 and December
      31, 2006, respectively, are Canadian in origin.




Amounts
      contractually receivable (including principal and interest) under our finance
      receivables at June 30, 2007, were as shown in the following table. The Company
      expects our actual collections to differ significantly from the amounts
      presented below as a result of prepayments, delinquent payments, partial
      payments and nonpayments.




2007
            
            $
            3,281,8222008
            
            
            5,360,5622009
            
            
            3,776,9392010
            
            
            2,157,2022011
            
            
            610,3892012
            
            
            37,083Total
            
            $
            15,223,997




Activity
      in the allowance for credit losses related to finance receivables for the three
      months ended June 30, 2007 and 2006, respectively, was as
      follows:




**2007**
            
            **2006**Balance,
                beginning of period
            
            $
            719,016
            
            $
            431,369Provision
                charged to expense
            
            
            376,891
            
            
            244,672Losses
                charged off
            
            
            (423,140
            )
            
            (324,660
            )Recoveries
                of previously charged off amounts
            
            
            135,681
            
            
            86,322Effect
                of foreign currency translation
            
            
            14,556
            
            
            10,248Balance,
                end of period
            
            $
            823,004
            
            $
            447,951




Activity
      in the allowance for credit losses related to finance receivables for the six
      months ended June 30, 2007 and 2006, respectively, was as follows:




**2007**
            
            **2006**Balance,
                beginning of period
            
            $
            720,967
            
            $
            412,228Provision
                charged to expense
            
            
            741,214
            
            
            542,160Losses
                charged off
            
            
            (849,776
            )
            
            (687,478
            )Recoveries
                of previously charged off amounts
            
            
            193,426
            
            
            173,007Effect
                of foreign currency translation
            
            
            17,173
            
            
            8,034Balance,
                end of period
            
            $
            823,004
            
            $
            447,951




The
      Company’s nonearning finance receivables totaled $298,091 at June 30, 2007. The
      Company provided an allowance for credit losses related to these receivables
      of
      $268,282.


9




**Note
                  4:**
              **Bank
                  Line of Credit**




On
      August
      18, 2006, the Company entered into a revolving credit loan and security
      agreement with Heartland Bank (“Heartland”) to provide the Company with a
      revolving line of credit of up to $3,000,000 to be used for working capital
      and
      general corporate and operating purposes. The maximum loan amount is limited
      to
      the lesser of $3,000,000 or 50% of the outstanding principal balance of the
      Company’s domestic finance receivables meeting certain underwriting and
      delinquency criteria. Borrowings under the line of credit bear interest at
      the
      bank’s prime rate plus 3% (11.25% at June 30, 2007) and are collateralized by
      substantially all of the Company’s assets, including the Company’s wholly-owned
      subsidiary, TCG. The loan matures on August 18, 2007.




The
      loan
      agreement contains covenants, among others, that 1) require the Company to
      maintain a minimum net worth of $10,000,000 as of the end of each fiscal
      quarter, 2) restrict the Company’s ability to declare or pay dividends, and 3)
      limit the amount of capital expenditures the Company can incur in any fiscal
      year. The Company was not in violation of any financial covenants as of June
      30,
      2007.




The
      Company incurred fees payable to its investment banking firm and to Heartland
      totaling $179,664 in connection with consummating the revolving credit loan
      agreement. These fees were recorded as deferred financing fees when paid and
      are
      being amortized to interest expense over the twelve-month term of the loan
      agreement on a straight-line basis.




The
      Company also issued warrants to purchase its common stock in connection with
      consummating the revolving credit loan agreement. The warrants were determined
      to have a nominal fair value on their date of issuance and therefore the Company
      did not recognize any expense related thereto. As of June 30, 2007 none of
      the
      warrants have been exercised and warrants to purchase up to 436,778 shares
      of
      the Company’s common stock at an exercise price of $0.63 per share and up to
      291,185 shares at an exercise price of $0.70 per share were outstanding. These
      warrants expire in August 2011 and are subject to certain anti-dilution
      protections.




On
      August
      6, 2007 the Company received an unqualified commitment from Heartland to extend
      the maturity date of the revolving credit loan and security agreement to
      February 1, 2008. The Company will incur fees totaling approximately $10,000
      in
      connection with the extension. These fees will be recorded as deferred financing
      fees and be amortized to interest expense over the term of the
      extension.




**Note
                5:**
            **Income
                Taxes**




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




Based
      on
      our evaluation, we have concluded that there are no significant uncertain tax
      positions requiring recognition in our consolidated financial statements. Our
      evaluation was performed for the tax years ended December 31, 2003, 2004, 2005
      and 2006, the tax years which remain subject to examination by major tax
      jurisdictions as of June 30, 2007.




10




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 $1,911,014 as of June 30, 2007. These commitments generally expire
      between 20 and 30 days after they are issued if unused. Typically, the Company
      funds between 30% and 40% of its outstanding commitments.




On
      October 10, 2005, the Company entered into an agency agreement with an
      investment banking firm to act as the Company’s exclusive placement agent in
      connection with raising debt and/or equity financing. The agreement called
      for
      the Company to pay cumulative transaction fees totaling not less than $250,000.
      As of June 30, 2007 the Company has paid transaction fees totaling $120,000
      and
      remains committed to pay an additional $130,000 upon consummation of a financing
      transaction or cancellation of the agreement by the Company.




The
      Company is also obligated under certain noncancelable operating leases for
      premises and equipment with terms ranging up to 39 months. Future minimum
      payments under these noncancelable operating leases as of June 30, 2007
      are:




2007
            
            $
            26,3722008
            
            
            34,8292009
            
            
            9,4322010
            
            
            3,144Total
            
            $
            73,777




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




The
      Company had no other commitments as of June 30, 2007.




**Note
                7:**
            **Loss
                Per Share**




Basic
      earnings per share is computed by dividing net loss by the weighted average
      number of common shares outstanding during the period. Diluted earnings per
      share is computed similar to basic earnings per share except the denominator
      is
      increased to include the number of additional common shares that would have
      been
      outstanding if dilutive potential common shares had been issued. Since the
      effect of converting the common stock warrants would be anti-dilutive for the
      three months and six months ended June 30, 2007 and the effect of converting
      the
      redeemable preferred stock would be antidilutive for the three months and six
      months ended June 30, 2006, basic and diluted loss per share amounts are based
      on the weighted average number of common shares outstanding.




11




Loss
      per
      share for the three months ended June 30, 2007, was computed as
      follows:


**Weighted****Average**
              
              **Per
                  Share****Loss**
              
              **Shares**
              
              **Amount**Net
                  loss
              
              $
              (323,746
              )
              
              19,927,001Basic
                  and diluted loss per share
              
              
              
              
              
              
              
              $
              (0.02
              )




Loss
      per
      share for the three months ended June 30, 2006, was computed as
      follows:


**Weighted****Average**
                
                **Per
                    Share****Loss**
                
                **Shares**
                
                **Amount**Net
                    loss
                
                $
                (192,678
                )
                
                10,928,252Basic
                    and diluted loss per share
                
                
                
                
                
                
                
                $
                (0.02
                )




Loss
      per
      share for the six months ended June 30, 2007, was computed as
      follows:


**Loss**
              
              **Weighted
                  Average Shares**
              
              **Per
                  Share Amount**Net
                  loss
              
              $
              (686,912
              )
              
              19,927,001Basic
                  and diluted loss per share
              
              
              
              
              
              
              
              $
              (0.03
              )





Loss
      per
      share for the six months ended June 30, 2006, was computed as
      follows:


**Weighted****Average**
              
              **Per
                  Share****Loss**
              
              **Shares**
              
              **Amount**Net
                  income
              
              $
              (573,383
              )
              
              10,880,393Basic
                  earnings per share
              
              
              
              
              
              
              
              $
              (0.05
              )




12




**Note
                8:**
            **Operating
                Expenses**




The
      components of operating expenses for the three months ended June 30, 2007 and
      2006, respectively, are as follows:




**2007**
            
            **2006**Salaries
                and benefits
            
            $
            352,608
            
            $
            373,082Professional
                fees
            
            
            52,048
            
            
            99,810Insurance
            
            
            40,597
            
            
            35,360Other
            
            
            143,152
            
            
            167,104$
            588,405
            
            $
            675,356




The
      components of operating expenses for the six months ended June 30, 2007 and
      2006, respectively, are as follows:




**2007**
            
            **2006**Salaries
                and benefits
            
            $
            728,358
            
            $
            784,658Professional
                fees
            
            
            154,944
            
            
            314,761Insurance
            
            
            81,710
            
            
            71,207Other
            
            
            255,551
            
            
            283,023$
            1,220,563
            
            $
            1,453,649




**Note
                9:**
            **Stock
                Based Compensation**




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




1.
            The
                Grant Shares are subject to forfeiture if the Company does not raise
                at
                least $10,000,000 in debt and/or equity financing before January
                9, 2009.
                Additionally, each officer must forfeit their Grant Shares if their
                employment with the Company is terminated for any reason prior to
                the
                Company raising at least $10,000,000 in debt and/or equity
                financing.




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




3.
            The
                officers may not sell any Existing Shares or Grant Shares until the
                Company has raised debt and/or equity financing of at least $10,000,000.
                No sooner than six months after raising debt and/or equity financing
                of at
                least $10,000,000 the officers may sell all of their Existing Shares
                and
                up to half of their Grant Shares. The officers may sell the remainder
                of
                their Grant Shares only if the Company has raised debt and/or equity
                financing of at least $15,000,000.




13




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




The
      Company has accounted for the Stock Grant Agreement under the provisions of
      FASB
      Statement No. 123(R), “Share Based Payment”, and determined the fair value of
      the Grant Shares to be $4,812 on the date they were granted. The fair value
      of
      the Grant Shares was estimated using several methods including discounted cash
      flow analysis, liquidation analysis and comparison to recent sales prices of
      the
      Company’s preferred stock and unrestricted common stock. As a result of this
      Stock Grant Agreement the Company recognized compensation expense of $4,812
      in
      its statement of operations for the six months ended June 30, 2006.




**Note
                10:**
            **Foreign
                Operations**




The
      Company’s foreign operations, all of which are in Canada, are conducted through
      its wholly owned subsidiary, T.C.G. – The Credit
      Group
      Inc. based in Winnipeg, Manitoba. Total assets, net of valuation allowances,
      associated with foreign operations were $4,645,474 at June 30,
      2007.




Total
      revenues, loss before taxes and net loss from foreign operations for the three
      months ended June 30, 2007 and 2006, respectively, were as shown below. Loss
      before income taxes and net loss reflect interest charges on amounts due to
      FFG
      of $112,079 and $101,951 for the three months ended June 30, 2007 and 2006,
      respectively. Loss before income taxes and net loss also reflect management
      and
      accounting fees charged to TCG by FFG for certain administrative services
      performed by FFG on TCG’s behalf of $24,000 for each of the three month periods
      ended June 30, 2007 and 2006. These interest charges and management and
      accounting fees eliminate in consolidation.




**2007**
            
            **2006**Total
                revenues
            
            $
            217,694
            
            $
            302,630Loss
                before income taxes
            
            
            (65,649
            )
            
            (20,122
            )Net
                Loss
            
            
            (65,649
            )
            
            (20,122
            )





Total
      revenues, loss before taxes and net loss from foreign operations for the six
      months ended June 30, 2007 and 2006, respectively, were as shown below. Loss
      before income taxes and net loss reflect interest charges on amounts due to
      FFG
      of $213,543 and $194,629 for the six months ended June 30, 2007 and 2006,
      respectively. Loss before income taxes and net loss also reflect management
      and
      accounting fees charged to TCG by FFG for certain administrative services
      performed by FFG on TCG’s behalf of $48,000 for each of the six month periods
      ended June 30, 2007 and 2006. These interest charges and management and
      accounting fees eliminate in consolidation.




**2007**
            
            **2006**Total
                revenues
            
            $
            432,042
            
            $
            585,096Loss
                before income taxes
            
            
            (158,936
            )
            
            (56,579
            )Net
                loss
            
            
            (158,936
            )
            
            (56,579
            )




14




**Note
                11:**
            **Additional
                Cash Flow Information**




The
      Company made cash interest payments totaling $35,352 and $49,965 during the
      three month and six month periods ended June 30, 2007, respectively, and no
      cash
      interest payments during the three month and six month periods ended June 30,
      2006.




The
      Company made no cash payments for income taxes during the three month and six
      month periods ended June 30, 2007 and 2006.




**Note
                12:**
            **Recently
                Issued Accounting
                Pronouncements**




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




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




**Note
                13:**
            **Subsequent
                Events**


On
        August
        8, 2007, the Company received the resignation of Mr. James K. Browne. Per
        the
        resignation, which was effective August 1, 2007, Mr. Browne resigned as an
        officer, director and employee of the Company’s wholly-owned subsidiary, T.C.G.
        - The Credit Group Inc., and as an officer of FFG. Concurrent with the Company’s
        receipt of the resignation, the Company entered into a severance agreement
        with
        Mr. Browne. The terms of the severance agreement call for (1) the Company
        to
        make payments to Mr. Browne totaling approximately $125,000; (2) the return
        to
        the Company of 139,458 shares of the Company’s common stock currently held by
        Mr. Browne; and (3) the full and final release by Mr. Browne of any and all
        claims he has or may have against the Company.
  Ms.
        Erin
        Fraser, the Manager of Credit and Administration of TCG since September 2002,
        has assumed, on an interim basis, the duties previously performed by Mr.
        Browne.
        Ms. Fraser has indicated her willingness to serve as a member of the Board
        of
        Directors of TCG and the Company expects to formally appoint her to such
        position within the next 30 days




15




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




**FORWARD-LOOKING
      STATEMENTS**





*This
      Quarterly Report on Form 10-QSB contains forward-looking statements within
      the
      meaning of the Private Securities Litigation Reform Act of 1995. Words such
      as
“intend,” “anticipate,” “believe,” “estimate,” “plan,” and “expect,” and
      variations of these words and similar expressions are intended to identify
      these
      forward-looking statements. All statements other than statements of historical
      facts contained in this report, including statements regarding our future
      financial position, business strategy, budgets, projected costs and plans and
      objectives of management for future operations, are considered to be
      forward-looking statements. We express our expectations, beliefs or projections
      in good faith and believe our expectations reflected in these forward-looking
      statements are based on reasonable assumptions; however, we cannot assure you
      that these expectations, beliefs or projections will prove to have been correct.
      Risks, uncertainties and assumptions that could cause actual results to differ
      materially from the expectations reflected in the forward-looking statements
      include, among other things: (i) the risks associated with business expansion;
      (ii) the ability to obtain sufficient outside debt and/or equity financing
      on
      terms acceptable to us in order to meet our cash requirements over the coming
      12
      months; (iii) our ability to compete successfully against competitors with
      significantly greater financial, marketing and advertising resources than the
      Company; and (iv) the risk of adverse economic conditions lessening demand
      for
      our products.*





*Readers
      are referred to the caption “Risk Factors” appearing at the end of* ***ITEM
      1, Description of Business*** *in
      our annual report on Form 10-KSB, filed on March 27, 2007, for additional
      factors that may affect our forward-looking statements. In light of these risks,
      uncertainties and assumptions, the forward-looking events discussed in this
      Form
      10-QSB might not occur. We undertake no obligation to update or revise our
      forward-looking statements, whether as a result of new information, future
      events or otherwise.*





The
      following discussion and analysis should be read in conjunction with the
      Condensed Consolidated Financial Statements of the Company and the related
      notes
      thereto and other information included or incorporated by reference
      herein.





***Overview***





We
      are a
      consumer finance company specializing in the acquisition, collection and
      servicing of sub-prime automobile loans purchased primarily from independent
      used car dealers. We invest significant amounts of cash to acquire Installment
      Contracts. (As used herein, the term “Installment Contract” includes all motor
      vehicle installment contracts, consumer installment contracts and small ticket
      leases acquired by the Company.) We generate cash over the terms of those
      Installment Contracts in the form of interest and principal payments we collect.





Our
      primary source of revenue is interest income generated from our portfolio of
      Installment Contracts.





The
      Company’s predecessor, Stevens Financial Group, Inc., filed for Chapter 11
      bankruptcy on March 19, 2001. See Part I, Item 1, under the heading ***Reorganization
      of Predecessor Under Chapter 11*** in the
      Company’s registration statement on Form 10-SB/A, filed on September 28,
      2005.





As
      a
      result of the Company’s reorganization, the Company’s U.S. operations were
      suspended between March 19, 2001 and January 1, 2003. From January 1, 2003
      through October of 2004, the Company engaged in limited operations. Due to
      this
      lengthy period of suspended or limited operations, when the Company fully
      re-entered the U.S. marketplace in October of 2004 it was essentially as a
      “start-up” organization. We consider ourselves to be a “growth” company, in that
      our primary focus is on increasing the size of our Installment Contracts
      portfolio. Our goal is to grow our portfolio to a size such that the interest
      income generated from the portfolio is sufficient to provide consistent
      operating profits.




16




The
      Company’s primary focus is on acquiring sub-prime automobile loans from
      independent used car dealers. In addition, the Company’s Canadian subsidiary,
      TCG, has in the past acquired a variety of consumer Installment Contracts,
      including small ticket leases, loans secured by home appliances and other
      consumer goods, and loans for bulk food purchases. While TCG will continue
      to
      acquire these types of Installment Contracts, TCG now also acquires sub-prime
      automobile loans from independent used car dealers. On a consolidated basis,
      the
      Company’s portfolio of outstanding Installment Contracts has been increasingly
      comprised of sub-prime automobile loans. The trend in the percentage of the
      Company’s outstanding receivables from automobile-secured Installment Contracts
      is as follows:





December
                31, 2003
            
            
            17
            %December
                31, 2004
            
            
            45
            %December
                31, 2005
            
            
            79
            %December
                31, 2006
            
            
            84
            %June
                30, 2007
            
            
            86
            %




The
      Company is devoting the majority of its marketing resources and efforts to
      acquiring sub-prime automobile loans, and anticipates that this trend will
      continue over the coming twelve months.





Over
      the
      course of 2007, in addition to closely monitoring this trend, the Company’s
      management will be focused on the following:





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





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





(3)
            Minimizing
                the credit losses in the Installment Contracts portfolio;
                and





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




***Recent
        Developments***
 
 On
        August
        8, 2007, the Company received the resignation of Mr. James K. Browne. Per
        the
        resignation, which was effective August 1, 2007, Mr. Browne resigned as an
        officer, director and employee of the Company’s wholly-owned subsidiary, T.C.G.
        - The Credit Group Inc., and as an officer of FFG. Concurrent with the Company’s
        receipt of the resignation, the Company entered into a severance agreement
        with
        Mr. Browne. The terms of the severance agreement call for (1) the Company
        to
        make payments to Mr. Browne totaling approximately $125,000; (2) the return
        to
        the Company of 139,458 shares of the Company’s common stock currently held by
        Mr. Browne; and (3) the full and final release by Mr. Browne of any and all
        claims he has or may have against the Company.
 
 Ms.
        Erin
        Fraser, the Manager of Credit and Administration of TCG since September 2002,
        has assumed, on an interim basis, the duties previously performed by Mr.
        Browne.
        Ms. Fraser has indicated her willingness to serve as a member of the Board
        of
        Directors of TCG and the Company expects to formally appoint her to such
        position within the next 30 days.




***Critical
      Accounting Policies, Judgments and Estimates***





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





The
      Company considers the determination of the allowance for credit losses to
      involve a higher degree of judgment and complexity than its other significant
      accounting policies. The allowance for credit losses is calculated with the
      objective of maintaining an allowance for credit losses that management believes
      is adequate to absorb reasonably estimable probable losses in the Company’s
      portfolio of Installment Contracts. Management’s determination of the adequacy
      of the allowance for credit losses is based on periodic evaluations of the
      Company’s portfolio of Installment Contracts and other relevant factors.
      However, this evaluation is inherently subjective as it requires material
      estimates, including, among others, expected default probabilities, value of
      collateral, the amount and timing of expected future cash flows on delinquent
      loans, estimated losses and general amounts for historical loss experience.
      The
      process also considers prevailing and expected future economic conditions,
      uncertainties in estimating losses and inherent risks in the Installment
      Contracts portfolio. All of these factors may be subject to significant change.
      To the extent actual outcomes differ from management estimates, additional
      provisions for credit losses may be required that would adversely impact our
      earnings in future periods.




17




The
      Company’s management evaluates the adequacy of the allowance for credit losses
      on a regular basis. This evaluation is based on a review of various quantitative
      and qualitative analyses. Quantitative analyses include the review of all loans
      charged-off by asset class, static pool analysis by month of acquisition and
      by
      dealer, review of delinquency trends, and analysis of the historical cumulative
      losses in the portfolio. Other quantitative analyses include a review of the
      current delinquency ratios and an analysis of the relative size of each asset
      class in relation to historical amounts. Qualitative analyses include an
      assessment of prevailing and anticipated economic conditions, trends in
      deficiency balance collections, trends in the number of loan modifications
      and
      extensions, trends in average borrower credit scores and trends in the
      percentage of balances recovered through sale of collateral. The analysis of
      the
      adequacy of the allowance for credit losses is dependent upon effective
      quantitative and qualitative analyses, some of which are inherently subjective
      as they require estimates that are susceptible to significant revision as more
      information becomes available.








***Selected
      Financial Data***





The
      following table presents selected unaudited summary information for the three
      months and six months ended June 30, 2007 and 2006. This table should be read
      in
      conjunction with the Condensed Consolidated Financial Statements and the notes
      thereto, included herein.




**Three
                  Months Ended**
                **June
                  30,**
              
              **Six
                  Months Ended**
                **June
                  30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**Installment
                  Contracts acquired during the period (total principal
                  amount)
              
              $
              1,923,809
              
              $
              2,209,622
              
              $
              4,220,144
              
              $
              4,502,594Purchase
                  price of Installment Contracts acquired
              
              $
              1,812,580
              
              $
              2,094,029
              
              $
              3,979,528
              
              $
              4,253,230Percentage
                  of dollar amount paid to principal balance acquired
              
              
              94.2
              %
              
              94.8
              %
              
              94.3
              %
              
              94.5
              %Number
                  of Installment Contracts acquired during the period
              
              
              255
              
              
              333
              
              
              558
              
              
              720Average
                  principal balance acquired
              
              $
              7,544
              
              $
              6,636
              
              $
              7,563
              
              $
              6,254Acquisition
                  cost per acquired Installment Contract (including
                  overhead)
              
              $
              600
              
              $
              768
              
              $
              618
              
              $
              787Monthly
                  servicing cost per Installment Contract (including
                  overhead)
              
              $
              19.76
              
              $
              21.42
              
              $
              20.78
              
              $
              21.75




18




***Results
        of Operations***
 
 **Interest
        Income**
 
 Our
        interest income totaled $675,031 and $1,326,201 three months and six months
        ended June 30, 2007, respectively, compared to $691,002 and $1,347,223 for
        the
        three months and six months ended June 30, 2006.
 
 The
        following tables present information relative to the average balances and
        interest rates of our interest earning assets for the three months and six
        months ended June 30, 2007 and 2006, respectively:
 
 **For
                  the Three Months Ended June 30, 2007 and 2006****2007**
              ****
              **2006**
              ********
              ****
              **Average**
              ****
              **Interest**
              ****
              ****
              ****
              **Average**
              ****
              **Interest**
              ****
              ****
              ********
              ****
              **Balance**
              ****
              **Income**
              ****
              **Yield**
              ****
              **Balance**
              ****
              **Income**
              ****
              **Yield****Installment
                  Contracts**
              
              $
              10,862,527
              
              $
              661,242
              
              
              24.35%
              
              $
              10,770,703
              
              $
              677,179
              
              
              25.15%**Cash
                  and cash equivalents**
              
              
              1,653,357
              
              
              13,592
              
              
              3.29%
              
              
              1,291,123
              
              
              13,450
              
              
              4.17%**Notes
                  receivable**
              
              
              6,212
              
              
              197
              
              
              12.75%
              
              
              11,725
              
              
              373
              
              
              12.72%**Total**
              
              $
              12,522,096
              
              $
              675,031
              
              
              21.56%
              
              $
              12,073,551
              
              $
              691,002
              
              
              22.89%
  **For
                  the Six Months Ended June 30, 2007 and 2006******
              ****
              **2007**
              ****
              **2006**
              ********
              ****
              **Average**
              ****
              **Interest**
              ****
              ****
              ****
              **Average**
              ****
              **Interest**
              ****
              ****
              ********
              ****
              **Balance**
              ****
              **Income**
              ****
              **Yield**
              ****
              **Balance**
              ****
              **Income**
              ****
              **Yield**
              ********
              ****
              ****
              ****
              ****
              ******Installment
                  Contracts**
              
              $
              10,693,998
              
              $
              1,301,004
              
              
              24.33%
              
              $
              10,571,724
              
              $
              1,315,056
              
              
              24.88%**Cash
                  and cash equivalents**
              
              
              1,505,649
              
              
              24,807
              
              
              3.30%
              
              
              1,594,272
              
              
              31,432
              
              
              3.94%**Notes
                  receivable**
              
              
              6,212
              
              
              390
              
              
              12.56%
              
              
              11,725
              
              
              735
              
              
              12.54%**Total**
              
              $
              12,205,859
              
              $
              1,326,201
              
              
              21.73%
              
              $
              12,177,721
              
              $
              1,347,223
              
              
              22.13%
  19
  The
        decrease in yield on our Installment Contracts is primarily the result of
        changes in the mix of our portfolio. Throughout 2006 and the first three
        months
        of 2007 our portfolio of Installment Contracts has been increasingly comprised
        of contracts acquired through our point-of-sale automobile financing programs.
        These contracts typically have lower yields than the other types of contracts
        in
        our portfolio, among them, automobile contracts acquired in bulk purchase
        transactions, small ticket leases, loans secured by home appliances and other
        consumer goods and loans for bulk food purchases. Our total interest yield
        has
        increased as Installment Contracts have comprised a higher percentage of
        our
        total interest earning assets.
 
 The
        following table sets forth the changes in interest income attributable to
        changes in volume (change in average balance multiplied by the prior period
        yield) and changes in rate (change in yield multiplied by the prior period
        average balance). Changes due to the rate/volume variance (the combined effect
        of change in yield and change in average balance) have been allocated
        proportionately based on the absolute value of the rate and volume
        variances.
 
 **For the Three Months Ended June 30, 2007 Compared to the**
                **Three
                  Months Ended June 30, 2006**
              ********
              ****
              ******Volume**
              ****
              **Rate**
              ****
              **Total**Increase
                  (decrease) in interest income:Installment
                  Contracts
              
              $
              5,840
              
              $
              (21,777
              )
              $
              (15,937
              )Cash
                  and cash equivalents
              
              
              571
              
              
              (429
              )
              
              142Notes
                  receivable
              
              
              (176
              )
              
              —
              
              
              (176
              )Total
                  Interest Income
              
              $
              6,235
              
              $
              (22,206
              )
              $
              (15,971
              )
  **For the Six Months Ended June 30, 2007 Compared to the Six**
                **Months
                  Ended June 30, 2006****Volume**
              ****
              **Rate**
              ****
              **Total**Increase
                  (decrease) in interest income:Installment
                  Contracts
              
              $
              15,581
              
              $
              (29,633
              )
              $
              (14,052
              )Cash
                  and cash equivalents
              
              
              (1,674
              )
              
              (4,951
              )
              
              (6,625
              )Notes
                  receivable
              
              
              (346
              )
              
              1
              
              
              (345
              )Total
                  Interest Income
              
              $
              13,561
              
              $
              (34,583
              )
              $
              (21,022
              )
 
  **Interest
        Expense**
 
 We
        incurred interest expense of $83,729 and $150,195 during the three months
        and
        six months ended June 30, 2007, respectively, on the outstanding balance
        of our
        bank line of credit. During the three months and six months ended June 30,
        2006
        we had no outstanding borrowings and therefore incurred no interest expense
        during the period.
  20
   **Provision
        for Credit Losses**
  Our
        consolidated provision for credit losses totaled $376,891 and $741,214 for
        the
        three months and six months ended June 30, 2007, respectively, compared to
        $244,672 and $542,160 for the three months and six months ended June 30,
        2006,
        respectively. The increase in the provision for the three months and six
        months
        ended June 30, 2007 compared to 2006 is a result of an increase in net
        charge-offs as a percent of net contracts to 10.59% and 12.28% for the three
        months and six months ended June 30, 2007, respectively, from 8.85% and 9.73%
        for the three months and six months ended June 30, 2006, respectively. As
        the
        Company continues to acquire Installment Contracts, and our average contracts
        receivable outstanding increases, we expect the charge to our earnings for
        credit losses will likewise increase.
 
 
 **Operating
        Expenses**
 
 Our
        operating expenses totaled $588,405 and $1,220,563 for the three months and
        six
        months ended June 30, 2007, respectively, compared to $675,356 and $1,453,649
        for the three months and six months ended June 30, 2006, respectively. A
        summary
        of these expenses follows:
 
 **Three
                  Months Ended June 30,****2007**
              
              **2006**
              
              **Percent
                  Change**Salaries
                  and benefits
              
              $
              352,608
              
              $
              373,082
              
              
              -5.5%Professional
                  fees
              
              
              52,048
              
              
              99,810
              
              
              -47.9%Insurance
              
              
              40,597
              
              
              35,360
              
              
              14.8%Other
              
              
              143,152
              
              
              167,104
              
              
              -14.3%Total
              
              $
              588,405
              
              $
              675,356
              
              
              -12.9%
  **Six
                  Months Ended June 30,****2007**
              ****
              **2006**
              ****
              **Percent
                  Change**Salaries
                  and benefits
              
              $
              728,358
              
              $
              784,658
              
              
              -7.2%Professional
                  fees
              
              
              154,944
              
              
              314,761
              
              
              -50.8%Insurance
              
              
              81,710
              
              
              71,207
              
              
              14.7%Other
              
              
              255,551
              
              
              283,023
              
              
              -9.7%Total
              
              $
              1,220,563
              
              $
              1,453,649
              
              
              -16.0%
 
 As
        a
        result of a decrease in the number of salaried individuals employed by the
        Company and a reduction in the amount of sales commissions paid, salaries
        and
        benefits decreased for the three months ended June 30, 2007 as compared to
        2006.
        Salaries and benefits decreased for the six months ended June 30, 2007 as
        compared to 2006 as a result of a decrease in the number of individuals employed
        by the Company and a reduction in sales commissions paid in 2007, and
        compensation expense recognized in connection with stock grants in 2006 that
        did
        not recur in 2007. As the Company continues to grow we expect our salaries
        and
        benefits costs to increase, but anticipate that as a percentage of total
        revenues these costs will decrease. Professional fees decreased during the
        three
        months and six months ended June 30, 2007 compared to the three months and
        six
        months ended June 30, 2006 as a result of significant non-recurring legal
        fees
        incurred during 2006 in connection with the conversion of the Company’s
        outstanding preferred stock into common stock. Insurance expense increased
        due
        to higher premiums experienced in 2007, the result of an increase in coverage
        limits of our directors and officers liability insurance policy. Other operating
        costs includes, among other items, occupancy costs, licenses and taxes,
        depreciation, postage, supplies, communications, travel and stockholder
        relations. Other operating expenses decreased primarily as a result of a
        decrease in stockholder relations expenses in 2007 as compared to 2006. The
        decrease in stockholder relations expenses resulted from expenses incurred
        in
        the three months ended June 30, 2006 for the Company’s 2006 annual meeting which
        for 2007 had not yet been incurred due to the timing of the 2007 meeting.
        Additionally, the Company recognized certain credits in 2007 against
        professional fees related to the conversion of the Company’s preferred stock
        that were charged to operations during 2006, which further reduced stockholder
        relations expenses for the six months ended June 30, 2007 as compared to
        2006.
  21
  Our
        growth plan, if achieved, will cause our operating costs to increase over
        time.
 
 The
        Company’s average cost to acquire an Installment Contract (which includes all
        direct marketing, business development and underwriting expenses and an
        allocation of certain overhead costs) during the three month and six month
        periods ended June 30, 2007 was approximately $600 and $618, respectively,
        per
        contract as compared to $768 and $787 for the three month and six month periods
        ended June 30, 2006, respectively. This decrease in average acquisition cost
        is
        a result of reduced sales and marketing staff employed by the Company during
        the
        three months and six months ended June 30, 2007 as compared to the three
        months
        and six months ended June 30, 2006, offset by a decrease in the Company’s
        book-to-look ratio. For the three month and six month periods ended June
        30,
        2007, the Company’s book-to-look ratio was 6.35% and 6.39%, respectively,
        compared to 8.07% and 7.87% for the three month and six month periods ended
        June
        30, 2006. Management is attempting to increase this ratio, and thereby reduce
        our average acquisition cost, by training our customers to send the Company
        only
        those credit applications that have a high probability of being approved
        and
        purchased by us.
 
 The
        Company’s average monthly cost to service an Installment Contract (which
        includes all direct collections and servicing expenses and an allocation
        of
        certain overhead costs) during the three month and six month periods ended
        June
        30, 2007 was $19.76 and $20.78, respectively, per serviced contract as compared
        to $21.42 and $21.75, respectively, during the three month and six month
        periods
        ended June 30, 2006. Management anticipates that this average servicing cost
        per
        contract will decrease as the size of the portfolio of Installment Contracts
        increases due to efficiency gains and economies of scale. The Company does
        not
        pay affiliates to engage in collection efforts.
 
 While
        we
        do not formally track our response time for responding to credit applications
        submitted by dealers or our response time for funding a loan package submitted
        by a dealer, we monitor these on a daily basis. Our goal is to reduce these
        response times to better serve the needs of our customers. We believe that
        reducing these response times will also reduce our overall costs of underwriting
        and funding. The Company is evaluating certain monitoring mechanisms that
        will
        allow us to precisely document and better monitor these times. We anticipate
        installing such mechanisms sometime during 2007 or early in 2008.
  22
  ***Financial
        Condition***
 
 **Installment
        Contracts Portfolio**
 
 The
        Company acquired Installment Contracts with outstanding principal balances
        totaling $1,923,809 and $4,220,144, respectively, during the three months
        and
        six months ended June 30, 2007.  We invested cash of approximately
        $1,837,958 and $4,024,642, respectively, (including payments of dealer reserves
        and dealer holdbacks) to acquire these contracts.  As a result of these
        acquisitions, our portfolio of Installment Contracts increased from $9,676,164,
        net of an allowance for credit losses of $720,967, at December 31, 2006 to
        $10,136,316, net of an allowance for credit losses of $823,004, at June 30,
        2007.
 
 All
        of
        the Company’s Installment Contracts are held for investment and are recorded at
        their outstanding principal balances adjusted for unamortized purchase discounts
        and an allowance for credit losses. Discounts on purchased Installment Contracts
        are recognized as income over the respective contractual terms using methods
        that approximate the interest method. A summary of our Installment Contracts
        portfolio as of June 30, 2007 and December 31, 2006 follows:
  **June
                  30, 2007**
              ****
              **December
                  31, 2006**
              ********
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**Automobiles
              
              $
              8,527,071
              
              $
              1,276,234
              
              $
              9,803,305
              
              $
              7,692,121
              
              $
              1,418,247
              
              $
              9,110,368Equipment
                  leases
              
              
              -
              
              
              280,677
              
              
              280,677
              
              
              -
              
              
              379,003
              
              
              379,003Bulk
                  food
              
              
              -
              
              
              353,561
              
              
              353,561
              
              
              -
              
              
              420,208
              
              
              420,208Other
              
              
              -
              
              
              943,557
              
              
              943,557
              
              
              -
              
              
              875,745
              
              
              875,745Total
              
              
              8,527,071
              
              
              2,854,029
              
              
              11,381,100
              
              
              7,692,121
              
              
              3,093,203
              
              
              10,785,324LessUnearned
                  discount
              
              
              325,066
              
              
              96,714
              
              
              421,780
              
              
              273,457
              
              
              114,736
              
              
              388,193Allowance
                  for credit losses
              
              
              665,837
              
              
              157,167
              
              
              823,004
              
              
              551,192
              
              
              169,775
              
              
              720,967Net
              
              $
              7,536,168
              
              $
              2,600,148
              
              $
              10,136,316
              
              $
              6,867,472
              
              $
              2,808,692
              
              $
              9,676,164
  23
  **Asset
        Quality**
 
 Substantially
        all of the Installment Contracts we acquire are considered sub-prime and
        are
        subject to a high degree of risk of default by the obligors.
 
 Charge-offs
        directly impact our earnings and cash flows. To minimize the amount of credit
        losses we incur, we monitor delinquent accounts, promptly repossess and remarket
        collateral, attempt to collect deficiency balances, and employ other servicing
        and collection techniques as we deem appropriate.
 
 We
        calculate delinquency based on the number of days payments are contractually
        past due. The following table sets forth information with respect to the
        delinquency of our portfolio of Installment Contracts as of June 30, 2007
        and
        December 31, 2006, respectively:
  **June
                  30, 2007**
              ********
              ****
              **United
                  States**
              ****
              **Canada**
              ****
              **Total**
              ********
              ****
              **Amount**
              ****
              **Pct.**
              ****
              **Amount**
              ****
              **Pct.**
              ****
              **Amount**
              ****
              **Pct.**
              ********
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****Installment
                  Contracts
              
              $
              8,527,071
              
              
              100%
              
              $
              2,854,029
              
              
              100%
              
              $
              11,381,100
              
              
              100%Period
                  of delinquency:30
                  - 59 days
              
              $
              803,616
              
              
              9.42%
              
              $
              52,627
              
              
              1.84%
              
              $
              856,243
              
              
              7.52%60
                  - 89 days
              
              
              461,068
              
              
              5.41%
              
              
              39,662
              
              
              1.39%
              
              
              500,730
              
              
              4.40%90
                  - 119 days
              
              
              252,846
              
              
              2.97%
              
              
              45,245
              
              
              1.59%
              
              
              298,091
              
              
              2.62%Total
              
              $
              1,517,530
              
              
              17.80%
              
              $
              137,534
              
              
              4.82%
              
              $
              1,655,064
              
              
              14.54%
 
 **December
                  31, 2006**
              ********
              ****
              **United
                  States**
              ****
              **Canada**
              ****
              **Total**
              ********
              ****
              **Amount**
              ****
              **Pct.**
              ****
              **Amount**
              ****
              **Pct.**
              ****
              **Amount**
              ****
              **Pct.**Installment
                  Contracts
              
              $
              7,692,121
              
              
              100%
              
              $
              3,093,203
              
              
              100%
              
              $
              10,785,324
              
              
              100%Period
                  of delinquency:30
                  - 59 days
              
              $
              748,375
              
              
              9.73%
              
              $
              109,720
              
              
              3.55%
              
              $
              858,095
              
              
              7.96%60
                  - 89 days
              
              
              462,508
              
              
              6.01%
              
              
              76,418
              
              
              2.47%
              
              
              538,926
              
              
              5.00%90
                  - 119 days
              
              
              266,282
              
              
              3.46%
              
              
              61,657
              
              
              1.99%
              
              
              327,939
              
              
              3.04%Total
              
              $
              1,477,165
              
              
              19.20%
              
              $
              247,795
              
              
              8.01%
              
              $
              1,724,960
              
              
              15.99%
  24
  The
        following tables set forth information with respect to actual credit loss
        experience in our portfolio of Installment Contracts for the three months
        and
        six months ended June 30, 2007 and 2006, respectively:
 
 **Three
                  Months Ended**
                **June
                  30, 2007**
              ****
              **Three
                  Months Ended**
                **June
                  30, 2006**
              ********
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**Installment
                  Contracts, net of unearned discounts, end of period
              
              $
              8,202,005
              
              $
              2,757,315
              
              $
              10,959,320
              
              $
              7,266,060
              
              $
              3,715,853
              
              $
              10,981,913Installment
                  Contracts, net of unearned discounts, average during the period
                  (1)
              
              $
              8,069,527
              
              $
              2,793,000
              
              $
              10,862,527
              
              $
              7,013,248
              
              $
              3,757,456
              
              $
              10,770,704Gross
                  charge-offs
              
              $
              374,182
              
              $
              48,958
              
              $
              423,140
              
              $
              228,035
              
              $
              96,625
              
              $
              324,660Recoveries
              
              
              119,671
              
              
              16,010
              
              
              135,681
              
              
              62,168
              
              
              24,154
              
              
              86,322Net
                  charge-offs
              
              $
              254,511
              
              $
              32,948
              
              $
              287,459
              
              $
              165,867
              
              $
              72,471
              
              $
              238,338Net
                  charge-offs as a % of avg. contracts during the period,
                  annualized
              
              
              12.62
              %
              
              4.72
              %
              
              10.59
              %
              
              9.46
              %
              
              7.71
              %
              
              8.85
              %
  (1)
                  - Average is based on month-end
                  balances
  **Six
                  Months Ended**
                **June
                  30, 2007**
              ****
              **Six
                  Months Ended**
                **June
                  30, 2006**
              ********
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**Installment
                  Contracts, net of unearned discounts, end of period
              
              $
              8,202,005
              
              $
              2,757,315
              
              $
              10,959,320
              
              $
              7,266,060
              
              $
              3,715,853
              
              $
              10,981,913Installment
                  Contracts, net of unearned discounts, average during the period
                  (1)
              
              $
              7,856,033
              
              $
              2,837,965
              
              $
              10,693,998
              
              $
              6,821,440
              
              $
              3,570,284
              
              $
              10,571,724Gross
                  charge-offs
              
              $
              700,558
              
              $
              149,218
              
              $
              849,776
              
              $
              505,742
              
              $
              181,736
              
              $
              687,478Recoveries
              
              
              143,101
              
              
              50,325
              
              
              193,426
              
              
              137,227
              
              
              35,780
              
              
              173,007Net
                  charge-offs
              
              $
              557,457
              
              $
              98,893
              
              $
              656,350
              
              $
              368,515
              
              $
              145,956
              
              $
              514,471Net
                  charge-offs as a % of avg. contracts during the period,
                  annualized
              
              
              14.19
              %
              
              6.97
              %
              
              12.28
              %
              
              10.80
              %
              
              8.18
              %
              
              9.73
              %
  (1)
                  - Average is based on month-end
                  balances
  25
  The
        Company maintains an allowance for credit losses at an amount it believes
        is
        adequate to absorb reasonably estimable probable losses in its portfolio
        of
        Installment Contracts. The Company’s management evaluates the adequacy of the
        allowance for credit losses on a regular basis. In performing these periodic
        evaluations, management follows an appropriately-documented methodology.
        This
        methodology requires management to evaluate the adequacy of the allowance
        for
        credit losses based on a review of various quantitative and qualitative analyses
        as described in **Item
        2, MANAGEMENT’S DISCUSSION AND ANALYSIS** ,
        under
        the heading ***Critical
        Accounting Policies, Judgments and Estimates*** .
 
 Our
        allowance for credit losses was $823,004 at June 30, 2007 compared to $720,967
        at December 31, 2006. As a percentage of our outstanding net Installment
        Contracts, our allowance for credit losses was 7.51% at June 30, 2007 and
        6.93%
        at December 31, 2006.
 
 During
        the six months ended June 30, 2007, our net Installment Contracts increased
        $562,189. This increase was the result of a $643,130 increase in
        automobile-secured contracts offset by an $80,941 decrease in all other
        Installment Contracts. The $643,130 increase in automobile-secured Installment
        Contracts was comprised of a $870,531 increase in Installment Contracts acquired
        through our U.S. point-of-sale program offset by a $140,209 decrease in
        Installment Contracts acquired through our Canadian point-of-sale program,
        and
        an $87,192 decrease in Installment Contracts acquired through bulk purchases.
 
 As
        a
        result of the increases in automobile-secured Installment Contracts in our
        U.S.
        portfolio from December 31, 2006 to June 30, 2007, we provided for a specific
        increase to our allowance for credit losses through a charge to earnings.
        As of
        December 31, 2006, delinquent accounts, defined as accounts 30 or more days
        contractually past due, totaled 15.99% of our outstanding Installment Contracts.
        As of June 30, 2007, delinquent accounts totaled 14.54% of our outstanding
        Installment Contracts.
 
 The
        Company’s loss history in its U.S. portfolio of Installment Contracts and in its
        Canadian portfolio of automobile-secured Installment Contracts is limited.
        Due
        to this limited operating history, using historical loss ratios to predict
        future probable losses is of limited usefulness. Additionally, uncertainty
        exists with respect to the accuracy of our estimates of amounts we will recover
        through the sale of repossessed collateral and with respect to anticipated
        future economic conditions, both in the U.S. and Canada, and their effect
        on the
        performance of our portfolio of Installment Contracts.
 
 During
        the six months ended June 30, 2007, we experienced net charge-offs of $656,350,
        which represented 12.28% of our average outstanding Installment Contracts
        during
        the period. During the year ended December 31, 2006, we experienced net
        charge-offs of $1,015,798, which represented 9.57% of our average outstanding
        Installment Contracts during the year. To account for this increase in
        charge-offs, we provided for a specific increase to our allowance for credit
        losses.
 
 The
        various increases to our allowance for credit losses described in the preceding
        paragraphs were substantially offset by net charge-offs during the six months
        ended June 30, 2007 totaling $656,350, resulting in an allowance for credit
        losses as of June 30, 2007 of $823,004 or 7.51% 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 June 30, 2007.
  26
  The
        following tables set forth the activity in the allowance for credit losses
        for
        the three months and six months ended June 30, 2007 and 2006,
        respectively:
 
 **Three
                  Months Ended**
                **June
                  30, 2007**
              ****
              **Three
                  Months Ended**
                **June
                  30, 2006**
              ********
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**Balance
                  at beginning of period
              
              $
              560,536
              
              $
              158,480
              
              $
              719,016
              
              $
              220,716
              
              $
              210,653
              
              $
              431,369Charge-offs
              
              
              (374,182
              )
              
              (48,958
              )
              
              (423,140
              )
              
              (228,035
              )
              
              (96,625
              )
              
              (324,660
              )Recoveries
              
              
              119,671
              
              
              16,010
              
              
              135,681
              
              
              62,168
              
              
              24,154
              
              
              86,322Net
                  charge-offs
              
              
              (254,511
              )
              
              (32,948
              )
              
              (287,459
              )
              
              (165,867
              )
              
              (72,471
              )
              
              (238,338
              )Provision
                  for credit losses
              
              
              359,812
              
              
              17,079
              
              
              376,891
              
              
              181,298
              
              
              63,374
              
              
              244,672Effect
                  of foreign currency translation
              
              
              -
              
              
              14,556
              
              
              14,556
              
              
              -
              
              
              10,248
              
              
              10,248Balance
                  at end of period
              
              $
              665,837
              
              $
              157,167
              
              $
              823,004
              
              $
              236,147
              
              $
              211,804
              
              $
              447,951
 
 
 **Six
                  Months Ended**
                **June
                  30, 2007**
              ****
              **Six
                  Months Ended**
                **June
                  30, 2006**
              ********
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**
              ****
              **United**
                **States**
              ****
              **Canada**
              ****
              **Total**Balance
                  at beginning of period
              
              $
              551,192
              
              $
              169,775
              
              $
              720,967
              
              $
              199,558
              
              $
              212,670
              
              $
              412,228Charge-offs
              
              
              (700,558
              )
              
              (149,218
              )
              
              (849,776
              )
              
              (505,742
              )
              
              (181,736
              )
              
              (687,478
              )Recoveries
              
              
              143,101
              
              
              50,325
              
              
              193,426
              
              
              137,227
              
              
              35,780
              
              
              173,007Net
                  charge-offs
              
              
              (557,457
              )
              
              (98,893
              )
              
              (656,350
              )
              
              (368,515
              )
              
              (145,956
              )
              
              (514,471
              )Provision
                  for credit losses
              
              
              672,102
              
              
              69,112
              
              
              741,214
              
              
              405,104
              
              
              137,056
              
              
              542,160Effect
                  of foreign currency translation
              
              
              -
              
              
              17,173
              
              
              17,173
              
              
              -
              
              
              8,034
              
              
              8,034Balance
                  at end of period
              
              $
              665,837
              
              $
              157,167
              
              $
              823,004
              
              $
              236,147
              
              $
              211,804
              
              $
              447,951
  27
  ***Liquidity
        and Capital Resources***
 
 We
        require substantial capital resources and cash to support our business
        strategy.
 
 The
        Company’s growth strategy requires the Company to increase its acquisitions of
        Installment Contracts. We intend to acquire Installment Contracts with principal
        balances totaling approximately $12,000,000 (roughly 1,600 Installment
        Contracts) over the coming 12 months. We expect to pay between 94% and 95%
        of
        the outstanding principal balance for these Installment Contracts, or a total
        of
        approximately $11,350,000. We expect to fund these acquisitions from a
        combination of internally generated cash flow, bank lines of credit and
        additional equity capital. We can give no assurance that we will be able
        to
        secure such additional financing on terms acceptable to us. If we are unable
        to
        secure such additional financing, we will be unable to meet our objective
        of
        acquiring Installment Contracts with principal balances totaling approximately
        $12,000,000 over the coming 12 months.
 
 The
        Company began 2007 with $1,276,994 cash on hand and had cash on hand of
        $1,792,310 at June 30, 2007. Operating activities provided cash of $85,579
        and
        $216,937 during the three month and six month periods ended June 30, 2007.
 
 We
        invested cash of approximately $1,838,000 and $4,025,000, respectively,
        (including payments of dealer reserves and dealer holdbacks) to acquire
        Installment Contracts during the three month and six month periods ended
        June
        30, 2007. We collected principal payments on our Installment Contracts of
        approximately $1,542,000 and $3,039,000, respectively, during the three month
        and six month periods ended June 30, 2007.
 
 During
        the three months and six months ended June 30, 2007 the Company received
        net
        advances on its bank line of credit totaling $390,164 and $1,153,000,
        respectively, to partially fund the acquisition of Installment Contracts.
        Total
        advances outstanding under the line of credit agreement at June 30, 2007
        totaled
        approximately $1,572,000.
 
 We
        paid
        financing fees totaling $25,532 during the six months ended June 30, 2006
        in
        connection with fund raising activities performed by our investment banking
        firm. These fees were recorded as deferred financing fees when paid and are
        being amortized to interest expense over the twelve-month term of our bank
        line
        of credit agreement.
 
 The
        bank
        line of credit agreement contains covenants, among others, that 1) require
        the
        Company to maintain a minimum net worth of $10,000,000 as of the end of each
        fiscal quarter, 2) restrict the Company’s ability to declare or pay dividends,
        and 3) limit the amount of capital expenditures the Company can incur in
        any
        fiscal year. The Company was in compliance with all covenants as of June
        30,
        2007.
 
 On
          August
          6, 2007 the Company received an unqualified commitment from Heartland to
          extend
          the maturity date of the revolving credit loan and security agreement to
          February 1, 2008. The Company will incur fees totaling approximately $10,000
          in
          connection with the extension. These fees will be recorded as deferred
          financing
          fees and be amortized to interest expense over the term of the
          extension
 The
        Company had no material commitments for capital expenditures as of June 30,
        2007. The
        Company expects to spend approximately $100,000 upgrading its underwriting
        systems over the coming twelve months. We believe these investments will
        serve
        to strengthen our internal controls, allow us to quicken our response time
        to
        our customers, provide management with improved reporting tools and fulfill
        our
        software needs for the foreseeable future.
 
 28
  The
        Company and its investment adviser are seeking to obtain additional equity
        financing in an amount up to $10,000,000. We can give no assurance that we
        will
        be able to secure such additional equity financing or other forms of additional
        financing (either debt or equity) on terms acceptable to us.
 
 As
        the
        Company continues to grow, we will need to recruit and hire additional sales,
        operating and administrative personnel. We expect to be able to fund the
        costs
        of these activities from operating cash flows.
  29
  ***Off-Balance
        Sheet Arrangements***
 
 The
        Company, in its ordinary course of business, commits to purchase certain
        Installment Contracts from its customers. Each commitment is essentially
        an
“offer” by the Company to purchase a specific Installment Contract that the
        Company has pre-approved, and customers generally have between 20 and 30
        days to
“accept” the offer by selling to the Company the pre-approved Installment
        Contract. The Company had outstanding commitments to acquire Installment
        Contracts totaling approximately $1,911,000 as of June 30, 2007. Typically,
        the
        Company funds between 30% and 40% of its outstanding commitments.
 
 The
        Company is also obligated under certain noncancelable operating leases for
        premises and equipment with terms ranging up to 39 months. Future minimum
        payments under these noncancelable operating leases as of June
        30,
        2007 are:
  2007
              
              $
              26,3722008
              
              
              34,8292009
              
              
              9,4322010
              
              
              3,144Total
              
              $
              73,777
  The
        Company’s agreement with its investment banking firm requires the Company to pay
        total aggregate transaction fees of not less than $250,000. As of June
        30 ,
        2007
        the Company has paid its investment bankers transaction fees totaling $120,000
        and remains committed to pay an additional $130,000 upon consummation of
        a
        financing transaction or cancellation of the agreement by the
        Company.
  Certain
        officers of the Company hold a total of 1,932,993 shares of the Company’s common
        stock, all or a portion of which, the Company may be required to repurchase,
        at
        the option of the officers upon the occurrence of certain events, which the
        Company believes are not probable at this time, at a price per share ranging
        from 90% to 100% of the common stock’s fair market value. The specific terms
        concerning these options and the repurchase of the common stock are set forth
        in
        the following documents: Employment Agreement with Jerald L. Fenstermaker,
        filed
        as an exhibit to the Company’s registration statement filed on Form 10-SB on May
        2, 2005; Addendum to Employment Agreement with Jerald L. Fenstermaker, filed
        as
        an exhibit to the Company’s Form 8-K filed on May 2, 2006; Extension of
        Employment Agreement filed with Jerald L. Fenstermaker, filed as an exhibit
        to
        the Company’s Form 8-K filed on October 10, 2006; 2003 Stock Grant (Unanimous
        Consent of the Board), filed as an exhibit to the Company’s registration
        statement filed on Form 10-SB on May 2, 2005; and Stock Grant Agreement dated
        January 9, 2006, filed as an exhibit to the Company’s Form 8-K filed on January
        11, 2006
  The
        Company had no other off-balance sheet arrangements as of June 30,
        2007.
  30
  **ITEM
        3.** **Controls
        and Procedures** ****
  The
        Company maintains disclosure controls and procedures (as defined in Rule
        13a-15(e) of the Securities and Exchange Act of 1934 (the “Exchange Act”)) that
        are designed to ensure that information required to be disclosed in the
        Company’s Exchange Act reports is recorded, processed, summarized and reported
        within the time periods specified in the Securities and Exchange Commission’s
        rules and forms, and that such information is accumulated and communicated
        to
        the Company’s management, including its Chief Executive Officer and Chief
        Financial Officer, as appropriate, to allow timely decisions regarding required
        disclosure.
 
 The
        Company carried out an evaluation, under the supervision and with the
        participation of the Company’s management, including the Company’s Chief
        Executive Officer and the Company’s Chief Financial Officer, of the
        effectiveness of the design and operation of the Company’s disclosure controls
        and procedures. Based on the foregoing, the Company’s Chief Executive Officer
        and Chief Financial Officer concluded that the Company’s disclosure controls and
        procedures were effective as of June 30, 2007.
 
 There
        have been no changes in the Company’s internal control over financial reporting
        during the quarter ended June 30, 2007 that have materially affected, or
        are
        reasonably likely to materially affect, the Company’s internal control over
        financial reporting.
  31
  **PART
        II.** **** **-
        OTHER INFORMATION**
  **ITEM
        1.** **Legal
        Proceedings** ****
  The
        Company is not currently a party to any pending legal proceeding other than
        routine litigation that is incidental to the Company’s business.
 
 As
        a
        consumer finance company, the Company can be subject to various consumer
        claims
        and litigation seeking damages and statutory penalties based upon, among
        other
        things, usury, disclosure inaccuracies, wrongful repossession, violations
        of
        bankruptcy stay provisions, fraud, breach of contract and discriminatory
        treatment of credit applicants. Some litigation against the Company could
        take
        the form of class action complaints by consumers. The Company, as assignee
        of
        Installment Contracts originated by dealers, may also be named as a co-defendant
        in lawsuits filed by consumers principally against dealers. The Company is
        also
        subject to other litigation common to the automobile finance industry and
        businesses in general. The damages and penalties claimed by consumers and
        others
        in these types of matters can be substantial. The relief typically requested
        by
        the plaintiffs varies but can include requests for compensatory, statutory
        and
        punitive damages.
 
 Management
        believes that the Company has taken prudent steps to address the litigation
        risks associated with the Company’s business. However, there can be no assurance
        that the Company will be able to successfully defend against all such claims
        or
        that the determination of any such claim in a manner adverse to the Company
        would not have a material adverse effect on the Company’s automobile finance
        business.
 
 **ITEM
        2.** **Unregistered
        Sales of Equity Securities and Use of Proceeds**
 
 None.
  **ITEM
        3.** **Defaults
        Upon Senior Securities**
 
 Not
        applicable.
 
 **ITEM
        4.** **Submission
        of Matters to a Vote of Security Holders**
 
 None.
 
 **ITEM
        5.** **Other
        Information**
 
 None.
  32
  **ITEM
        6.** **Exhibits**
 
 **INDEX
        TO EXHIBITS**
 
 **Exhibit********Number******
              
              **Description**2.1
                  (a)
              
              Corrected
                  Trustee’s Amended Plan of Reorganization2.2
                  (a)
              
              Disclosure
                  Statement for Trustee’s Amended Plan of Reorganization3.1
                  (a)
              
              First
                  Amended and Restated Certificate of Incorporation3.1.1
                  (a)
              
              Certificate
                  of Amendment to Certificate of Incorporation3.2
                  (a)
              
              Bylaws3.2.1
                  (a)
              
              Amendment
                  to Bylaws4.1
                  (a)
              
              Amended
                  and Restated Trust Agreement of Freedom Financial Group I Statutory
                  Trust10.1
                  (a)
              
              Employment
                  Agreement with Jerald L. Fenstermaker10.1.1
                  (e)
              
              Addendum
                  to Employment Agreement with Jerald L. Fenstermaker10.1.2
                  (g)
              
              Extension
                  of Employment Agreement with Jerald L. Fenstermaker10.2
                  (a)
              
              Investment
                  Banking Agreement with Milestone Advisors, LLC10.3
                  (a)
              
              Unanimous
                  Consent of the Board of Directors Adopting Executive Management
                  Stock
                  Bonus Plan10.4
                  (a)
              
              Office
                  Lease – 3058 East Elm10.5
                  (b)
              
              Purchase
                  and Sale Agreement, dated April 7, 2003, between Freedom Financial
                  Group,
                  Inc. (as Seller) and The Cadle Company (as Buyer)10.6
                  (b)
              
              Commercial
                  Real Estate Purchase Contract, dated May 9, 2003, between Freedom
                  Financial Group, Inc. (as Seller) and New Life Church of God (as
                  Buyer)10.7
                  (b)
              
              Real
                  Estate Sale Contract, dated June 4, 2003, between Donald D. Bass
                  and Don
                  W. Bass (as Buyers) and Freedom Financial Group, Inc. (as
                  Seller)10.8
                  (b)
              
              Application
                  and Order by Bankruptcy Court Approving Employment of Biltmore
                  Associates10.9
                  (d)
              
              Stock
                  Grant Agreement dated January 9, 200610.10
                  (f)
              
              Revolving
                  Credit Loan and Security Agreement10.11
                  (f)
              
              Promissory
                  Note10.12
                  (f)
              
              Stock
                  Pledge Agreement10.13
                  (f)
              
              Warrant
                  for 300,000 shares of common stock10.14
                  (f)
              
              Warrant
                  for 200,000 shares of common stock10.15
                  (f)
              
              Warrant
                  for 136,778 shares of common stock10.16
                  (f)
              
              Warrant
                  for 91,185 shares of common stock11.1
              
              Statement
                  Re: Computation of Per Share Earnings - See Note 7 to Condensed
                  Consolidated Financial Statements14.1
                  (c)
              
              Code
                  of Ethics21.1
                  (a)
              
              Subsidiaries31.1
              
              Certification
                  of Chief Executive Officer Under Section 302 of the Sarbanes-Oxley
                  Act of
                  200231.2
              
              Certification
                  of Chief Financial Officer Under Section 302 of the Sarbanes-Oxley
                  Act of
                  200232.1
              
              Certifications
                  of the Chief Executive Officer and Chief Financial Officer under
                  Section
                  906 of the Sarbanes-Oxley Act of
                  2002
 
 (a)
        Incorporated by reference to the Company’s registration statement filed on Form
        10-SB on May 2, 2005 (File Number 000-51286).
 
 (b)
        Incorporated by reference to the Company’s first amended registration statement
        filed on Form 10-SB/A on July 22, 2005 (File Number 000-51286).
 
 33
  (c)
        Incorporated by reference to the Company’s quarterly report filed on Form 10-QSB
        on August 15, 2005 (File Number 000-51286).
 
 (d)
        Incorporated by reference to the Company’s Current Report filed on Form 8-K on
        January 9, 2006 (File Number 000-51286).
 
 (e)
        Incorporated by reference to the Company’s Current Report filed on Form 8-K on
        May 2, 2006 (File Number 000-51286).
 
 (f)
        Incorporated by reference to the Company’s Current Report filed on Form 8-K on
        August 24, 2006 (File Number 000-51286).
 
 (g)
        Incorporated by reference to the Company’s Current Report filed on Form 8-K on
        October 10, 2006 (File Number 000-51286).
 
 34
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  **FREEDOM
                  FINANCIAL GROUP, INC.**Date:
              August
                  13, 2007
              By:
              /s/
                  Jerald L. Fenstermaker
                Jerald
                  L. Fenstermaker, President and Chief Executive
                  OfficerDate:
              August
                  13, 2007
              By:
              /s/
                  Daniel F. Graham
                Daniel
                  F. Graham, Chief Financial Officer
 
 35