U. S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

     [x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 2000

     [ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

           For the transition period from ___________ to ____________


                        Commission file number 000-15216


                             AUTOCORP EQUITIES, INC.
                 (Name of small business issuer in its charter)


           Nevada                                          87-0522501
(State or other jurisdiction                         (I.R.S. Employer
 of incorporation or organization)                    Identification No.)


911 W. Parker Rd., Suite 306
Plano, Texas                                                 75023
(Address of principal executive offices)                  (Zip Code)


                    Issuer's telephone number: (972) 378-5355
Securities registered under Section 12(b) of the Exchange Act:

          Title of each class          Name of each exchange on which registered

            None

Securities registered under Section 12(g) of the Exchange Act:

                   Common Stock, Par Value of $.001 per Share
                                (Title of class)

     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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

     State issuer's revenues for its most recent fiscal year: $12,364,994.

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was sold,  or the average bid and asked price of such common equity as of
a  specified  date  within the past 60 days:  $482,818,  based on the $0.078 per
share price at which common equity was sold on February 14, 2001.

     State the number of shares  outstanding of each of the issuer's  classes of
common equity,  as of the latest  practicable  date:  4,362,274 shares of Common
stock, $0.001 par value, as of February 14, 2001.

     Transitional Small Business Disclosure Format (check one): Yes____ No X



                                       i

<PAGE>

TABLE OF CONTENTS

THE COMPANY....................................................................1

RISK FACTORS...................................................................1

PART I ........................................................................8
     Item 1.  Description of Business..........................................8
     Item 2.  Description of Property.........................................14
     Item 3.  Legal Proceedings...............................................15

PART II  .....................................................................15
     Item 5.  Market for Common Equity and Related Stockholder Matters........17
     Item 6.  Management's Discussion and Analysis or Plan of Operation.......21
     Item 7.  Financial Statements............................................22
     Item 7A. Quantitative and Qualitative Disclosure about Market Risk
     Item 8.  Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure........................................22

PART III .....................................................................22
     Item 9.  Directors, Executive Officers, Promoters and Control Persons;
              Compliance with Section 16(a) of the Exchange Act...............22
     Item 10. Executive Compensation..........................................24
     Item 11. Security Ownership of Certain Beneficial Owners and
              Management......................................................25
     Item 12. Certain Relationships and Related Transactions..................27
     Item 13. Exhibits and Reports on Form 8-K................................28

SIGNATURES....................................................................30

INDEX TO FINANCIAL STATEMENTS.................................................F1






                                       ii

<PAGE>

         This  report  includes  statements  that  are  based on  forecasts  and
Intentions  concerning  Company  operations,   capital  requirements,   economic
performance  and  financial  condition,  in  particular,   statements  regarding
intended  plans for  future  operations  and  expectations  of future  operating
performance.  Such  statements  are subject to various risks and  uncertainties.
Actual results may differ,  and could differ  materially,  from those  currently
anticipated  due to a number of factors,  including those under the Risk Factors
Set forth below.

THE COMPANY

         AutoCorp  Equities,  Inc. ("the  Company"),  which is  headquartered in
Plano,  Texas owns and operates  three  independent  automobile  dealerships  in
Texas,  one in Lufkin and two in Dallas and one loan servicing center in Dallas,
Texas.  Through  used car sales,  the  dealership  originates  non-prime  retail
installment  contracts secured by automobiles and light-duty trucks. In previous
years the Company also purchases portfolios of non-prime automobile receivables,
although  none were  purchased  in fiscal  year 2000.  In both  cases,  the loan
servicing   function  is  retained  (see  Item  1,  Description  of  Business  -
Development of Current Business).

         During the fiscal  year ended  September  30,  1998,  the  Company  was
headquartered in Phoenix,  Arizona,  and had business  operations in Arizona and
New  Mexico.  Effective  at the  end  of  fiscal  1998,  these  businesses  were
transferred  to the  controlling  shareholders,  as part of a change of control,
which was  formalized on December 30, 1998. On that date, the ownership of those
businesses  was  transferred  to  the  controlling  shareholders  as  part  of a
restructuring  transaction  and  related  business  reorganization  (see Item 1,
Description of Business  Operations  Owned and Operated  During Fiscal 1998). In
addition,  at December  30,  1998,  the Company was  financially  distressed.  A
restructuring  was  effected  on that date in order to create an  organizational
structure that is efficient and reflects the revised business plans. The Company
again  restructured on October 1, 2000 in a continuing  effort to create such an
organizational  and financial  structure (see Item  1,Description  of Business -
Recent Restructuring Transactions).

RISK FACTORS

         Limited  Operating  History  of  Present  Business;   No  Assurance  of
Profitability.  The  Company's  significantly  restructured  current  operations
commenced on December 30, 1998. The relatively  brief  operating  history of the
restructured  operations  provides  only a  limited  basis for  evaluation.  The
prospects must be considered in light of the risks,  expenses,  difficulties and
problems  frequently   encountered  in  an  industry  characterized  by  intense
competition.  For the years ended  September 30, 1998,  1999,  and 2000, the net
losses were $12,504,470, $438,566 and $9,034,212, respectively.

         There can be no  assurance  of future  profitability.  The  ability  to
operate profitably will depend primarily on management's ability to:

o    generate additional revenue without incurring a proportionate  increase in
     administrative overhead costs;

o    reduce the overall cost structure of the organization;

o    purchase and resell pools of automobile receivables in an effective manner;

o    originate automobile receivables with an acceptable level of credit risk;

o    effectively   collect   payments  due  on  the   portfolios  of  automobile
     receivables  serviced (recourse  liability on these receivables is retained
     even though they are no longer owned) and control  delinquencies and losses
     on the automobile receivables portfolio;

o    obtain financing on acceptable terms to fund the expansion of operations;

o    continue  to sell,  on a loan by loan  basis,  the  automobile  receivables
     generated at owned used car dealership operations;

o    adapt to an increasingly competitive marketplace.

         The failure to achieve and/or  maintain any or all of these  objectives
could have a materially  adverse  impact on the business,  results of operations
and financial condition of the Company.

                                       1

<PAGE>

         Capital Intensive Business;  Need for Substantial Additional Financing.
The Company's operations are capital intensive.  They require the expenditure of
substantial amounts of working capital in order to purchase additional inventory
and  to  generate  retail  installment  sale  contracts.  In  order  to  finance
operations in the ordinary course and to implement the desired growth  strategy,
there will be a need to obtain  additional bank or similar type financing,  sell
additional  debt or equity (or hybrid)  securities in future  private and public
financings,  and continue to sell the  automobile  receivables  generated in the
ordinary  course of the Company's  business.  There can be no assurance that any
such  additional  financing  will be available or, if available,  that its terms
will be satisfactory.  Failure to obtain additional financing,  if needed, would
have a materially adverse effect on the Company's results of operations. In such
event, the Company may be required to materially curtail all or a portion of its
operations.

         Liquidity  and Need for  Additional  Funds.  There is a need to  obtain
additional  capital in order to increase operating volumes and the related asset
base.  Various types of debt financing such as additional lines of credit may be
pursued.  However,  there can be no assurance  that  additional  funding will be
available  when needed or, if  available,  that its terms will be  favorable  or
acceptable.

         Substantial  Leverage. To meet the ongoing working capital requirements
of the  Company,  substantial  indebtedness  has been  incurred,  resulting in a
highly leveraged capital structure.  Substantial indebtedness related to holding
additional  automobile  receivables  may be incurred in the future.  The current
highly leveraged capital structure could have adverse consequences, including:

o    limiting the ability to obtain additional financing;

o    requiring  the use of operating  cash flow to meet  interest and  principal
     repayment obligations;

o    increasing  the  Company's  vulnerability  to changes  in general  economic
     conditions and competitive pressures;

o    limiting the ability to realize some or all of the benefits of  significant
     business opportunities.

         In  addition,  any  indebtedness  that would be incurred is expected to
contain  covenants  that  limit,  among  other  things,  the  ability  to  incur
additional  indebtedness,  engage in mergers and acquisitions,  pay dividends or
take other  actions.  These  covenants  may also  require the meeting of certain
financial  tests and the  maintenance  of a minimum level of collateral  and may
give the lender the right to perform  periodic audits to ensure  compliance with
the terms of the applicable loan.  Non-compliance  with any of the terms of such
covenants may result in a suspension  of funding,  acceleration  and  consequent
demand for repayment and a foreclosure on collateral,  as well as the pursuit of
other rights and remedies,  all of which could have a materially  adverse effect
on the financial condition, results of operations and prospects of the Company.

         Interest Rate  Fluctuations.  The Company's  profitability is based, in
part, on the interest  rate charged on interest  bearing  liabilities.  Interest
rates with  respect to  outstanding  indebtedness  or  indebtedness  that may be
incurred in the future  are,  or will be, as the case may be,  based on interest
rates prevailing in the market at the time the debt is incurred.  In some cases,
the rates may be floating rates. Increases in interest rates paid on outstanding
indebtedness would adversely affect the profitability of the Company.

         Poor  Creditworthiness  of Borrowers;  High Risk of Credit Losses.  The
Company  currently  sells  and  services  automobile  receivables  generated  in
connection  with the  sale of used  cars at the  Dallas,  Texas  dealership.  In
addition, a portfolio of automobile receivables that have been acquired are also
serviced.  These  receivables  are payable by customers with  non-prime  credit.
Loans to persons  with  non-prime  credit  involve an increased  probability  of
default and/or  delinquency and involve greater  servicing costs than loans made
to  borrowers  with prime  credit  profiles.  The ability to operate  profitably
depends, in part, on an accurate evaluation of the creditworthiness of customers
and the minimization of losses  following  defaults.  As a result,  it is likely
that delinquency and loss rates in the Company's portfolio will fluctuate in the
near term and may increase as a greater  portion of the  portfolio of automobile
receivables  matures.  A significant  variation in the timing of or increases in
credit losses experienced on the portfolio of automobile  receivables could have
a  materially  adverse  effect on the  Company.  If  greater  credit  losses are
experienced  in the future,  it will be necessary  to increase  reserves for bad
debts,  thereby reducing overall  profitability.  There can be no assurance that
any loans made to customers  will be repaid in whole or in part or that reserves
for such credit risks will be  adequate.  Any loans that are in default may need
to be charged off against the reserves.

                                       2

<PAGE>

         The occurrence of any of the foregoing  events could  adversely  affect
the Company's ability to obtain or maintain its financing sources and could have
a materially  adverse effect on business  activities,  results of operations and
financial condition.

         Risks Inherent in Automobile Finance Business.  It is the intent of the
Company to purchase  high yield loans,  usually  made to persons with  non-prime
credit.  Extending credit to retail used car buyers with such credit standing is
inherently  risky.  The borrowers on such loans will either be first time buyers
or buyers with poor credit ratings. Such buyers may be more likely to default on
their used car loans than buyers with higher credit ratings.

         Enforcement of Vehicle Loan  Contracts.  Various federal and state laws
impose requirements and restrictions applicable to the origination and servicing
of retail  installment  vehicle loan  contracts.  Violations of certain of those
laws may give rise to claims and defenses by a borrower. In addition, a borrower
may be entitled to assert  claims and defenses that it has against the seller of
the financed vehicles. Because the Company will not be originating every loan at
its own dealership operations,  it will not be able to fully minimize this risk.
Certain states also impose requirements and restrictions relating to foreclosure
sales of used cars and on obtaining  deficiency  judgments following such sales.
The Company  may not  realize the full amount due on a used car loan  because of
the  application  of  those   requirements   and  restrictions  or,  because  of
depreciation,  damage or loss to a financed used car, the application of federal
and state bankruptcy and insolvency laws, or other factors.

         Risks Relating to Security  Interests and  Repossession  of Collateral.
The automobile receivables that the Company originates,  buys, sells or services
are secured by security  interests in the financed  vehicles.  The procedure for
perfecting a security interest on a motor vehicle varies from state to state. In
most states,  perfection of security  interests in a motor vehicle requires that
the lien be noted on the vehicle's title certificate.

         Failure to  properly  perfect a lien or to  otherwise  comply  with the
requirements  of the relevant  statute would impair the priority of the security
interest  and the  ability  to  enforce  those  liens  by  either  collecting  a
deficiency  judgment or repossessing the financed vehicle and could also subject
the Company to a claim by the debtor for  tortious  conversion  in an attempt to
repossess the vehicle.

         In addition, such security interests may also be subject to a number of
federal and state laws,  including the Uniform  Commercial  Code as in effect in
various states.  Under such statutes,  liens of third parties for the storage or
repair of financed vehicles or unpaid taxes, which are beyond the control of the
Company, may have priority over the security interest granted even if such liens
arise  subsequent  to the granting of a security  interest and there has been no
receipt of notice of such liens.

         The value of the vehicle  securing an automobile  receivable is usually
less than the sum of the balance due on such automobile receivable,  the cost of
repossessing,  reconditioning  and  reselling  the  vehicle  and the  expense of
obtaining a deficiency judgment. In addition, the value of a vehicle securing an
automobile  receivable  may  depreciate  at a rate faster than that at which the
automobile receivable is being repaid.

         Further,  limitations  imposed by  bankruptcy  laws or other federal or
state laws may limit or delay the Company's  ability to (a) repossess and resell
used cars in which there is a valid,  perfected security interest, (b) enforce a
deficiency judgment, or (c) collect the amount due. In addition,  there may be a
determination  that a deficiency  judgment is not an appropriate or economically
viable remedy.  The Company may also settle at a significant  discount any claim
or any  deficiency  judgment that is obtained.  There is no intent to obtain any
insurance  covering these risks. In the event that a deficiency  judgment is not
obtained, or is not satisfied, or a claim or deficiency judgment is satisfied at
a discount, or is discharged, in whole or in part in bankruptcy proceedings, the
loss may adversely affect the business, operations or financial condition of the
Company.

                                       3

<PAGE>

         Risk  Associated  with  Expansion.  As  part  of the  Company's  growth
strategy,  the  intent  is  to  seek  to  establish  and/or  acquire  additional
dealerships and finance offices.  There can be no assurance that management will
successfully  integrate the  operations of the dealership  currently  owned with
those that may be acquired or established in the future and  effectively  manage
the combined  enterprise.  There will be a need to limit increasing  overhead as
additional  operations are acquired while still maintaining  sufficient staff to
effectively  collect any additional  receivables.  Failure to do so would have a
materially  adverse effect on the business,  financial  condition and results of
operations  of the  Company.  (see Item 1,  Description  of  Business  - Present
Business Operations).

         Unspecified Acquisitions. Although the Company is currently negotiating
an  agreement  to acquire  an  operating  interest  in a new car  dealership  in
Oklahoma,  no agreements or understandings  to acquire any specific  dealerships
currently  exist,  it is the  intent  to  actively  seek  and  investigate  such
opportunities  on a limited basis.  Such  acquisitions  would likely be financed
with cash; the issuance of equity or debt  securities;  by incurring  additional
indebtedness or any combination of the foregoing. There is no assurance that any
acquisitions  will be made. If any  acquisitions are made, there is no assurance
they can be made on favorable  terms, or that the  acquisition  will prove to be
profitable. Failure to make future acquisitions would limit the growth potential
of the Company.

         Geographic  Concentration.  Currently the Company  conducts direct used
car sales in the Dallas,  Texas  metropolitan  area.  The used car financing and
servicing   operations   are   located  in  Dallas,   Texas.   Because  of  this
concentration,  business  levels  may be  adversely  affected  in the event of a
downturn in the general economic conditions existing in Texas.

         Competition. The automobile industry is highly competitive. The Company
competes with other  independent used car dealerships,  including ones that make
financing  available  to their  customers;  national  and  regional  rental  car
companies;  franchised new vehicle  dealerships,  which are directing  increased
attention to the used car market; companies selling used cars over the Internet;
auction houses;  dealer groups;  independent "Buy Here - Pay Here" dealers which
sell and finance  sales of used cars to customers  with  non-prime  credit;  and
individual buyers and sellers of used cars.

         In  addition,  many new vehicle  dealerships  are  offering  attractive
leasing  transactions  as an  alternative  to prime and just below prime  credit
borrowers. Industry-wide gross profit margins on sales of new and used cars have
been  declining  and  some of the  recent  market  entrants  may be  capable  of
operating on smaller gross margins than existing industry participants.

         There can be no assurance  that the Company will be able to maintain or
increase  its size  relative to that of  competitors  or to maintain or increase
profit margins in the face of increased  competition.  It is expected that there
will be  increasing  competition  in the  acquisition  of other  dealerships  as
industry  participants  become  larger,  which may make it  difficult to acquire
dealerships on acceptable terms.

         Although recent  high-profile  losses in non-prime  lending have caused
many of the most  substantial  conventional  lenders to pull out of this market,
competition for financing customers with non-prime credit is still quite strong.
The  Company's  competitors  include  local,  regional and  national  automobile
dealers,  secondary  finance  companies  and  other  sources  of  financing  for
automobile purchases, such as lease financing and dealer self-financing. Many of
these competitors are larger and have greater financial and marketing  resources
than the Company. Historically, commercial banks, savings and loan associations,
credit unions,  captive  finance  subsidiaries of automobile  manufacturers  and
other consumer lenders have not competed for financing for credit-impaired  used
car buyers.  To the extent that such  lenders  expand  their  activities  in the
credit-impaired market, the Company's financial condition, results of operations
or  cash  flows  could  be  materially  and  adversely  affected  (see  Item  1,
Description of Business -Competition).

         Risks  Associated  with  Short Term  Nature of  Leases.  Certain of the
Company's  leases for used car  dealerships  are for short  occupancy  terms. An
inability  to  renew  such  leases  or  to  continue  to  occupy  premises  on a
month-to-month  basis would  require  entering into  arrangements  to occupy new
premises.  There can be no  assurance  that the Company will be able to identify
and enter into  arrangements  to occupy new  premises,  and the failure to do so
could have a materially adverse effect on the business,  financial condition and
results of operations.

                                       4

<PAGE>

         General Economic Conditions. The Company's business is directly related
to sales of used  cars.  These are  affected  by  employment  rates,  prevailing
interest rates, and other general economic  conditions.  Management believes the
current  economic  conditions  favor  continued  growth in the used car  markets
served. However, a future economic slowdown or recession could lead to increased
delinquencies,  repossessions,  and  credit  losses  that could  hinder  planned
expansion.  Because of the Company's  focus on non-prime  borrowers,  the actual
rate of  delinquencies,  repossessions,  and credit losses on contracts could be
higher under adverse conditions than those experienced in the used car sales and
finance industry in general.  Economic changes are uncertain, and sluggish sales
of used cars and  weakness  in the economy  could have an adverse  effect on the
business and that of the third party dealers from which contracts are purchased.

         Seasonality; Variability of Quarterly Operating Results. The automobile
industry is subject to substantial  seasonal variations in revenues.  Demand for
used cars is generally  lower in the winter than in other seasons.  In addition,
sales tend to be lower and payment  delinquency  rates higher during the holiday
and back-to-school seasons, while sales tend to be higher during the late spring
and through the summer  months.  Furthermore,  the planned  growth  strategy may
subject the Company's  operating  results to  substantial  variables and changes
each  quarter.   Accordingly,   given  the  possibility  of  such  fluctuations,
management  believes  that  quarterly  comparisons  of the results of operations
during any fiscal year are not  necessarily  meaningful and that results for any
one  fiscal  quarter  should  not be  relied  upon as an  indication  of  future
performance.

         Supervision,   Regulation  and  Licensing.  The  automobile  sales  and
financing industry is subject to extensive regulation, supervision and licensing
under various  federal,  state and local laws.  Among other  things,  these laws
require that  dealership  operations  obtain and maintain  certain  licenses and
qualifications;  limit or  prescribe  terms of sales  and  financing  contracts;
require specified disclosures to customers and borrowers;  impose finance charge
ceilings; limit the right to repossess and resell collateral; and restrict where
used car sales operations may locate.

         There can be no assurance  that the Company will continue to be able to
obtain any required licenses and qualifications,  or, if obtained, to be able to
remain in  compliance  with the laws,  rules and  regulations  under  which such
licenses and qualifications were obtained. Although the intent is to comply with
all laws,  rules and  regulations  applicable to its  operations,  failure to so
comply  with  current  and  future  adoptions  of  additional  laws,  rules  and
regulations  could have a materially  adverse effect on the business,  financial
condition and results of operations of the Company.

         Under most state vehicle dealer licensing laws,  sellers of automobiles
and  light-duty  trucks are  required to be licensed to sell  vehicles at retail
sale. In addition,  with respect to used cars,  the Federal  Trade  Commission's
Rule on Sale of Used  Vehicles  requires  that all sellers of used cars prepare,
complete and display a "Buyer's Guide" which explains the warranty  coverage for
such vehicles.  Furthermore,  Federal Odometer Regulations promulgated under the
Motor Vehicle  Information and Cost Savings Act and the motor vehicle title laws
of most states require that all sellers of used cars furnish a written statement
signed by the seller  certifying  the  accuracy of the  odometer  reading.  If a
seller  is not  properly  licensed  or if  either a  Buyer's  Guide or  Odometer
Disclosure  Statement  was not  provided  to the  purchaser  of a  vehicle,  the
purchaser may be able to assert a defense against the seller of the vehicle. Any
losses  relating  to any such claims  would  result in losses to the Company and
could have a materially  adverse  effect on its ability to meet its  obligations
and could  materially and adversely  affect its business,  results of operations
and financial condition.

                                      5

<PAGE>

         Consumer Protection and Usury Laws. Numerous federal and state consumer
protection  laws impose  requirements  upon the  origination  and  collection of
retail  installment  contracts.  State laws impose finance  charge  ceilings and
other  restrictions on consumer  transactions  and may require certain  contract
disclosures in addition to those required under federal law. These  requirements
impose  specific  statutory  liabilities  upon creditors who fail to comply with
these  provisions.  Further,  to the extent  that the  Company  acquires  retail
installment  contracts  from  third  parties,  there  may be  liability  for any
violations of law  committed by such third  parties as a  successor-in-interest.
Currently,  a maximum  fixed  interest  rate of  approximately  26% per annum is
charged on contracts originated at the Company's dealerships. The state of Texas
imposes  limits  on the  interest  rate a lender  may  charge.  There  can be no
assurance that Texas and any other applicable  states will not lower their usury
limits or that these  states or other  jurisdictions  into which the Company may
expand will not (i) by judicial  decision change the  interpretation of existing
precedents  and/or (ii) adopt  additional laws, rules and regulations that could
adversely effect the business,  financial condition and results of operations of
the Company.

         Dependence on Management Information Systems; Year 2000 Compliance. The
Company's  future  success  depends in part on the  ability to continue to adapt
technology,  on a timely and cost-effective basis, to meet changing customer and
industry standards and requirements.  The loan servicing and collection software
is depended on to monitor the portfolio of automobile receivables.

         Continued Control by an Insider. As of September 30, 2000,approximately
52.0% of the  Company's  outstanding  voting  securities  are  controlled by Mr.
Charles W. Norman,  as Trustee under three voting trusts (see Item 11,  Security
Ownership  of Certain  Beneficial  Owners  and  Management).  Mr.  Norman is the
President  and  Chief   Executive   Officer  and  a  Director  of  the  Company.
Accordingly,  Mr. Norman will retain the power to approve or disapprove  matters
submitted  to a vote of the  shareholders  and to  elect  the  entire  Board  of
Directors  who shall,  in turn,  have the power to appoint  the  officers of the
Company and to determine the direction, objectives and policies of the Company.

         Dependence  on Key  Personnel.  The Company is highly  dependent on the
services of Mr. Charles W. Norman,  the Company's  President and Chief Executive
Officer.  The  Company  has  not  entered  into  an  employment  agreement  with
Mr.Norman,  nor is there any key-man life insurance on Mr.  Norman.  The loss of
Mr. Norman's services could have a materially adverse effect on the business and
operations of the Company (see Item 9, Directors,  Executive Officers, Promoters
and Control  Persons;  Compliance  With Section  16(a) of the Exchange  Act). In
addition,  the future success of the Company depends upon its ability to attract
and  retain  qualified  personnel,   including  managers  for  each  dealership.
Competition  to attract  and retain  such  personnel  within the  vehicle  sales
industry is intense.  There can be no  assurance  of success in  attracting  and
retaining qualified personnel in the future.

                                       6

<PAGE>

         The December 30, 1998 Transaction.  Certain of the Company's  Preferred
and Common Shares were tendered to AutoPrime,Inc.  ("AutoPrime") in the December
30, 1998,  Transaction (see Item 1, Description of Business - How the Purpose of
the  Restructuring  Was  Achieved).  AutoPrime is majority  owned by a regulated
financial  institution  and can  lawfully  own the  Company's  stock  only after
receiving  approval  from the Office of Thrift  Supervision  and  perhaps  other
governmental  regulatory  agencies.  The Transaction  also allowed  AutoPrime to
defer taking  ownership of any of the Company's  stock until receipt of approval
from the Office of Thrift Supervision and any other  governmental  approval that
may be necessary  Initially the parties  agreed that if approval is not received
by December 31, 1999, and AutoPrime  determines  not to accept the tender,  then
the tender is rejected. On December 31, 1999, the parties agreed to an extension
of the required  approval date from  December 31, 1999 to January 1, 2001.  Such
approval was never obtained and the tender was rejected.

         Since the tender was ultimately  rejected,  then the credits  AutoPrime
issued on December 30, 1998,  as part of the  Transaction,  were  withdrawn.  In
addition,  the  debts for  which  credit  was  given  were  reinstated  and were
immediately  due and payable,  with  interest at 10% per year from  December 31,
1998.

         The  Company  and  AutoPrime  renegotiated  the  Transaction  effective
October1,  2000.(See  Item  1,  Description  of  Business-Recent   Restructuring
Transactions).

         Market for Common Stock; Volatility of Prices. There has been a limited
public  trading  market  for  Common  Shares  of the  Company.  There  can be no
assurance that a regular  trading market for the Common Shares will ever develop
or, if developed,  that it will be sustained. No assurance can be given that the
Common Shares will continue to be listed on the Bulletin Board. The market price
of the  Common  Shares  could also be subject  to  significant  fluctuations  in
response to such factors as variations in the  anticipated  or actual results of
operations  of the Company or other  companies in the used car sales and finance
industry,  changes  in  conditions  affecting  the  economy  generally,  analyst
reports,  general trends in the industry,  and other political or  socioeconomic
events or factors.

         Lack of Prospective  Dividends.  The Company has not paid any dividends
on its Common Stock and anticipates that future  earnings,  if any, will be used
to reduce debt or finance  future growth and that  dividends will not be paid to
shareholders.  There  can  be  no  assurance  that  operations  will  result  in
sufficient  revenues to enable the Company to operate at profitable levels or to
generate a positive cash flow. In addition,  the 6,578,485  shares of Series "A"
Preferred  Stock  tendered on December  30, 1998,  had an annual  non-cumulative
dividend  preference of $328,924 (5% of $6,578,485)  and the 1,612,083  Series B
Preferred Stock has an annual  non-cumulative  dividend preference of $80,604.15
(5% of 1,612,083).  Accordingly,  the Company does not anticipate the payment of
any dividends on Common Stock for the foreseeable future (see Item 5, Market for
Common Equity and Related Stockholder Matters).

         Forward-Looking  Information May Prove Inaccurate. This report contains
various  forward-looking  statements that are based on  management's  beliefs as
well as assumptions made by and information  currently  available.  When used in
this  report,  the words  "believe,"  "expect,"  "anticipate,"  "estimate,"  and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are  subject  to  certain  risks,  uncertainties,  and  assumptions,
including those identified under this "Risk Factors" section. Should one or more
of these risks or uncertainties  materialize,  or should underlying  assumptions
prove  incorrect,  actual results may vary  materially  from those  anticipated,
estimated or  projected.  In addition to the other risk factors set forth above,
among the key factors that may have a direct  bearing on the  Company's  results
are  competitive  practices in the used car  financing and sales  industry,  the
ability to meet existing financial  obligations in the event of adverse industry
or  economic   conditions  or  to  obtain  additional  capital  to  fund  future
commitments  and  expansion,  and the  impact of  current  and  future  laws and
governmental regulations on operations.

                                     7

<PAGE>

         Possible  Other Risks.  In addition to the above risks,  businesses are
often  subject to risks not  foreseen or fully  appreciated  by  management.  In
reviewing  this report,  investors and potential  investors  should keep in mind
other possible risks that could be important.

PART I
Item 1. Description of Business

        Organization and History

         The Company was  incorporated  in Colorado on January 2, 1986 under the
name Vivatae,  Inc. and completed an initial  public  offering in May,  1986. In
November,  1986, all of the outstanding stock of Eagle  Entertainment,  Inc. was
acquired  and the name of the Company was changed to Eagle  Entertainment,  Inc.
Through subsidiaries, performance guarantees for motion picture productions were
provided.  In September,  1990, the subsidiaries were divested and Arizona based
corporations  engaged in the  retailing  and  financing of motor  vehicles  were
acquired.

         On  January  3,  1992,  the name of the  Company  was  changed to Eagle
Holdings,  Inc. and on October 20, 1993, the corporate domicile was changed from
Colorado to Nevada.  This was done by forming a Nevada  corporation  named Eagle
Automotive Enterprises, Inc. and merging "downstream" into it. At that time, the
subsidiary was a shell corporation without any substantial assets or equity.

         On March 28,  1994,  the  automotive  subsidiaries  were  divested  and
Diamond  Entertainment  II,  Inc.,  a Utah  corporation  licensed  by the Samuel
Goldwyn  Company to produce  live  productions  of  "American  Gladiators",  was
acquired.   On  April  6,  1994,   the  company  name  was  changed  to  Chariot
Entertainment, Inc.

         On December 31, 1994, the Goldwyn  Licensing  Agreement expired and the
existing  subsidiaries  were  divested.  The  Company  re-entered  the  business
development stage and began seeking business combination candidates.

         On September 30, 1996,  the name of the Company was changed to AutoCorp
Equities,  Inc.  On  July  21,  1997,  an  acquisition  was  made of 100% of the
outstanding  stock  of  Consumer  Investment  Corporation,   Consumer  Insurance
Services, Inc. (including Consumer Insurance Services Cayman Island subsidiary),
and Lenders Liquidation Centers, Inc. in exchange for 3,677,500 shares of Common
Shares to the  shareholders of the acquired  companies and 300,000 Common Shares
to CIC Fund V, a related  company.  The former  president  of the  Company  also
received  303,500  Common  Shares in  conjunction  with this  transaction.  This
transaction  resulted in the shareholders of the acquired companies becoming the
majority shareholders of the Company. The acquired companies were engaged in the
sales, financing and insurance of used cars.

         During the fiscal  year ended  September  30,  1998,  the  Company  was
headquartered  in Phoenix,  Arizona and operated a combined used car finance and
sales business in Arizona and New Mexico.  Business operations were concentrated
on used cars purchased by non-prime credit purchasers  (persons with low incomes
and  previous  credit  problems)  and the  retail  installment  sales  contracts
evidencing  non-prime  used car loans  (see Item 1,  Description  of  Business -
Business Operations During Fiscal 1998).

         Effective  at the end of fiscal  1998,  the  Company  ceased to operate
those  locations and  transferred the management and operation of them to all or
some of the Merritt Group. Ownership of those businesses was transferred to them
on  December  30,  1998,  as part of a  restructuring  Transaction  and  related
business   reorganization   (see  Item  1,  Description  of  Business  -  Recent
Restructuring Transaction).

         AutoCorp  Equities,  Inc.,  is a  holding  company  and has  been since
July 1997. In August 1998, Suburba  Acquisition Company was formed. In November,
1998 Suburba split its finance servicing activities into a new corporation named
AutoCorp  Financial  Services,  Inc.  ("AFS")  and  changed the name of its used
automobile retail sales operations to ACE Motor Company ("ACE") .

         In November,  1998, AFS acquired  certain  assets of Buyers  Acceptance
Corporation  of  Louisville,  Kentucky,  a loan  servicing  center.  The  assets
included a portfolio of loans  originated in a five-state  area  surrounding the
Louisville servicing center.

                                       8

<PAGE>

         ACE  acquired  certain  assets  related to the  present  Austin,  Texas
dealership on December 30, 1998, from a corporation  owned by William O. Merritt
and Dennis W. Miller.  This  transaction  was separate from, but related to, the
restructuring  Transaction that took place on the same date. This transaction is
a related party transaction and is described in Item 12, "Certain  Relationships
and Related Transactions."

         In April,  1999,  the Company  acquired  certain assets of Horizon Auto
Sales, Ltd. , a Dallas based used car dealership that operated a single lot. The
consideration issued in this transaction was 75,000 shares of AutoCorp Equities,
Inc.  common  stock,  of which  50,000  shares  were  issued at closing  and the
remaining 25,000 shares were to be issued prior to April 15, 2000 but have never
been issued.

         In June,  1999, the Company  acquired  certain assets of Angelina Motor
Company in Lufkin,  Texas.  The assets  acquired  included a single lot used car
dealership and two  portfolios of automobile  installment  loans,  both of which
have been subsequently sold to AutoPrime.

         In June, 1999, the Company  relocated its headquarters to Plano,  Texas
and rented  approximately 2,600 square feet of office space from AutoPrime.  The
Company  then moved into a separate  office  facility in Plano,  Texas in April,
2000 where it is currently located.

         Through ACE,  the Company  currently  owns and operates  three used car
dealerships in Texas,  Through July of 2000, the company  operated five used car
dealerships  in Texas - three in  Dallas,  one in Lufkin  and one in Austin  and
consolidated  its  dealerships  into the single Dallas  location in August 2000.
Through used car sales,  these  dealerships  originate  non-prime  used car loan
contracts  In  addition,  through AFS,  portfolios  of  non-prime  used car loan
contracts are purchased and one loan servicing center is operated. During fiscal
year 2000 the Company also  consolidated  the four  servicing  centers to one in
Dallas,  Texas.  The Company  retains the loan servicing  function of all of the
loans originated or purchased.

         Recent Restructuring Transactions

         At  December  30,  1998,  the  Company was  financially  distressed.  A
restructuring  took  place on that  date in order to  create  an  organizational
structure  that is  efficient  and reflects  the current  business  plans of the
Company.

The following was accomplished through the restructuring:

o    disposed of non-productive subsidiaries not consistent with future plans.

o    substantially  reduced  debt and made  arrangements  to reduce  exposure to
     further liability.

o    acquired new  management  systems and  software to enhance  loan  servicing
     ability.

o    changed the control of the Company.

         In this report,  the  restructuring is referred to as the "Transaction"
because it is defined that way in the documents providing for it.

         How the Purpose of the Restructuring Was Achieved

         The purpose of the restructuring was achieved by the following:

o    The disposition of  non-productive  subsidiaries not consistent with future
     plans

     This was achieved by  transferring  them,  along with other  interests,  to
     Merritt and Miller in  exchange  for the  redemption  of  2,653,500  Common
     Shares. These represent 42.9% of the Common Shares now outstanding. Merritt
     and Miller (or their  assignees)  combined  still own 600,000 Common Shares
     (9.7% of the outstanding).

o    The substantial  reduction of debt and the  arrangements to reduce exposure
     to further liability.

         This was accomplished in the manner described in detail in Item 1, "How
the Purpose of the  Restructuring  Was  Achieved" of Form 8-K which was filed on
March 11, 1999.

o    The  acquisition  of new  management  systems and  software to enhance loan
     servicing ability

         After assessing the needs of operations for both sales and collections,
and addressing  concerns for Year 2000  compliance,  it was determined  that the
AutoStar 2000 system would meet the needs of all aspects of operations.

                                       9

<PAGE>

o    The change of control of the Company

     This took place through:

     (a)  The  redemption of the 2,653,500  Common  Shares  previously  owned by
          Merritt and Miller

     (b)  The  re-issuance  of the redeemed  Common  Shares,  as well as another
          563,500 Common Shares that were already in the treasury.

     (c)  The establishment of the three trusts, and the transfer to them of the

     (d)  reissued 3,217,000 Common Shares.  These represent 52.0% of the Common
          Shares then outstanding.

     (d)  AutoPrime is majority owned by a regulated  financial  institution and
          can lawfully own stock of the Company  only after  receiving  approval
          from the Office of Thrift  Supervision and perhaps other  governmental
          regulatory  agencies.  The Transaction also allowed AutoPrime to defer
          taking  ownership  of any stock  until  receipt of  approval  from the
          Office of Thrift Supervision and any other governmental  approval that
          may be necessary.  The Transaction is based on the assumption that any
          necessary  approval can be obtained.  The deferral was accomplished by
          the following:

          The  tendering of Preferred and Common Shares to AutoPrime in exchange
          for AutoPrime  releasing  the Company from  liability on a substantial
          portion of its indebtedness.

     o    AutoPrime  declined to accept the tender  until  after  receipt of any
          necessary  regulatory  approvals.  (the  approval was  ultimately  not
          received);

     o    These securities were placed in the Exchange Trust pending the outcome
          of the  tender.  Since  necessary  approvals  were not  received,  the
          parties  to the  Transaction  renegotiated  some of the  debt  release
          portions of its terms.

          In addition,  the parties anticipate that some number of Common Shares
          will  remain in the  Exchange  Trust after the earlier to occur of the
          retirement  of the CIC notes or January 30,  2000.  These  shares will
          first be available  to AutoPrime  for  satisfaction  of the  Company's
          and/or CIC's obligations to AutoPrime.  However,  the Trustee will not
          transfer  these  shares  to  AutoPrime  unless  the  tender  has  been
          accepted.

         Initially  the  parties  agreed  that if  approval  is not  received by
December 31, 1999, and AutoPrime  determines not to accept the tender,  then the
tender is rejected.  On December 31, 1999, the parties agreed to an extension of
the required approval date from December 31, 1999 to January 1, 2001. The tender
was ultimately rejected,  and the credits AutoPrime issued on December 30, 1998,
as part of the  Transaction,  were withdrawn.  In addition,  the debts for which
credit was given was  reinstated  and was due and payable,  with interest at 10%
per year from December 31, 1998. The Company and AutoPrime agreed to renegotiate
the  Transaction.  A description of the  renegotiation  is described in the next
section. There is no assurance as to the outcome the renegotiation, and it could
have a materially adverse effect on the Company.

         On October 1, 2000 the  Company  renegotiated  the  December  30,  1998
transaction  with  AutoPrime as a result of the  inability  to gain  approval by
AutoPrime from the Office of Thrift Supervision and the subsequent  rejection of
the  tender  by   AutoPrime.   The   restructuring   took  place  to  create  an
organizational  and financial  structure that is more efficient and more closely
reflects the current business plans of the Company.

The following was accomplished through the restructuring:

     o    Substantially reduced debt and made arrangements to reduce exposure to
          future liability.

     o    Made  arrangements  for  short-term  working  capital to  provide  the
          Company  funding  to  continue  operations  in the  near-term  without
          acquiring new debt.

     o    Changed the capital structure of the Company.

     o    Acquired a substantial  loan portfolio to enhance the Company's  asset
          base.

     o    Increased  servicing fees (as a percentage of gross  collections)  and
          reimbursements  to enable the company to recover expenses not recouped
          under previous fee arrangements.

     How the Purpose of the Restructuring Was Achieved

     The purpose of the restructuring was achieved by the following:

     o    Substantially reduced debt and made arrangements to reduce exposure to
          future liability.

          This was achieved by  exchanging  a new series of  Preferred  Stock in
          exchange  for  the  extinguishment  of  all  debt,  either  direct  or
          indirect,  of the Company owed  AutoPrime  as of  September  30, 2000.
          Additionally,  as part of the  transaction,  the Company was  released
          and/or indemnified against any future liability arising as a result of
          the extinguishment of the debt.

     o    Made  arrangements  to for short term  working  capital to provide the
          Company  funding  to  continue  operations  in the near  term  without
          acquiring new debt.

          This was achieved by including in the transaction a substantial number
          of  re-possessed  automobiles  owned by AutoPrime as a result of their
          security interest in the underlying  finance  contract.  This provided
          the automobile  dealership an inventory  which was  unencumbered as of
          the  date  of  the  transaction.   Additionally,  servicing  fees  for
          collection  of the AutoPrime  portfolio  were  increased  five-fold to
          provide additional working capital in the near term (approximately six
          months).  These fees will return to predetermined levels in the longer
          term.  Its terms are  described  in detail at the end of item 5 and in
          the exhibits to this filing.

     o    Changed the capital structure of the company.

          This took place through:

          (a)  The designation of a new series of Preferred Stock (re-designated
               from Series A to Series B).

          (b)  Issued 1,612,083 shares of Series B Preferred Stock that resulted
               in  exchange  for  working  capital  in the  form of  cash  (on a
               deferred basis), repossessed automobiles, a portfolio of customer
               notes receivable (secured by automobiles) owned but considered to
               be  "active'  by  the  seller,  a  portfolio  of  customer  notes
               receivable owned but considered  "inactive" by the seller and the
               elimination  of  approximately  23,000,000 of debt,  recourse and
               other obligations and liabilities owed by the Company.

          (c)  Transferred  1,817,000  common  shares  from the  Exchange  Trust
               created in the December  30, 1998  transaction  to the  Company's
               treasury  previously  tendered to AutoPrime  and other parties on
               December 30, 1998.

          (d)  Returned to the Company the 6,578,485  Series A preferred  shares
               previously tendered to AutoPrime on December 30, 1998.

          (e)  Cancelled  552,551  common  shares to  prevent  an over issue and
               reduce the total  outstanding  common  shares to  4,362,274 as of
               October 1, 2000.


         This was  accomplished  by including in the  transaction a portfolio of
         retail installment contracts from AutoPrime that had been classified as
         "Active", "Past Due" or "Written Off" by AutoPrime.  These notes had an
         adjusted basis on AutoPrime's  books of approximately  $9,600,000 which
         when serviced by the Company may enhance the asset base of the Company.

         Increased  servicing fees and  reimbursements  to enable the Company to
         recover expenses not recouped under previous fee arrangements.

         This was  accomplished by including  provisions in the transaction that
         allowed the Company to increase  its  servicing  fee and  reimbursement
         structure to allow recovery of certain taxes and repossession costs not
         included in previous fee arrangements.

         Present Business Operations

         At February  15, 2001,  the Company  owns and  operates  three used car
dealerships  in Texas.  Through  used car  sales,  these  dealerships  originate
non-prime  used car loan  contracts.  Although  none were  purchased  during the
fiscal year ended  September  30, 2000,  the Company may also buy  portfolios of
non-prime  used car loan  contracts as a part of its current  business  plan. In
both cases,  the loan servicing  function is retained and, as the loan servicer,
record  keeping and  collection of payments and general  enforcement of the used
car loan contracts is assumed.

         ACE  Motor  Company,  Inc.("ACE")  owns  and  operates  three  used car
dealerships in Texas. It sells used cars to non-prime  purchasers and originates
non-prime  used car loans as a result of those sales.  Non-prime  purchasers are
usually persons with low incomes and a poor credit history. AFS then retains the
loan servicing function on the portfolios.

                                       10

<PAGE>

         Another  subsidiary of the Company,  AFS,  during the fiscal year ended
September 30, 1999 bought  portfolios  of loan  contracts at a discount from net
principal  balance,  usually ranging between 35% and 45%. Since the Company does
not have the necessary  capital to carry a portfolio of contracts,  AFS sold the
loans, with recourse, to AutoPrime at a lower discount from net principal value.
A sale "with recourse"  means that if a loan contract  becomes  delinquent,  the
seller becomes obligated to pay the purchaser an amount equal to the purchaser's
unrecovered  purchase  price,  plus accrued  interest on that  amount.  AFS also
retains the loan servicing  function.  AFS operates one loan servicing center in
Texas.  Due to severe  shortages of working capital during the fiscal year ended
September 30, 2000,  the Company did not purchase any new loan  portfolios  and,
consequently did not sell any portfolios to AutoPrime during that period.

         ACE and AFS have each entered into a Master Purchase and Sale Agreement
with  AutoPrime.  ACE entered into this  agreement on January 12, 1999,  and AFS
also  entered  into  their  agreement  on January  12,  1999.  The  Company is a
guarantor on both agreements to AutoPrime.  AutoPrime is engaged in the business
of purchasing  retail  installment  contracts  secured by automobiles  and light
duty-trucks, which include contracts for non-prime credit customers. Under these
agreements,  ACE and AFS sell contracts to AutoPrime,  with recourse, at a price
generally  ranging from 55% to 70% of the current net  principal  balance of the
contract. The Company and its subsidiaries,  ACE and AFS, have joint and several
liability to  AutoPrime  for the recourse  liability  on all  contracts  sold to
AutoPrime. Like many investors, AutoPrime does not want to be in the business of
servicing the contract loans in its investment portfolio. Therefore, the Company
and its subsidiaries,  ACE and AFS, have each entered into a Servicing Agreement
with AutoPrime.  This was done on the same dates as the Master Purchase and Sale
Agreements  were  signed.  Under these  agreements,  ACE and AFS each retain the
servicing of the contracts sold to AutoPrime.  This is done for a fee of between
10%  and  37% of the  cash  collected  from  servicing  contracts.  As the  loan
servicer, payments are collected, the servicing fee is retained, and the balance
is remitted to AutoPrime. As a result of the October 1, 2000 transaction,  there
have been limited transactions of this nature with AutoPrime.

         In the  event  payments  on a  contract  become  delinquent,  the  loan
servicer is responsible to make the collections and, if necessary, repossess the
used car  involved.  After  repossession,  the Company  either (1) floor  plans,
reconditions and attempts to resell the car through its dealership or, (2) sells
the car at  wholesale.  During the fiscal year ended  September 30, 2000, if the
net  recoupment  on this  delinquency  collection/recovery  process  (collection
efforts  on the  contract  after  delinquency,  repossessing  the  used  car and
disposing of it) is less than what  AutoPrime  is owed on the contract  balance,
the  loss is  applied  against  the  Company's  recourse  liability  obligation.
Effective  as of October  1, 2000,  the  Company  is no longer  charged  for any
recourse  liability  regardless  of the  amount  of the  net  recoupment  on the
repossession.

         Prior to October 1, 2000,  there were additional  Servicing  Agreements
with AutoPrime under which the Company services portfolios,  owned by AutoPrime,
for a fee. The servicing fee retained on payments  collected  ranges between 10%
to 37%.  The intent is to actively  seek and  investigate  other such  servicing
opportunities as they become available.  The current staffing infrastructure and
systems will allow the  servicing of multiple  portfolios  for outside  lenders.
Because the ollection of retail consumer loans is highly regulated,  the Company
employs xperienced collection managers and staff.

         Satisfactory  collection performance depends largely on the maintenance
of a balanced collection effort,  personal  interaction with the customers,  and
the exercise of good  judgment in the selection of the action to be taken on any
individual  account.  Since each of the successive  steps is more  expensive,  a
proper administration of collection procedures  concentrates the emphasis on the
early steps as essential to the success of the total collection effort.

         At  September  30,  2000,  the  Company  was the  servicing  agent  for
approximately  $6,019,382 of active automobile  receivables.  As a result of the
October 1, 2000 transaction,  that amount decreased to $3,464,840.  Accordingly,
the results of  operations  and  financial  condition  depends,  in part, on the
ability to properly  service  automobile  receivables  in order to reduce credit
losses.

         The  Company's   computer  system  is  designed  to  promptly  identify
customers whose accounts have become past due. Upon identification of a customer
with a delinquent account, that customer is immediately contacted by telephone o
demand  payment,  or, if the customer cannot be reached by this means, a Company
employee is dispatched to the customer's  home or place of employment to collect
payment.  If payment  cannot be obtained  from the  customer  at that time,  the
Company will seek to make alternative  arrangements for payment. Early detection
of a customer's delinquencies, as well as a commitment to working with customers
to  resolve   payment  issues,   reduces  credit  loss  and  promotes   customer
satisfaction.  Many finance  companies  serving the prime  market,  in contrast,
including  credit card  companies,  may wait up to 30 days before  contacting  a
customer in connection with a delinquent payment.

                                       11

<PAGE>

         If a customer's account becomes more than two payments days past due, a
process begins to protect the collateral.  In certain instances, a customer will
work with the Company to coordinate a "voluntary  repossession"  of the vehicle.
In the case of an "involuntary repossession," an independent firm is retained to
repossess the vehicles pursuant to prescribed legal procedures.  If a vehicle is
repossessed,  the  customer is allowed a minimum ten days to redeem the vehicle.
In some circumstances,  the customer may be allowed the opportunity to redeem at
any time until the vehicle has been sold to a third party.  After repossessing a
vehicle, the vehicle may be reconditioned by a third party. It will then be sold
at retail through one of the Company's dealerships or in the wholesale market.

         Having retail  capability  allows the Company to quickly  wholesale the
vehicles  that are  repossessed  and avoid  certain  expenses that a stand-alone
financecompany  would incur in  connection  with  repossessing  and  reselling a
vehicle.  Vehicles  that  cannot  be  sold  retail  are  sold at  auction  or to
wholesalers.

         As of  September  30,  2000 ACE had a  revolving  line of  credit  with
AutoPrime for the purpose of  purchasing  inventory of used  vehicles,  a "floor
plan,"  which is  guaranteed  by  AutoCorp  Equities,  Inc.  The floor plan with
AutoPrime  was  initially  established  on  October  26,  1998,  with a limit of
$750,000  and a variable  rate of  interest  of 6.5% over the index known as the
Wall Street  Journal  Prime Rate.  The rate was  initially set at 15%. The floor
plan note was a demand note that matured on April 26, 1999.  On that date it was
renewed and extended at the same variable rate of interest, initially 14.25%.

         The amount of the floor plan was  increased to  $1,000,000  on June 17,
1999, at the same variable rate of interest,  initially  14.25%. On September 8,
1999,  this latter note was replaced  with three notes  totaling  $1,400,000  in
commitments.  The  floor  plan  notes  are all due on  demand,  however,  if not
demanded they then all mature on March 8, 2000.  One note amounting to $400,000,
has a fixed  interest rate of 12%. The other two notes carry  variable  rates at
6.5% over the Wall  Street  Journal  Prime  Rate,  with the  initial  rate being
14.75%.  As a result of the October 1, 2000  transaction,  the revolving line of
credit and floor plan  agreements  were  terminated and any amounts  outstanding
were liquidated as a part of the transaction.

Competition

         The  Company  competes  with other  independent  used car  dealerships,
including ones that make financing available to their customers, and "Buy Here -
Pay Here" dealers that provide the financing themselves.  In addition,  many new
vehicle  dealerships are competing for used car buyers with non-prime credit and
are offering attractive leasing transactions as an alternative to prime and just
below prime credit borrowers.

         Generally,  the captive finance arms of major automotive  manufacturers
increase their  marketing  efforts in the non-prime  segment only when inventory
control and/or production scheduling  requirements of their parent organizations
dictate a need to focus on this  market.  They then exit this  market once these
sale volumes are  satisfied.  In addition,  the focus of these  captive  finance
companies  remains on new car  financing,  which is not commonly the purchase of
the higher-risk buyer. Moreover, many financial organizations electing to remain
in the automotive  finance  business have migrated  toward higher credit quality
customers to reduce their processing and collection costs.

         As a result of these  conditions,  the  non-prime  consumer  automotive
finance market is highly  fragmented,  and primarily serviced by smaller finance
organizations  that solicit business when and as their capital resources permit.
Due to such a lack of a major, consistent financing source, a number of lenders,
including  well-capitalized  public  companies,  have  abandoned  this market in
recent years.

         Despite the enormous income potential in the non-prime consumer market,
many traditional  financing sources,  such as banks,  savings and loans,  credit
unions,  captive  finance  companies and leasing  companies do not  consistently
provide  financing to, or have from time to time  withdrawn  from,  this market.
However,  many of these same  institutions  will buy loans on this type of buyer
once the initial, higher-risk period of the first three months have passed.

                                       12

<PAGE>

         Business Operations Owned and Operated During Fiscal 1998

         Effective at the end of fiscal 1998, the Company ceased to operate most
of the  locations  it had  operated  during  fiscal  1998.  The  management  and
operation  of those  businesses  was  transferred  to all or part of the Merritt
Group on September 30, 1998. The ownership of those  businesses was  transferred
to them on December 30, 1998 as part of the restructuring via the Transaction.

         During  fiscal 1998,  the Company  operated a combined used car finance
and sales  business,  concentrating  on used cars purchased by non-prime  credit
purchasers.  Through a subsidiary,  Consumer Investment Corporation ("CIC"), the
Company  engaged  in  non-prime  used  car  financing   activities.   Through  a
subsidiary,   Lenders   Liquidation   Centers,   Inc.   ("LLCI"),   the  Company
reconditioned and marketed repossessed used cars.

         Consumer  Investment  Corporation.  CIC was licensed in Arizona and New
Mexico as a sales  finance  company.  During  fiscal  1998,  it  engaged  in the
business of originating, purchasing, reselling and servicing used car loans.

         CIC primarily purchased contracts originated by LLCI in Arizona and New
Mexico.  CIC  purchased  them at a discount  from face  value,  usually  ranging
between 15% and 35%.  Since the Company  did not have the  necessary  capital to
carry a portfolio of contracts,  CIC typically re-sold the loans, with recourse,
at a discount to investors. CIC sold the contracts to investors who did not want
to service  the loans in the  portfolio  themselves  and CIC then  serviced  the
loans.

         Lenders  Liquidation  Centers,  Inc. LLCI was originally formed late in
January,  1997, by the Merritt Group for the  remarketing  of  repossessed  used
cars.  LLCI acted as a  reconditioning  center  and resale  outlet for used cars
repossessed by CIC and other lenders on a consignment basis. LLCI was to operate
in coordination with the Company's loan insurance program (which was intended to
remedy  defaulted  CIC  loans).  The  concept  of  LLCI  was to  have  a  single
reconditioning  center that served all of the Company-owned  resale lots. During
fiscal 1998,  LLCI  operated  four  facilities  located in the Maricopa  County,
Arizona, cities of Mesa, Phoenix,  Scottsdale and Glendale. It also operated one
facility in Albuquerque, New Mexico and another one in Santa Fe, New Mexico.

         CIC entered into a Master Purchase and Sale Agreement with AutoPrime on
October 6, 1997.  Under this  agreement,  LLCI would sell  contracts to CIC. CIC
would in turn sell those  contracts to AutoPrime,  with recourse,  at an average
price equal to approximately 70% of the outstanding  contract balance.  AutoCorp
Equities,  Inc.,  LLCI and CIC had joint and several  liability to AutoPrime for
the recourse liability on all contracts sold to AutoPrime.

         CIC would  service  the loans for a  servicing  fee of 20% of the gross
amounts collected.  In the event payments on a contract would become delinquent,
CIC was  responsible to make the  collections  and, if necessary,  repossess the
financed  vehicle  involved.  This  relationship  was  governed  by a  Servicing
Agreement dated October 6, 1997, between CIC and AutoPrime.

         After  payment to AutoPrime of its  unrecovered  purchase  price,  plus
accrued  interest  on that  amount,  the Company  would  become the owner of the
repossessed  used car. LLCI would  recondition the car and attempt to resell it,
generally, through one of LLCI's resale centers.

         CIC had also purchased, and assumed recourse liability with respect to,
a portfolio of non-prime loan  contracts  from AutoPrime in October 1997,  which
had been originated by a dealer that had gone out of business.  AutoPrime had no
mechanism  to  service  or  collect  these  loans.  The loan  contracts  in that
portfolio had originated  from sales of used cars in Austin,  Texas.  Due to the
recourse  obligation,  CIC then needed an operation in Austin similar to the one
provided  by LLCI in Arizona and New  Mexico.  Some or all of the Merritt  Group
formed a corporation  that  established a similar business in Austin to act as a
reconditioning center and resale outlet for used cars repossessed by CIC as well
as sell other used cars.  The  corporation  was Lenders  Auto Resale  Centers of
Texas,  Inc., and it did business under the assumed name of "Lenders Auto Resale
Centers" ("Lenders of Texas").  During fiscal 1998, Lenders of Texas established
and  operated  four  dealerships  and one  reconditioning  center  in  Austin to
re-market  used  cars  repossessed  as a  result  of  delinquent  loans  in that
portfolio as well as to originate its own automobile receivables.

         Lenders  also entered into a Master  Purchase and Sale  Agreement  with
AutoPrime  dated  January 22, 1998,  for the sale of contracts,  with  recourse,
generated  by the retail  sales of Lenders.  The terms of the sales to AutoPrime
under this Master  Agreement  were the same as under the other Master  Agreement
CIC had with  AutoPrime.  The Company and  Lenders  undertook  joint and several
liability  to  AutoPrime  for  the  recourse  liability  on all  contracts  sold
toAutoPrime.

                                       13

<PAGE>

         These contract loans were  originated and serviced by Lenders of Texas.
This relationship was governed by a Servicing  Agreement dated January 22, 1998,
between Lenders and AutoPrime.

         ACE  Motor  Company  acquired  certain  assets of  Lenders  of Texas on
December 30, 1998.  This  transaction  was  separate  from,  but related to, the
restructuring  Transaction that took place on the same date. This transaction is
a related party transaction and is described in Item 12, "Certain  Relationships
and Related  Transactions." The Company subsequently closed the Austin locations
that were not  profitable and  consolidated  the sales staff into one dealership
location  sufficient to also house the collection staff, thus reducing operating
overhead.  In addition,  as the portfolio  stabilized,  this allowed the service
center  operating  in Austin to be closed,  and instead  contract  with  outside
service vendors to service and recondition repossessed vehicles at a lower cost.
During the fiscal year ended  September 30, 2000, the company  consolidated  the
remaining Austin locations into one Dallas location.

         Employees.  At  January  26,  2001 the  Company  employed a total of 20
people; 6 in ACE Motors, 9 in AFS and 5 at the headquarters in Plano,  Texas. No
employees  are  covered  by  a  collective  bargaining  agreement.  The  Company
considers its relations with its employees to be good.

         Seasonality. The automobile industry is subject to substantial seasonal
variations  in revenues.  Demand for used cars is generally  lower in the winter
than in  other  seasons.  In  addition,  sales  tend  to be  lower  and  payment
delinquency rates higher during the holiday and  back-to-school  seasons,  while
sales tend to be higher during the late spring and through the summer months.

         Inflation. Higher interest rates, which generally occur with inflation,
would tend to  increase  the cost of credit  used by the  Company and would thus
decrease  profits.  Such effects can be limited by increasing the prices of used
cars sold, and negotiating purchases of loan contracts from third parties with a
higher  discount or interest rate (APR).  Inflation  has not had any  noticeable
effect on the Company's operations.

Item 2.  Description of Property

         The  principal  executive  offices of the Company are located at 911 W.
Parker Rd., Suite 306, Plano,  Texas 75023.  Approximately  3,600 square feet of
leased  premises are at this location.  The rent is  approximately  $ 42,000 per
year. However, as part of the October 1, 2000 transaction, AutoPrime has assumed
responsibility for the lease for the remainder of its term.

         As of January 26,  2001,  The Company has three  leased  properties  in
addition  to the  corporate  headquarters.  They  are  leased  for  ACE  and AFS
operations,  and are listed in the  following  table  together with the year the
lease expires:

         1.  9922 Linn Station Rd., Louisville, Kentucky     3,025 sq ft    2004
         2.  2101 First Street, Lufkin, Texas                4,000 sq ft    2001
         3.  624 So. Buckner Blvd., Dallas, Texas            5,600 sq ft    2004


                                       14

<PAGE>

         Management believes the Company's  facilities and equipment are in good
repair and are adequate for current needs.

Item 3.  Legal Proceedings

         It was previously  reported that the Securities and Exchange Commission
(the  "SEC")  filed  suit on August  10,  1998,  against  the  Company,  Michael
Carnicle,  Robert Cord Beatty, Hillel Sher, Amotz Frenkel and Nilli Frenkel. The
suit does not name, as a defendant,  anyone who is an officer or director of the
Company.  The complaint was filed in the United  States  District  Court for the
District of Utah. The Docket number is: 2:98CV-0562S.

         The SEC  dismissed  the  Company  from the suit  without  prejudice  on
October 7, 1999, so it is no longer a pending legal proceeding.

         There are no other material legal proceedings.

Item 4.  Submission of Matter to Vote on Security Holders

         Not Applicable.


PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         The  Common  Stock of the  Company  is  quoted  on the NASD  Electronic
Bulletin  Board  and  traded in the  over-the-counter  market  under the  symbol
"ACOR". Trading is only sporadic and there is no established trading market. The
tables  below list the high and low bid prices for each  quarter of the last two
fiscal years,  as best can be determined by combining  information  from several
sources.

                                                 Bid Quotations
                                                 --------------
                                              Low             High



           Fiscal 2000:
                  First Quarter              $0.125          $0.22
                  Second Quarter              0.19            0.28
                  Third Quarter               0.188           0.468
                  Fourth Quarter              0.031           0.10


           Fiscal 1999:
                 First Quarter                0.25            0.63
                 Second  Quarter              0.56            1.75
                 Third Quarter                0.50            0.81
                 Fourth Quarter               0.21            0.81


--------------------

*    These  quotations  reflect  inter-dealer  prices,  without retail  mark-up,
     mark-down, or commission and thus may not represent actual transactions.

         At September 30 , 2000, there were  approximately 439 holders of record
of the Common Shares of the Company.

         The  Company  has not  paid  any  dividends  on its  Common  Stock  and
anticipates  that future  earnings,  if any, will be retained to finance  future
growth. In addition, the 1,612,083 shares of Series "B" Preferred Stock, issued

on November 14, 2000,  as a result of the October 1, 2000  transaction,  have an
annual  non-cumulative  dividend  preference  of  $80,204  (5%  of  $1,612,083).
Accordingly,  the Company  does not  anticipate  paying any  dividends on Common
Stock for the foreseeable future.

                                       15

<PAGE>

         From October 1, 1997 through  September 30, 2000,  the Company sold the
following securities without registration under the Securities Act of 1933:

     (1)  On several  occasions  from January 13, 1998 to September  30, 1999, a
          total of 512,076 Common Shares were delivered to  approximately  47 of
          the  approximately  115  holders  of CIC  notes,  in  return  for  the
          cancellation of those notes. As a result of those exchanges, CIC notes
          in the principal amount of $1,488,570,  together with accrued interest
          $255,297,  were  canceled.  These Common  Shares were issued under the
          Section 4(2) exemption of the Securities Act.

     (2)  219,706 Common  Shares,  in April,  May,  June,  September and October
          1998, for accounting and consulting services valued at $202,939. These
          Common  Shares were issued  under the Section 4 (2)  exemption  of the
          Securities Act.

     (3)  50,000  Common  shares  on  April  15,  1999,  to  George  Mueller  in
          connection with the acquisition by ACE Motor Company,  a subsidiary of
          the Company,  of two  promissory  notes in the aggregate  principal of
          approximately  $2,500,000 and the underlying collateral and guarantees
          executed by an  affiliate  of Mr.  Mueller.  These  shares were issued
          under the Section 4(2) exemption of the Securities Act.

     (4)  52,787 Common  Shares on November 4, 1999,  to George  Mueller for his
          services  (and  agreement  to render  services)  to the  Company as an
          independent  consultant from April 1 through December 31, 1999, on the
          terms set forth in a Business Consulting Agreement.  Through September
          30, 2000 Mueller has  performed no  consulting  services of any nature
          for the company  under the terms of the  agreement.  These shares were
          issued under the Section 4(2) exemption of the Securities Act.

                                       16

<PAGE>

Summary of the Terms of  Convertibility  of the Series "B" Preferred  Shares. As
part of the Transaction,  a series of 9,000,000  authorized  shares of Series"A"
Non-Cumulative  Convertible  Preferred Stock was  established.  Then, a total of
2,000,000 of those shares were  re-designated  as Series "B" of which  1,612,083
Preferred  Shares  as part of the  October  1,  2000  Transaction  were  issued.
Additionally, the 6,578,485 Preferred Series "A" shares were cancelled as a part
of that transaction

         The terms of the Series "B" Preferred Shares are:

          o    They pay non-cumulative dividends at the rate of 5% per year;

          o    They have a liquidation preference of $14.64 per share;

          o    They have no voting rights, sinking fund provisions or redemption
               rights;

          o    They are convertible into Common Shares on a 1-for-1 basis at any
               time. They will also become  convertible  automatically if any of
               certain  specified  events take  place.  Here is a summary of the
               events that can accelerate convertibility:

               (a)  When  or if the  Company's  Common  Stock  is  accepted  for
                    trading in the NASDAQ National Marketing System, or

               (b)  When or if the Company's  Common Stock is publicly traded at
                    a price equal to $14.64 per share or more.

Item 6.  Management's Discussion and Analysis or Plan of Operation

Forward Looking Statements:

         This report contains forward looking statements.  Additional written or
oral forward looking  statements may be made by the Company from time to time in
filings with the Securities and Exchange  Commission or otherwise.  Such forward
looking  statements  are within the  meaning of that term in Section  27A of the
Securities  Act,  and Section 21E of the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange  Act").  Such statements may include,  but not be limited
to, projections of revenue,  income, or loss, estimates of capital expenditures,
plans for future operations, products, or services, financing needs or plans, as
well as assumptions  relating to the foregoing.  The words "believe",  "expect",
"anticipate",  "estimate",  "project",  and similar expressions identify forward
looking statements, which speak only as of the date the statement was made.

         Forward  looking   statements  are  inherently  subject  to  risks  and
uncertainties,  some of which cannot be predicted or  quantified.  Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying  the forward  looking  statements.  The Company  undertakes no
obligation to publicly update or revise any forward looking statements,  whether
as a result of new  information,  future  events,  or  otherwise.  The following
disclosures,  as  well  as  other  statements  in this  Report  on Form  10-KSB,
including those in the notes to the Company's consolidated financial statements,
describe  factors,  among  others,  that  could  contribute  to  or  cause  such
differences, or that could affect the Company's stock price.

                                      17

<PAGE>

Results of Operations

         Overview. The Company operates "Buy Here-Pay Here" used car dealerships
and underwrites, finances and services retail installment contracts generated by
sales of used cars by the Company's  dealerships.  In addition, the Company may,
as a part of its ongoing  business plan,  purchase  portfolios of loan contracts
from third party  dealerships  and services these loan  portfolios.  The Company
targets the non-prime  borrowing segment of the automobile  financing  industry.
The Company finances much of its operations by collecting principle and interest
on contracts  purchased  from AutoPrime in its October 1, 2000  transaction  and
continuing to service contracts retained by AutoPrime.

         The Company began its used car operations in 1996 with the  acquisition
of a car lot in Phoenix,  Arizona. By 1997, the Company had seven car lots, five
in Arizona and two in New Mexico. The Company had operating difficulties in 1997
and fiscal  1998 and by the first  quarter of fiscal  1999 had  decided to close
down some lots and find a more permanent solution to its cash flow needs. At the
end of December 1998,  there was a change in control of the Company.  As part of
this, the Company reached an agreement with its primary lender,  AutoPrime,  and
certain of its officers at the time. The officers  returned most of their shares
of the Company's common stock in exchange for the Company  transferring  certain
assets and  liabilities to the officers.  The Company  tendered shares of common
and  preferred  stock to AutoPrime in exchange for agreeing to transfer  certain
liabilities  to the former  officers  and the  agreement to provide a new credit
facility.

         In fiscal 1999 the Company  experienced a complete  transformation from
1998. The operations and management were dramatically  changed. Most of the used
car lots operated in 1998 were closed and new lots were added so that at the end
of fiscal 1999 the Company was operating  five lots in total,  all of which were
in Texas.  Three  were in Dallas,  one in Austin and one in Lufkin.  A change of
control took place and a new Chief Executive Officer was hired who has put a new
management team in place. A loan servicing  operation was established  with four
offices, one in Kentucky and three in Texas. Both the level of car sales and the
volume  of  retail  installment  contracts  serviced  increased   significantly.
Although  the  Company  is in the same  business  in 1999 as in 1998,  the size,
focusand  direction of the Company bears little resemblance at the end of fiscal
1999 to what existed in 1998.

1998

         With all lots operating at the beginning of 1998,  the Company's  sales
increased  significantly  during the first nine months of fiscal 1998. Sales for
the entire fiscal year increased by approximately  $960,000.  Substantially  all
notes were sold to AutoPrime during 1998, with full recourse. Due to poor credit
underwriting,  the Company  continued  to  experience  a high rate of default on
these  notes.  The  Company  was unable to meet the  lenders'  requirements  for
repurchasing  the defaulted notes and was unable to increase sales  sufficiently
to replace the defaulted loans with performing contracts.

         With  increasing  losses,  the  Company  obtained  additional  funds by
incurring debt of  approximately  $990,000  during 1998.  Funds were advanced by
AutoPrime  and  individual  outside  investors.  Interest  expense  on the  debt
increased by approximately  $195,000 to over $475,000. The resulting losses also
prevented the Company from paying its vendors in a timely  manner.  As a result,
trade  payables and accrued  expenses  increased  by over  $900,000 by September
30,1998.  By June 1998,  Management  had  decided to close the sales  lots.  The
reconditioning  facility and the  insurance  subsidiary  were also closed.  Upon
closure of the lots,  a small  staff was left in Phoenix to  continue to service
and collect on the notes for AutoPrime and transition the record keeping.

         Effective at the end of fiscal 1998,  the Company ceased to operate the
businesses  operated  during fiscal 1998.  The management and operation of those
businesses was  transferred to some or all of the Merritt Group on September 30,
1998. In August,1998,  Charles Norman was asked to assume day-to-day  management
of the  Company.  The  Board of  Directors  hired  Mr.  Norman,  elected  him as
President and a Director,  and gave him the necessary  authority to  restructure
the Company.  In addition,  during  August 1998,  the Company  acquired  certain
assets of Suburba  Auto  Sales,  an  independent  automobile  dealer  located in
Dallas,  Texas.  As  a  result,  assets,  inventory,  equipment  and  automobile
receivables owned by Suburba were acquired and the Suburba  Acquisition  Company
was formed to  facilitate  the sale of used cars and the servicing of automobile
receivables.  In November,  1998,  Suburba split its finance servicing  business
into a new  corporation  named AutoCorp  Financial  Services,  Inc.  ("AFS") and
changed the name of the used  automobile  retail  sales  operation  to ACE Motor
Company  ("ACE").  ACE Motor Company  continued to operate the vehicle sales and
finance  operation of the dealership,  and the existing and resulting loans were
serviced by AFS.

                                       18

<PAGE>

         Effective  October 1, 1998,  AFS began its business of buying,  selling
and servicing non-prime retail installment loan contracts secured by automobiles
and light-duty trucks. ACE owns and operates independent  automobile dealerships
and originates  retail  installment  contracts  secured by used  automobiles and
light-duty trucks.

         The Company's  subsidiary,  ACE Motor Company,  acquired certain assets
related to the Austin  dealership on December 30, 1998, from Lenders Auto Resale
Centers of Texas,  Inc.,  a  corporation  owned by William O. Merritt and Dennis
W.Miller.

         As a result of the  uncertainty of the  collections and the recent weak
history of the portfolios,  the Company recorded a contingency reserve of 30% of
the total  recourse  portfolio  outstanding.  Management  expected  that rate to
decline as better  collection  efforts are made and controls are tightened  over
delinquency reporting and repossession efforts.

1999

         Net sales  of used  automobiles  increased  from $3,881,748 in  1998 to
$11,580,947  in 1999,  an increase of  $7,699,199,  or 198%.  As the Company has
completely  changed its retail automobile sales operations as described earlier,
its sales volumes have  consistently  increased quarter over quarter as new lots
have been added and become productive. The sales amounts by quarter for 1999 are
as follows:

                      Quarter 1                  $  812,383
                      Quarter 2                  $1,576,638
                      Quarter 3                  $3,716,030
                      Quarter 4                  $5,475,896

The last  quarter  of 1999  reflects  the five used car lots in  operation  that
currently make up the retail sales activity of the Company.

         The other major  elements of revenue for the Company in 1999 consist of
service  fees  from loan  servicing  activity  and the  difference  between  the
purchase price paid and the sale price received ("the spread") from the purchase
and resale of bulk loan  portfolios.  Service  fee  revenue in 1999  amounted to
approximately  $1,150,000,  up substantially  from 1998. This increase  resulted
from a  significant  increase in the loan  servicing  activity of the Company in
1999.  Revenue from the spread on bulk purchases was  approximately  $626,000 in
1999, significantly greater than the comparable amount in 1998.

         Cost of sales as a percentage of automobile sales decreased  from 90.6%
in 1998 to 78.1% in 1999, an  improvement of 13.8%.  In  particular,  the fourth
quarter of 1999 experienced a cost of sales percentage of approximately  66%, an
improved  performance  over that of the  earlier  quarters  in 1999.  Management
improvements in general cost control and profit margin management contributed to
the overall improvement.

         Selling,  administrative and other operating expenses for 1999 amounted
to $4,434,650,  substantially  less than the comparable number for 1998. In 1998
the  Company  made  a  number  of  significant  changes  to its  operations  and
management.  These  changes  resulted in  expenses  in this area which  create a
non-meaningful year to year comparison. Looking only at performance within 1999,
these expenses  improved during the year as a percentage of sales.  Year to date
through June 30, 1999  selling,  administrative  and other  expense was 34.0% of
sales.  In the fourth  quarter the  comparable  percentage  was 32.1%,  with the
fullyear  percentage  averaging  33.2%.  Given  that  many of  these  costs  are
discretionary  in  nature,  general  cost  control  efforts  contributed  to the
improvement in this area.

         Bad debt expense was the result of the purchase of two installment note
portfolios  from  Angelina  Motor  Company in Lufkin,  Texas.  These  notes have
ultimately been sold to AutoPrime, however the Company held them for a period of
time before  selling  them and a provision  for bad debt expense was made during
that time. No similar item  occurred in 1998. In addtion,  in September of 1999,
AutoPrime took sole management  over the portfolio  which were bought,  serviced
and sold to third parties.

                                       19

<PAGE>

         The  provision for recourse  liability  increased to $2,726,918 in 1999
         from $2,320,000 in 1998. This increase was primarily impacted by:

     -    an  approximate  $2.2 million  charge to the reserve at year-end  1999
          resulting  from  systems  change-over  problems  including  inadequate
          portfolio  management  by  AutoPrime.  The systems  problems have been
          corrected  and  appropriate  personnel  changes  have  been  made.  In
          addition,  AutoPrime  ceased  management  of the  portfolio  effective
          October 1, 2000.

     -    purchase  and  resale  of  large  installment  loan  portfolios.  This
          activity  results in a negative  short  term  impact to the  financial
          results. Portfolios are purchased at a substantial discount and resold
          to AutoPrime at a smaller  discount,  yielding a profit on the resale.
          However, since the Company retains recourse liability on the notes and
          sets a reserve  against  possible  defaults  at a level that is higher
          than the profit on the resale,  the immediate result is negative.  The
          ultimate  profit on these is recognized over time as the notes perform
          and the recourse  liability is reduced,  and the service fee income is
          recognized as the notes are collected

     -    improved  performance of newer installment notes. Based on a review of
          empirical  data it  appears  that  newer  notes  with  more  stringent
          underwriting  criteria  have a  better  collection  performance.  As a
          result,  the  overall  reserve  ratio  has been  adjusted  to 25%,  an
          improvement from the rate that was used in 1998.

         Interest expense is incurred by the Company in connection with its line
of credit that is used to floor purchased and  repossessed  automobiles and from
the outstanding  note payable to AutoPrime.  The amount of interest  expense for
1999 is less than incurred in 1998 because 1998 included expense related to debt
to be exchanged  for Common and  Preferred  shares of the Company as a result of
the December 30, 1998 Transaction.

         In December  1998, an agreement  was reached  between two officers (and
largest  shareholders)  of the Company and the largest  creditor of the Company.
The Company  agreed to take back  2,653,500  shares of Common stock owned by the
officers.  In  exchange,  the Company  transferred  and disposed of control over
certain  operations of the Company to the officers and a gain on disposition was
recorded as a result.

2000

         Management believes that fiscal year 2000 could have been a turn around
year for the Company had certain unforeseen events not taken place. Primarily as
a result the inability by AutoPrime to continue  funding its floor plan and note
acquisition plans to the Company late in the second quarter of fiscal year 2000,
the  company  was  basically  unable  to  purchase  inventory  for its  used car
operations or purchase note pools from third  parties.  This came as a result of
the sale of AutoPrime's  primary lending source. Also as a result of the sale of
its primary lending source,  AutoPrime also discontinued  purchasing installment
contracts under the Master Purchase and Sale Agreement  mentioned above and thus
discontinued  advancing funds under that  arrangement.  In addition,  due to its
financial  difficulties in the past, the Company was unable to obtain additional
sources  of  financing  from  alternative  sources  such  as  commercial  banks,
commercial  finance  companies  and the  like.  As a  result,  once the used car
automobile  inventory  had been  depleted in the third  quarter,  the only autos
available  for sale were  those  repossessed  as a result  of a  default  on the
underlying  installment  contract(s).  These  autos were sold by the  automobile
dealerships  for a marketing fee which was  generally  equal to the down payment
made by the customer.  These fees proved to be insufficient to allow the Company
to continue its operations in multiple cities  throughout  Texas.  Servicing fee
income  was  also  negatively  impacted  in that the  supply  of new  notes  for
servicing was reduced and through routine turnover of the notes in the servicing
portfolio.

         Management made the decision to close its Kentucky  servicing center in
the third  quarter and four of its five retail used car lots  located in Dallas,
Lufkin and Austin in the fourth  quarter.  Inventory,  if any, in the Lufkin and
Austin locations was moved to Dallas, key personnel were relocated to Dallas and
those facilities were closed.  The collection  centers in Lufkin and Austin were
also closed in the fourth quarter and moved to Dallas.

         During the second through fourth quarters of fiscal 2000, substantially
all funds to continue operations of the Company came from AutoPrime. Ultimately,
the Company and  AutoPrime  entered  into an  agreement  to allow the Company to
recapitalize  and issue preferred shares of stock to an affiliate of AutoPrime's
US parent  company in exchange for debt,  working  capital and income  producing
assets.  That  agreement  is more fully  described in Item 1,  Organization  and
History and as exhibits attached to this filing.

         Net sales of used  automobiles  decreased  from  $11,580,947 in 1999 to
9,790,142 in 2000, a decrease of 1,790,805. Management believes that sales would
have  increased  over 1999 had it had  sufficient  working  capital to  maintain
higher  inventory  levels during fiscal year 2000.  The sales amounts by quarter
for 2000 are as follows:

                           Quarter 1                 $6,123,000
                           Quarter 2                 $3,056,000
                           Quarter 3                 $  240,000
                           Quarter 4                 $  371,086

         The last two quarters  reflect the result of the Company not being able
to  purchase  additional  used  automobile  inventory  in the  normal  course of
business.

         The other major  element of revenue for the Company in 2000  consist of
service fees from loan servicing activity. Service fee revenue in 2000 amount to
approximately  $2,574,852  an  increase  of  45%from  1999  as a  result  of the
implementation  of stricter  collection  procedures in 2000. In 1999,  there was
approximately  $626,000  in income as a result of the  spread on bulk  purchases
whereas  the  Company  made no bulk  purchases  in fiscal  year 2000 and thus no
income on any spread that may have been achieved.

         Cost of sales as a percentage of automobile  sales increased from 78.1%
in  1999  to  97.0%  in  2000,  primarily  as a  result  of the  quality  of the
automobiles  available for sale in the last two quarters of the year. Management
expects costs of sales to remain relatively high in the first quarter of 2001 as
a result of liquidation of its beginning  inventory at prices below retail in an
effort to  increase  working  capital  for future  purchases  of higher  quality
automobiles in the mid to later quarters of the fiscal year.

         Selling,  general  and  administrative  expenses  for 2000  amounted to
$4,428,530,  a slight decrease over the comparable number of $4,449,155 in 1999.
Beginning  in the fourth  quarter of fiscal  year 2000 and  continuing  into the
first  quarter  of fiscal  2001,  management  has  implemented  plans  that have
significantly reduced operating costs at all levels and expects those costs as a
percentage of revenues will decrease dramatically in fiscal 2001.

         Bad  debt  expense  increased  dramatically  from  $465,042  in 1999 to
$7,746,442 in 2000 as a result of the passing through of the recourse  liability
to the Company  once the  installment  contracts  are written off by  AutoPrime.
AutoPrime wrote off approximately  $5,000,000 in the Company's fourth quarter of
2000. The result of the write-off  also decreased the Company's  exposure to the
recourse  liability  of  approximately  $933,000  as of  September  30, 2000 and
resulted in a reduction in the provision for recourse liability of approximately
$3,660,000  for the twelve  months ended  September 30, 2000. As a result of the
October 1, 2000  transaction,  the  Company has been  released  from any and all
recourse liability beginning and after October 1, 2000.

         Interest expense is incurred by the Company in connection with its line
of credit that is used to floor purchased and  repossessed  automobiles and from
the outstanding  note payable to AutoPrime.  The amount of interest  expense for
2000 is more than  incurred  in 1999  because a large  portion of the debt to be
converted to equity by AutoPrime  was not  converted  and interest  charges were
re-instated on the original debt. As a result of the October 1, 2000 transaction
the  aforementioned  debt was  converted  to  Preferred  Stock  and  accordingly
management  estimates that interest expense will be dramatically  reduced during
fiscal year 2001.

         In November 2000 and  effective  October 1, 2000,  the Company  entered
into an agreement  with  AutoPrime  and an affiliate of  AutoPrimes'  US parent,
Pacific  Financial Group to exchange  1,612,083 shares of Series B Preferred for
substantially all debt, both direct and direct, of the Company to AutoPrime.  In
addition  to the  exchange  of  debt,  the  Company  acquired  an  inventory  of
repossessed automobiles, certain note portfolios owned by AutoPrime and retained
the  servicing  of certain  note  portfolios  owned by  AutoPrime  at  increased
servicing  rates than were in effect  prior to the  agreement.  The  substantive
details of the  agreement  are included in exhibits to this filing for reference
purposes.  As a result of this  issuance of the Preferred  Stock,  the Company's
capital structure increased by approximately $16,350,000.

         In addition to the positive  effects that the October 1, 2000 agreement
has  had on the  financial  structure  of the  Company,  management  has had the
opportunity to begin to formulate  long-term plans for the future of the Company
and has retained tax  professionals  to  determine  the amount of the  operating
losses  that can be used to offset  future  taxable  income.  As a part of these
plans,  management  is  evaluating a proposal by the current  management  of Ace
Motor Co. to buy the  automobile  operations  from the Company  effective  as of
October 1, 2000. Although discussions are on-going,  no definitive agreement has
been reached as of the date of this  filing.  Should an agreement be reached and
finalized, details will be announced through press releases and filings required
by the Securities and Exhange Commission.

Liquidity

         The Company no longer  continues  to be in a negative  working  capital
position as of October 1, 2000 as a result of the  acquisition of  approximately
$225,000 in cash (on a deferred  basis),  approximately  $370,000 of repossessed
automobiles as inventory and customer installment notes receivable and therefore
is no longer  dependent on AutoPrime  to provide the needed  working  capital to
supplement  internally generated cash flow in funding the operating needs of the
Company.  As a  result  of  the  significant  changes  made  to  operations  and
Management  since  the  recapitalization   was  completed,   there  has  been  a
substantial  improvement  in the cash flow  performance  of the  Company.  It is
anticipated  that  operations  will become cash flow positive on a monthly basis
during fiscal 2001.

Effect of Inflation

         The Company does not expect any material  negative effect to operations
from an increase in the inflation rate.

Year 2000 Compliance

              Modifications  to and  replacements  of portions of the  Company's
software have been made to address this issue. In the opinion of management, the
changes made have  resulted in its computer  systems  functioning  properly with
respect to dates in the year 2000 and thereafter.

                                       20

<PAGE>

Item 7.  Financial Statements

         The following financial statements are attached to and filed as part of
this report:

         Consolidated Balance Sheets - September 30, 2000 and 1999

         Consolidated  Statements  of  Operations  For the Years  Ended
         September 30, 2000, 1999 and 1998

         Consolidated  Statement of Changes in Shareholders' Equity For
         the Years Ended September 30, 2000, 1999 and 1998

         Consolidated  Statements  of Cash  Flows For the  Years  Ended
         September 30, 2000, 1999 and 1998

         Notes to Consolidated Financial Statements




                                       21

<PAGE>

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

         The Company has market risk  exposure  related to its interest  bearing
liabilities.   Interest  rates  with  respect  to  outstanding  indebtedness  or
indebtedness that may be incurred in the future is, or would be, as the case may
be, based on the interest rates prevailing in the market at the time the debt is
incurred. In some cases, the rates may be floating rates.  Increases in interest
rates paid on  outstanding  indebtedness  of the  Company  would have an adverse
effect on the Company's profitability.

         Current levels of  indebtedness of the Company as of September 30, 1999
and the related interest rates are as follows:

         Notes payable, fixed interest rate of 9%, due May 1, 2000    $3,900,657

         Borrowings under line of credit, fixed interest rate of
         12%, due March 8, 2000                                       $  125,450


Item 8.  Disagreements with Accountants on Accounting and
         Financial Disclosure - N/A


PART III

Item 9.  Directors,   Executive   Officers,   Promoters  and  Control   Persons;
         Compliance with Section 16(a) of the Exchange Act

         The executive officers and Directors of the Company, as of November 26,
1999, are:

    Name             Age           Position                       Director Since
    ----             ---           --------                       --------------

Charles Norman       43       President and Chief Executive             1998
                              Officer; Director*


William O. Merritt   56       Director**                                2000

David Brown          40       Director***                               2000

Hunter Ennis         30       Secretary and Treasurer;****              1999

Terri Ashley         47       Vice President - Investor                 2001
                              Relations*****

-----------------
*     Elected President and a Director in August 1998.
**    Elected a Director in May 2000.
***   Elected Director in June 2000.
****  Elected Secretary and Treasurer in December 1998, resigned in  June  2000,
      re-elected Secretary and Treasurer in December 2000.
***** Elected Vice President - Investor Relations in January 2001.

         A brief  statement  setting forth the principal  occupation and certain
other information for each of them is set forth below.

                                     22

<PAGE>

         Charles Norman has been engaged in various  aspects of working with and
making successful, financially distressed companies. Mr. Norman was formerly the
Director of Asset Management for AutoPrime from March 1998 until September 1998.
In this  capacity,  he  developed  a  risk-management  department  to design and
implement work-out and exit strategies for distressed dealer portfolios owned by
AutoPrime.  From January,  1997,  until March,  1998, he was the Chief Executive
Officer of  Windsor  Holdings,  Inc.,  a  non-prime  indirect  consumer  lending
institution.  As CEO, Mr. Norman  negotiated with financing  sources and secured
outside  financing  for  the  company's  operations,  wrote  and  developed  all
underwriting criteria and marketing materials,  and was directly involved in the
direction of all administrative and executive staff. Before 1997, Mr. Norman was
the  President of Allied Auto Credit from 1995 until 1997.  His duties  included
working  directly  with  the  company  ownership  to  develop  programs,  design
procedures and oversee all phases of  operations.  In 1994, Mr. Norman owned and
operated a non-prime finance consulting  company,  Dumont,  Norman & Associates.
This company was  contracted  by multiple  non-prime  lenders to design  finance
models,  train finance staff, and write marketing materials for numerous lending
programs.  Also during 1994 and 1995,  Mr.  Norman was  President  of a group of
non-prime  finance offices under the name Auto Express Financial and managed all
sales/leasing  operations on a daily basis. From 1993 until 1994, Mr. Norman was
the Vice President of Operations for Leadership Financial,  a non-prime indirect
lender. He was responsible for implementing the company's underwriting criteria,
hiring and training all key personnel and developing all marketing materials.  A
detailed resume of Mr.  Norman's  experience is attached as Exhibit 99.1 to Form
8-K filed March 11, 1999. Certain additional  information  concerning Mr. Norman
is set forth in Item 11, "Security  Ownership of Certain  Beneficial  Owners and
Management."

         Hunter Ennis has been with the Company  since August 1998.  He has been
Secretary and Treasurer since December 1998, and also the Director of Operations
for Auto Corp Financial Services.  Prior to joining the Company, Mr. Ennis was a
Dealer Auditor with AutoPrime from July, 1998 to August,  1998.  Before that, he
was Vice  President of  Accounting  and Finance,  of Windsor  Holdings,  Inc., a
Dallas non-prime,  indirect consumer lender,  from May, 1997 to July, 1998. From
June 1996 to May 1997,  Mr. Ennis was Director of Accounting  for Allied Funding
Corporation,  a Dallas non-prime finance lender.  During 1994 until mid 1996, he
was a Senior Analyst with Alltel, a telecommunications company. Mr. Ennis worked
in the Little Rock, Arkansas office of Alltel.

         David Brown has been with the Company  since  November  1997. He became
Director of  Collections  for Lenders Auto Resale Centers in Austin,  Texas.  In
this  capacity,  he was  responsible  for  the  supervision  of  all  day-to-day
operations in collections.  From September,  1995 to October 1997, Mr. Brown was
Senior Loan Service Counselor for Westcorp  Fiancial Services in Austin,  Texas.
From  September,  1994 to September  1995,  Mr. Brown was with Dell  Computer of
Austin, Texas as collector of Fortune 500 national accounts.

         Terri Ashley has been with the Company  since  November 1998 and became
an officer in January 2001. From January 1997 through October of 1998 she was an
executive  assistant for Gatehouse  Capital.  From January 1996 through December
1996 Ms.  Ashley was an  administrative  assistant  with Sony  Pictures and from
August 1995 through December 1995 Ms Ashley was an administrative assistant with
Phoenix Ventures, Inc.

         During  fiscal  1998,  Messrs.  William O. Merritt and Dennis N. Miller
were the Company's controlling shareholders.  In August 1998, they asked Charles
Norman to assume day-to-day management control of the Company.

         Mr. Norman agreed to do this and assist in the  re-structuring  effort,
but only if he had control of all major  decisions.  Based on Mr.  Norman's past
experience, and his knowledge of the non-prime automobile business, the Board of
Directors,  in August,  1998, hired Mr. Norman,  elected him as a Director,  and
gave him the necessary  authority to restructure  the Company.  He  beneficially
became the controlling shareholder of the Company on December 30, 1998.

         On December 30, 1998, Mr. Miller resigned as a Director. From that date
until April 28, 1999, the Directors of the Company were:

         o    Charles Norman
         o    William O. Merritt

         On April 29, 1999,  Merritt and Norman  elected Mr. Ennis as a Director
and Mr. Merritt resigned.  Messrs. Norman and Ennis then elected Darr Heath as a
Director.  Messrs. Ennis and Heath were and continue to be employees of AutoCorp
Financial  and/or ACE Motor  Company.  The Board of  Directors  held one meeting
during  fiscal  year  1999.  The  Board of  Directors  had no  Audit  Committee,
Compensation or Nomination  Committees during fiscal 1999 and does not currently
have any committees.


                                       23

<PAGE>

         The Company's  governing  documents provide that there must be at least
one Director. In addition, the Bylaws authorize the Board of Directors to act by
resolution to increase or decrease the number of Directors.  The present  number
of authorized Directors is three.

         We  presently  contemplate  that  after  the  2001  Annual  Meeting  of
Shareholders,  the newly elected Directors will hold a regular annual meeting of
the Board of Directors.  If a regular  meeting is not held,  the Directors  will
sign a unanimous  consent in lieu of holding the meeting and will  re-elect  the
current officers to the same positions for the coming year.

Item 10. Executive Compensation

         Executive  Officers.  The table below shows cash and stock compensation
paid  during the last  three  years to each of the three  persons  who served as
Chief  Executive  Officer during fiscal 1999.  None of the next four most highly
compensated  officers serving on September 30, 1999, received more than $100,000
for fiscal 1999.



Name and                             Fiscal             Consulting  Other Annual
Principal Position                    Year     Salary      Fees     Compensation
------------------                   ------  ---------  ----------  ------------
Charles Norman, President and         2000   $ 144,500   $     0      $ 48,266
Chief  Executive Officer              1999   $ 123,689   $     0      $ 11,250
(August 1998 to Present)


Andrew Kacic* - President and         2000   $       0   $     0      $      0
Chief Executive Officer               1999   $       0   $     0      $      0
(December 1997 to June 1998)          1998   $   6,600   $43,564      $110,200**

William O. Merritt - President        2000   $       0   $     0      $      0
and Chief Executive Officer (July     1999   $       0   $     0      $      0
to December 1997) (June 1998 to       1998   $  16,350   $     0      $      0
August 1998)                          1997   $  63,900   $     0      $      0


*    See  Item  12,  "Certain  Relationships  and  Related  Transactions",   for
     information  as to  equipment  purchased  and leased from Mr.  Kacic during
     fiscal 1998 and 1999.

**   Consists  of  110,200  Common  Shares  valued at $1.00 per  share,  paid to
     Advisory Services, Inc. for consulting services rendered by Mr. Kacic.


         On December 30, 1998, the Company  established  Voting Trust I with Mr.
Norman as Trustee,  and placed  350,000  Common  Shares in it for the benefit of
officers of the Company to be named in the future.  The Board of  Directors  has
not yet determined  which officers will participate in these shares or the terms
on which the shares will be made available to them.  For additional  information
about Voting  Trust I see Item 11,  "Security  Ownership  of Certain  Beneficial
Owners and Management."

                                       24

<PAGE>

The Company has a non-qualified  stock option plan (the "Plan") that was adopted
by the Board of Directors in March 1997. The Plan, as  authorized,  provides for
the issuance of up to 2,000,000 shares of the Company's stock.  Persons eligible
to  participate  in the Plan as  recipients  of stock  options  include full and
part-time employees of the Company, as well as officers,  directors,  attorneys,
consultants and other advisors to the Company or affiliated corporations.

Options  issued under the Plan are  exercisable at a price that is not less than
twenty percent (20%) of the fair market value of such shares (as defined) on the
date the options are granted.  The  non-qualified  stock  options are  generally
non-transferable  and are exercisable over a period not to exceed ten (10) years
from the date of the grant.  Earlier  expiration is operative due to termination
of employment or death of the issuee. The entire Plan expires on March 20, 2007,
except as to non-qualified stock options then outstanding,  which will remain in
effect until they have expired or have been exercised.

As of September  30,  2000,  981,857  shares had been issued under the Plan,  no
options  were  outstanding,  and  1,018,143  shares  were  available  for future
issuance.

         Compensation of Directors. Directors received a fee of $300 per meeting
for serving as Directors  during  fiscal 1998.  No fees were paid during  fiscal
2000.

         Section 16(a) Beneficial Ownership Reporting Compliance.  Section 16(a)
of the  Securities  Exchange  Act of 1934 and the rules  promulgated  thereunder
require that  directors  and  executive  officers of the Company and  beneficial
owners of greater than 10% of the  Company's  Common Stock file various  reports
with the  Securities  and  Exchange  Commission  (the  "SEC").  The  Company has
reviewed its files with respect to fiscal 1999. The following persons and trusts
did not file a Form 3 but did report the same  information  on a Form 5 that was
timely filed: Hunter Ennis when he became an officer; David Brown when he became
a Director;  and Voting Trust I, Voting  Trust II and  Exchange  Trust when they
became a beneficial owner of greater than 10% of the Company's Common Stock.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         On December  30, 1998,  the Company  established  three  trusts  naming
Charles  Norman  as  Trustee  of  each of  them.  This  was  done as part of the
Transaction  and  certain  shares  of stock  were  placed  in each of the  three
trusts.. As a result, Mr. Norman acquired control of our Company from William O.
Merritt,  Dennis W. Miller and others in the  Transaction.  Messrs.  Merritt and
Miller continue to have beneficial  ownership of a total of 600,000 (or 9.7%) of
the outstanding Common Shares.

         As of December 6, 1999, Mr.  Norman,  in his capacity as Trustee of the
three trusts,  beneficially  owns a total of 3,217,000  Common  Shares.  This is
52.0% of the  6,189,971  Common Shares that,  according to the  Company's  stock
transfer agent, were outstanding as of December 6, 1999.

         As part of the December 30, 1998, Transaction,  1,091,113 Common Shares
were  tendered to  AutoPrime,  as  described  above in Item 1,  "Description  of
Business - How the Purpose of the  Restructuring  Was  Achieved."  AutoPrime can
accept  the tender  only after  approval  has been  received  from the Office of
Thrift  Supervision.  There  is no  assurance  the  approval  can  be  obtained.
AutoPrime disclaims any beneficial  ownership of the 1,091,113 shares as long as
it cannot accept the tender.

         The following table sets forth certain  information,  as of December 6,
1999,  concerning the beneficial  ownership of Common Stock by all Directors and
nominees,  certain executive  officers,  all Directors and executive officers of
the Company,  as a group, and each person who beneficially  owns more than 5% of
the  6,189,971  outstanding  shares of Common  Stock,  $.001 par  value.  Unless
otherwise indicated, each person named has sole voting and investment power over
the shares indicated.

         Name and Address              Amount and Nature of         Percent
         of Beneficial Owner           Beneficial Ownership (1)     of Class (1)
         -------------------           ------------------------     ------------

         Charles Norman, Trustee            3,217,000 (1)(2)           52.0%
         2740 North Dallas Parkway
         Suite 110
         Plano, Texas 75093

                                      25

<PAGE>

         All directors and officers         3,217,000 (1)(2)           52.0%
         as a group (3 persons)


(1)  As part of the transaction  described in Item 1, above, the Company entered
     into three trust agreements dated as of December 30, 1998, with Mr. Norman,
     as Trustee  under Voting Trust  Agreement I, Voting Trust  Agreement II and
     Exchange Trust Agreement.  Certain shares were placed in each trust on that
     date. As of April 12, 1999, the parties  created an additional  purpose for
     Exchange Trust and allocated certain of the shares in Exchange Trust to it.
     Mr. Norman is the sole trustee and has sole voting power. The beneficiaries
     of the three trusts and the  securities  in each trust as of September  30,
     1999, are:


Name of Trust             Beneficiaries                   Securities Held
-------------             -------------                   ---------------

Voting Trust I   Executive officers of the Company     350,000 Common Shares
                 to be named in the future

Voting Trust II  Executive officers of AutoPrime,      350,000 Common Shares
                 Inc. ("Auto Prime") to be named
                 in the future

The Exchange     (a) Consumer Investment Corporation   up to 700,000 Common
Trust            "CIC" (for the benefit of the         Shares (all unused shares
                 holders of the CIC notes)             will  first  be available
                                                       to AutoPrime  for
                                                       satisfaction of the
                                                       Company's and/or CIC's
                                                       obligations to them.)

                 (b)  AutoPrime (for the purpose of    3,340,529 Preferred
                 holding the securities tendered to    Shares and 1,091,113
                 AutoPrime and that it cannot          Common Shares
                 lawfully accept prior to receipt
                 of approval from the Office of
                 Thrift Supervision)

                 (c) AutoPrime (for the purpose of     up to 725,887 Common
                 satisfying the Company's and/or       Shares
                 CIC's obligation to AutoPrime.)


(2)  Does not include  3,340,529  Common  Shares  issuable  upon  conversion  of
     3,340,529  Series "A" Preferred Shares held by Mr. Norman as Trustee of the
     Exchange Trust. The Series "A" Preferred  Shares are not convertible  until
     January 1, 2001,  unless certain events occur. The terms of  convertibility
     are  described  in more  detail in "Item 5.  Market for  Common  Equity and
     Related Stockholder Matters."

         By virtue of his beneficial  ownership of Common Stock,  Mr. Norman may
be deemed to be a "parent"  of the  Company as such term is defined in the rules
and regulations of the Securities and Exchange Commission.

         Possible Change of Control.  The 700,000 Common Shares held in Exchange
Trust for the  benefit  of the  holders of the CIC notes are  anticipated  to be
released from Exchange Trust and  transferred to the holders of the CIC notes by
January 30, 2000. In addition,  prior to January 1, 2001,  AutoPrime may be able
to lawfully  accept the tender of the  1,091,113  Common Shares held in Exchange
Trust for its benefit.  Further,  the 725,887  Common Shares held to satisfy the
Company's  and/or CIC's  obligations  to AutoPrime may be utilized by January 1,
2001.

         The  occurrence  of these events would reduce Mr.  Norman's  beneficial
ownership  to  700,000  Common  Shares  (11.3% of the  6,189,971  Common  Shares
outstanding  at December 6, 1999).  These  shares  would still be held in Voting
Trust  I and  Voting  Trust  II.  Simultaneously,  AutoPrime  would  become  the
beneficial  owner of at least 1,091,113  Common Shares (17.6% of the outstanding
Common  Shares),  and perhaps the  additional  725,887  shares,  as well. In the
latter  case,   AutoPrime  would  beneficially  own  1,817,000  (29.4%)  of  the
outstanding Common Shares.

                                       26

<PAGE>

Item 12. Certain Relationships and Related Transactions

         During  fiscal  1998,  CIC, a subsidiary  of the  Company,  purchased a
telephone system from Advisory Services, Inc., an affiliate of Andrew Kacic. The
purchase price was $4,500 cash. The Company  believes that amount did not exceed
its fair market value,  however, the Company has no knowledge of the cost of the
equipment to Mr. Kacic. At the time, Mr. Kacic was the Company's President and a
Director.  He held these  positions  from December 1997 to August 1998.  CIC was
disposed of in the December 30, 1998 Transaction.

         In addition,  in September,  1998,  CIC leased  computer  equipment and
software  from Mr. Kacic on a lease that expired in September,  1999.  The lease
payments totaled $37,603 and $28,800 during fiscal 1999 and 1998,  respectively.
The equipment was returned to Mr. Kacic at the end of the lease.

         Prior to September  30, 1998,  the Company  received  advances from and
made payments for a company known as "CIC Fund V." During that time,  CIC Fund V
was an affiliate of AutoCorp Equities,  Inc. . It is owned by William O. Merritt
and Dennis  Miller,  who were, at that time,  also Directors and officers of the
Company. There were no amounts outstanding between the Company and CIC Fund V at
September 30, 1998.

         AutoPrime  is a third  party  creditor  that  purchased  a  substantial
portion of the installment  contracts of the subsidiaries the Company had at the
time.  These were purchased  under an agreement by which the amounts  receivable
were derecognized, but the Company continued to service the contracts for a fee.
AutoPrime,  the note holder,  also sold  contracts  originated  by a third party
dealer  to CIC and the  Merritt  Group  for a  purchase  price of  approximately
$3,000,000, represented by a note bearing interest at 10% per annum.

         In March and June 1998 a total of 172,000  Common Shares of the Company
were issued to Stanley F. Wilson as part of the  severance  agreement  with him.
Mr.  Wilson had served as a Vice  President and a Director from December 1997 to
August 1998.

         On December  30, 1998,  as part of the  Transaction,  2,653,500  Common
Shares of the Company were  redeemed  from the Merritt Group in exchange for the
stock of CIC, LLCI and other  subsidiaries of the Company,  which were deemed to
be non-productive  and not consistent with future plans (see Item 1, Description
of Business-Recent Restructuring Transaction).

         On that same date,  December  30,  1998,  ACE Motor  Company,  acquired
certain assets of Lenders Resale Centers of Texas,  Inc., a corporation owned by
Messrs.  Miller and  Merritt.  This  corporation  is  referred as as "Lenders of
Texas." The purchase price was $50,000. Simultaneously,  ACE Financial Services,
Inc.  ("AFS") assumed the rights and obligations of Lenders of Texas  pertaining
to a note portfolio with a remaining gross balance of $1,400,000.

         The portfolio had previously  been sold to AutoPrime.  The  obligations
ACE assumed contained recourse as to the contracts in that portfolio. In return,
Lenders of Texas gave its note in the amount of  $2,205,919  to ACE. The Company
has attributed no value to that note in its financial records.



                                       27

<PAGE>

Item 13. Exhibits and Reports on Form 10-K

     (a)  Exhibits

         The  following  documents are attached to and filed with this report as
Exhibits:

     2.1       Master  Agreement  dated as of  December  30,  1998 by and  among
               AutoPrime,  Inc.,  AutoCorp Equities,  Inc.,  Consumer Investment
               Corporation,   Lenders  Liquidation  Centers,  Inc.,  William  O.
               Merritt,  Dennis W. Miller, Andrew J. Kacic, Vincent W. Bustillo,
               Wayne McLaws and Efrain Diaz.*
     2.2       Unconditional  Tender of  AutoCorp  Preferred  and Common  Stock,
               effective  December 30, 1998, by and between  AutoCorp  Equities,
               Inc. and AutoPrime, Inc.*
     2.3       Agreement to Issue  Additional  Preferred Stock between  AutoCorp
               Equities, Inc., AutoPrime, Inc., Consumer Investment Corporation,
               and Lenders  Liquidation  Centers,  Inc.  effective  December 30,
               1998.*
     2.4       Pledge  Agreement  dated as of December 30, 1998,  from  Consumer
               Investment  Corporation and Lenders Liquidation Centers,  Inc. to
               AutoPrime, Inc.*
     2.5       Pledge  Agreement  dated as of December 30, 1998, from William O.
               Merritt and Dennis W. Miller to AutoPrime, Inc.*
     2.6       General  Indemnity  Agreement dated as of December 30, 1998, from
               Consumer Investment  Corporation and Lenders Liquidation Centers,
               Inc. to AutoCorp Equities, Inc.*
     2.7       Ratification  of Obligations  dated as of December 30, 1998, from
               Consumer Investment  Corporation and Lenders Liquidation Centers,
               Inc. to AutoPrime, Inc.*
     2.8       Release of Pledge  Agreement  dated as of December 30, 1998, from
               AutoPrime, Inc. to the Merritt Group.*
     2.9       Supplemental Stock Pledge  dated  April 12, 1999  between Charles
               Norman and AutoCorp Equities, Inc. and AutoPrime, Inc.
     3.1       Certificate  of  Designation  of the  Series  "A"  Non-Cumulative
               Convertible Preferred Stock of AutoCorp Equities, Inc.*
     9.1       Voting Trust  Agreement I dated as of December 30, 1998,  Charles
               Norman,  Trustee  (When  this  document  has  been  appropriately
               amended,  it  will  contain  a  management  compensatory  plan or
               arrangement).*
     9.2       Voting Trust Agreement II dated as of December 30, 1998,  Charles
               Norman, Trustee.*
     9.3       Exchange Trust Agreement dated as of December 30,  1998,  Charles
               Norman, Trustee.*
     10.1      Master Purchase and Sale Agreement dated October 6, 1997, between
               AutoPrime, Inc. and Consumer Investment Corporation.**
     10.2      Guaranty  dated October 6, 1997,  executed by AutoCorp  Equities,
               Inc.  with respect to Master  Purchase and Sale  Agreement  dated
               October 6, 1997.**
     10.3      Servicing  Agreement  dated October 6, 1997,  between  AutoPrime,
               Inc. and Consumer Investment Corporation.**
     10.4      Master  Purchase  and Sale  Agreement  dated  January  22,  1998,
               between AutoPrime, Inc. and Lenders Auto Resale Centers of Texas,
               Inc.**
     10.5      Servicing  Agreement dated January 22, 1998,  between  AutoPrime,
               Inc. and Lenders Auto Resale Centers of Texas, Inc.**
     10.6      Master  Purchase  and Sale  Agreement  dated  January  12,  1999,
               between AutoPrime, Inc. and ACE Motor Company.**
     10.7      Guaranty dated January 12, 1999,  executed by AutoCorp  Equities,
               Inc., ACE Motor Company,  and AutoCorp Financial Services,  Inc.,
               with respect to Master  Purchase and Sale Agreement dated January
               12, 1999.**
     10.8      Servicing  Agreement dated January 12, 1999,  between  AutoPrime,
               Inc. and ACE Motor Company.**
     10.9      Master  Purchase  and Sale  Agreement  dated  January  12,  1999,
               between AutoPrime, Inc. and AutoCorp Financial Services, Inc.**
     10.10     Guaranty dated January 12, 1999,  executed by AutoCorp  Equities,
               Inc., ACE Motor Company,  and AutoCorp Financial Services,  Inc.,
               with respect to Master  Purchase and Sale Agreement dated January
               12, 1999.**
     10.11     Servicing  Agreement dated January 12, 1999,  between  AutoPrime,
               Inc. and AutoCorp Financial Services.**
     10.12     Business Loan  Agreement  dated October 26, 1998 between  Suburba
               Acquisition  Company, Inc.  d/b/a  ACE  Motor Co.  and AutoPrime,
               Inc.**
     10.13     Promissory  Note dated October 26, 1998, in the principal  amount
               of $750,000 executed by Suburba Acquisition  Company,  Inc. d/b/a
               ACE Motor Co. in favor of AutoPrime, Inc.**
     10.14     Commercial  Security  Agreement  dated October 26, 1998,  between
               Suburba Acquisition Company, Inc. and AutoPrime, Inc.**
     10.15     Promissory Note dated April 26, 1999, in the principal  amount of
               $750,000 executed by Suburba Acquisition Company,  Inc. d/b/a ACE
               Motor Co. in favor of AutoPrime, Inc.**


                                       28

<PAGE>

     10.16     Business Loan  Agreement  dated June 17, 1999,  between ACE Motor
               Co. (formerly known as Suburba  Acquisition  Company,  Inc. d/b/a
               ACE Motor Co.) and AutoPrime, Inc.**
     10.17     Promissory  Note dated June 17, 1999, in the principal  amount of
               $1,000,000,  executed by ACE Motor Co. (formerly known as Suburba
               Acquisition  Company,  Inc.  d/b/a  ACE  Motor  Co.) in  favor or
               AutoPrime, Inc.**
     10.18     Commercial  Security  Agreement dated June 17, 1999,  between ACE
               Motor Co. (formerly known as Suburba  Acquisition  Company,  Inc.
               d/b/a ACE Motor Co.) and AutoPrime, Inc.**
     10.19     Asset  Purchase   Agreement   dated  December  30,  1998  between
               AutoCorp  Financial  Services,  Inc.  and ACE Motor  Company,  as
               Buyer, and Lenders Auto Resale Center of Texas,  Inc. and Lenders
               Liquidation Centers, Inc., as Seller.**
     10.20     Addendum to Promissory Note dated September 30, 1999  executed by
               AutoCorp Equities,Inc. in favor of AutoPrime, Inc.
     10.21     Promissory  Note   dated  April 16,  1999  executed  by  AutoCorp
               Equities, Inc. in favor of AutoPrime, Inc.
     10.22     Addendum to Promissory Note dated September 30, 1999  executed by
               AutoCorp Equities, Inc. in favor of AutoPrime, Inc.
     10.23     Promissory  Note   dated  April 16, 1999  executed   by  AutoCorp
               Equities, Inc in favor of AutoPrime, Inc.
     10.24     Amendment  to  Unconditional  Tender  of AutoCorp  Preferred  and
               Common Stock dated  December 31, 1999  between AutoCorp Equities,
               Inc. and  AutoPrime, Inc.
     10.25     Promissory Note dated September 8, 1999 in the amount of $400,000
               executed by ACE Motor Company in favor of AutoPrime, Inc.
     10.26     Promissory Note dated September 8, 1999 in the amount of $250,000

     10.27     Master  Agreement,  effective  October  1, 2000,  by and  between
               Pacific  Financial  Group,  inc.,   AutoPrime,   Inc.,   AutoCorp
               Equities,  Inc.,  ACE Motor Co.,  Inc.,  and  AutoCorp  Financial
               Services, Inc.
     10.28     Supplemental Agreement dated October 1, 2000.
     10.29     Mutual Covenant Not to Sue.
     10.30     Mutual Recourse Release.
     10.31     Amendment  to   Certificate   of  Designation  of  the  Series  A
               Non-Cumulative  Convertible Preferred Stock of AutoCorp Equities,
               Inc.
     10.32     Servicing Agreement.
     10.33     Cancellation/Termination and Tender of Series A  Preferred  Stock
               effective October 1, 2000.
     10.34     Indemnity Agreement


                                       29

<PAGE>


                                   SIGNATURES

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

Date:  February 20, 2001                  AUTOCORP EQUITIES, INC.

                                          (Registrant)


                                           /s/ Charles Norman
                                           -------------------------------------
                                           Charles Norman
                                           President and Chief Executive Officer



<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2000 and 1999


                                                             Page No.

INDEPENDENT AUDITORS' REPORT                                       1

CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheets                               2

         Consolidated Statements of Operations                     4

         Consolidated Statements of Changes in
          Shareholders' Deficit                                    5

         Consolidated Statements of Cash Flows                     7

         Notes to Consolidated Financial Statements               10







<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

The Board of Directors
AutoCorp Equities, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  AutoCorp
Equities,  Inc. and  subsidiaries  (the  "Company") as of September 30, 2000 and
1999,  and  the  related  consolidated  statements  of  operations,  changes  in
shareholders'  deficit,  and cash  flows for each of the years in the three year
period ended September 30, 2000. These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
AutoCorp Equities,  Inc. and subsidiaries as of September 30, 2000 and 1999, and
the  results of its  operations  and its cash flows for each of the years in the
three year period  ended  September  30,  2000,  in  conformity  with  generally
accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from  operations  and has a working  capital  deficit at September 30, 2000 that
raise  substantial  doubt  about its  ability to  continue  as a going  concern.
Management's  plans in regard to these matters are also described in Note 3. The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

                                                Hurley & Company

Granada Hills, California
January 5, 2001
                                        1

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           September 30, 2000 and 1999


                                                  2000         1999
                                               ----------   ----------
ASSETS

CURRENT ASSETS:
         Cash and cash equivalents             $  111,521   $  347,046
         Notes receivable, net of allowances
          of $7,746,442 and $479,926                 --        737,391
         Other receivables                           --          5,783
         Inventory                                396,469    1,607,538
         Prepaid expenses                          46,510       59,066
                                               ----------   ----------
              Total current assets                554,500    2,756,824

PROPERTY AND EQUIPMENT
         Furniture and fixtures                     3,448       11,295
         Office equipment                         218,657      208,513
         Computer equipment                        41,719       42,134
         Automobiles                                 --          2,500
         Machinery and equipment                   86,239       91,865
         Leasehold improvements                     9,198       21,674
                                               ----------   ----------
                                                  359,261      377,981
         Less accumulated

          depreciation and amortization           259,261       36,216
                                               ----------   ----------
                                                  100,000      341,765

OTHER ASSETS
         Deposits                                   3,962        7,743
                                               ----------   ----------
         Total assets                          $  658,462   $3,106,332
                                               ==========   ==========




The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        2

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                           September 30, 2000 and 1999

                                                     2000            1999
                                                ------------    ------------
LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Current portion, long-term debt               $       --      $    683,001
  Accounts payable                                   138,305         292,772
  Accrued expenses                                   287,929         529,302
  Sales tax payable                                1,200,000         641,824
  Line of credit                                     125,450       1,196,921
  Related party payables                          10,373,650         538,847
  Note payable, related party                      3,900,657       4,590,617
  Other current liabilities                          198,759         219,077
                                                ------------    ------------
     Total current liabilities                    16,224,750       8,692,361

Allowance for recourse liability                   1,950,956       2,884,000

Related party payable                              6,578,485       6,578,485
                                                ------------    ------------
     Total liabilities                            24,754,191      18,154,846
                                                ------------    ------------

Commitments and contingencies                           --              --

SHAREHOLDERS' DEFICIT:
Convertible preferred stock, no par value,
 5% non-cumulative; liquidation preference
 of $1.00 per share; 10,000,000 shares
 authorized, no shares issued and outstanding
 at September 30, 2000 and 1999, respectively           --              --
Common stock, par value $.001; 110,000,000
 shares authorized, 6,189,971 and 6,137,184
 shares issued and outstanding at September
 30, 2000 and 1999, respectively                       6,190           6,137
Additional paid-in-capital                        11,555,415      11,536,718
Accumulated deficit                              (35,419,834)    (26,353,869)
Shares in trust                                     (227,500)       (227,500)
Stock subscriptions receivable                       (10,000)        (10,000)
                                                ------------    ------------
     Total shareholders' deficit                 (24,095,729)    (15,048,514)
                                                ------------    ------------
     Total liabilities and

      shareholders' deficit                     $    658,462    $  3,106,332
                                                ============    ============


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                        3

<PAGE>
<TABLE>
<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended September 30, 2000, 1999 and 1998


                                             2000            1999            1998
                                        ------------    ------------    ------------
<S>                                     <C>             <C>             <C>
Net Revenues                            $ 12,364,994    $ 13,356,609    $  4,098,074

Cost of sales                              9,581,836       9,440,944       3,517,643
                                        ------------    ------------    ------------
      Gross profit                         2,783,158       3,915,665         580,431

Selling, administrative
 and other operating expenses              4,428,530       4,449,155       9,952,292
Bad debt expense                           7,746,442       2,627,960            --
Provision for (recovery of)
 recourse liability                         (933,044)        564,000       2,320,000
Loss on impairment of assets                 150,913            --              --
                                        ------------    ------------    ------------
                                          11,392,841       7,641,115      12,272,292
                                        ------------    ------------    ------------

Operating loss                            (8,609,683)     (3,725,450)    (11,691,861)

Other income (expense):
  Interest expense                          (435,224)       (280,167)       (478,621)
  Miscellaneous                                 --              --            (5,225)
  Gain on disposition of subsidiaries           --           565,648            --
 (Loss)/gain on disposal of assets           (21,058)            403            --
  Loss on lot closings                          --              --          (144,740)
  Loss on conversion of debt to equity          --              --          (184,023)
                                        ------------    ------------    ------------
  Total other income (expense)              (456,282)        285,884        (812,609)
                                        ------------    ------------    ------------

Net loss                                $ (9,065,965)   $ (3,439,566)   $(12,504,470)
                                        ============    ============    ============

Net loss per share,
 basic and diluted                      $      (1.38)   $       (.56)   $      (2.28)
                                        ============    ============    ============

Weighted average number
 of shares outstanding,
 basic and diluted                         6,555,036       6,122,328       5,484,807
                                        ============    ============    ============

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        4

<PAGE>
<TABLE>
<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
              For the Years Ended September 30, 2000, 1999 and 1998

                                      Common Stock            Additional         Stock
                                                  Par           Paid-In      Subscriptions     Shares in      Treasury
                                Shares           Value          Capital       Receivable         Trust          Stock
                             ------------    ------------    ------------    ------------    ------------   ------------
<S>                          <C>             <C>             <C>             <C>             <C>            <C>
Balance at
 October 1, 1997                5,100,018    $      5,100    $  9,309,979    $    (12,000)   $       --     $   (569,000)

Shares issued to
 convert debt
 to equity                        490,076             490       1,839,400            --              --             --

Shares issued for services        227,141             227         212,227            --              --             --

Cancellation of stock
 subscription agreement           (20,000)            (20)         (1,980)          2,000            --             --

Shares issued to former
 officer per agreement            192,000             192            --              --              --             --

Shares issued to former
 officer for services             110,200             110         110,090            --              --             --

Net loss for the year
 ended September 30, 1998            --              --              --              --              --             --

                             ------------    ------------    ------------    ------------    ------------   ------------
Balance at
 September 30, 1998             6,099,435           6,099      11,469,716         (10,000)           --         (569,000)

Shares issued for services          2,737               3           2,734            --              --             --

Shares issued to convert
 debt to equity                    22,000              22            --              --              --             --

Shares issued to
 acquire subsidiary                50,000              50          49,950            --              --             --



                              Accumulated
                                Deficit          Total
                             ------------    ------------
                             <C>             <C>

Balance at
 October 1, 1997             $(10,409,833)   $ (1,675,754)

Shares issued to
 convert debt
 to equity                           --         1,839,890

Shares issued for services           --           212,454

Cancellation of stock
 subscription agreement              --              --

Shares issued to former
 officer per agreement               --               192

Shares issued to former
 officer for services                --           110,200

Net loss for the year
 ended September 30, 1998     (12,504,470)    (12,504,470)

                             ------------    ------------
Balance at
 September 30, 1998           (22,914,303)    (12,017,488)

Shares issued for services           --             2,737

Shares issued to convert
 debt to equity                      --                22

Shares issued to
 acquire subsidiary                  --            50,000

</TABLE>




The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        5

<PAGE>
<TABLE>
<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT (CONTINUED)
              For the Years Ended September 30, 2000, 1999 and 1998

                                      Common Stock             Additional       Stock
                                                   Par           Paid-In     Subscriptions     Shares in       Treasury
                                 Shares           Value          Capital      Receivable         Trust           Stock
                              ------------    ------------    ------------   ------------    ------------    ------------
<S>                           <C>             <C>             <C>            <C>             <C>             <C>
Shares cancelled
 per agreement                     (36,988)   $        (37)   $       --     $       --      $       --      $       --

Shares received from
 former officers in
 debt relief                    (2,653,500)           --              --             --              --        (1,724,775)

Shares issued to
 trust in disposition
 of subsidiaries                 2,653,500            --            14,318           --          (227,500)      2,293,775

Net loss for the year ended
 September 30, 1999                   --              --              --             --              --              --
                              ------------    ------------    ------------   ------------    ------------    ------------
Balance at
 September 30, 1999              6,137,184           6,137      11,536,718        (10,000)       (227,500)           --

Shares issued for services          52,787              53          18,697           --              --              --

Net loss for the year ended
 September 30, 2000                   --              --              --             --              --              --
                              ------------    ------------    ------------   ------------    ------------    ------------
Balance at
 September 30, 2000              6,189,971    $      6,190    $ 11,555,415   $    (10,000)   $   (227,500)   $       --
                              ============    ============    ============   ============    ============    ============

                               Accumulated
                                 Deficit          Total
                              ------------    ------------


Shares cancelled
 per agreement                $       --      $        (37)

Shares received from
 former officers in
 debt relief                          --        (1,724,775)

Shares issued to
 trust in disposition
 of subsidiaries                      --         2,080,593

Net loss for the year ended
 September 30, 1999             (3,439,566)     (3,439,566)
                              ------------    ------------
Balance at
 September 30, 1999            (26,353,869)    (15,048,514)

Shares issued for services            --            18,750

Net loss for the year ended
 September 30, 2000             (9,065,965)     (9,065,965)
                              ------------    ------------
Balance at
 September 30, 2000           $(35,419,834)   $(24,095,729)
                              ============    ============

</TABLE>



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        6

<PAGE>
<TABLE>
<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended September 30, 2000, 1999 and 1998

                                              2000            1999            1998
                                         ------------    ------------    ------------
<S>                                      <C>             <C>             <C>
Net loss                                 $ (9,065,965)   $ (3,439,566)   $(12,504,470)

Adjustments  to reconcile
 net loss to net cash provided
 by (used in) operating activities:
   Depreciation and
    amortization                               75,309          35,966         147,889
   Deferred income                               --              --           (74,099)
   (Loss)/gain on disposal of assets           21,058            (403)           --
   Loss on impairment of assets               150,913            --              --
   Gain on disposition of subsidiaries           --          (565,648)           --
   Loss on lot closings                          --              --           144,740
   Loss on conversion of
    debt to equity                               --              --           184,023
   Stock issued for services                   18,750           2,737         212,454
   Provision for doubtful accounts          7,266,516         479,926            --
   Provision for (recovery of)
    recourse liability                       (933,044)        564,000       2,320,000
 Changes in:
   Notes receivable                        (6,529,125)       (749,655)        816,856
   Related party payables                   9,144,843       1,505,557       5,632,499
   Receivables from officers                     --               468          47,677
   Prepaid expenses                            12,556         (59,066)        406,685
   Inventory                                1,211,069      (1,497,741)        851,081
   Accounts payable                          (154,467)       (118,353)        575,425
   Accrued expenses                          (241,373)        297,571         686,119
   Sales tax payable                          558,176         641,824            --
   Line of credit                          (1,071,471)      1,196,921            --
   Other                                      (10,754)         22,391          26,976
                                         ------------    ------------    ------------
       Total adjustments                    9,518,956       1,756,495      11,978,325
                                         ------------    ------------    ------------
       Net cash provided by/(used
        in ) operating activities             452,991      (1,683,071)       (526,145)
                                         ------------    ------------    ------------

Cash flows from investing activities:
  Capital expenditures                         (5,515)       (300,276)       (102,072)
                                         ------------    ------------    ------------
     Net cash used in
      investing activities                     (5,515)       (300,276)       (102,072)
                                         ------------    ------------    ------------

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        7

<PAGE>
<TABLE>
<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
              For the Years Ended September 30, 2000, 1999 and 1998


                                                         2000           1999           1998
                                                     -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>
Cash flows from financing activities:

  Principal payments
   on long-term debt                                 $  (683,001)   $(2,827,207)   $  (466,767)
  Additional borrowings                                     --        5,105,621        993,124
  Proceeds from issuance
   of common stock                                          --             --              192
  Cancellation of stock
   subscription agreement                                   --             --              (20)
                                                     -----------    -----------    -----------
     Net cash (used in)/provided
      by financing activities                           (683,001)     2,278,414        526,529
                                                     -----------    -----------    -----------
Net (decrease)/increase in
  cash and cash equivalents                             (235,525)       295,067       (101,688)

Cash and cash equivalents
  at beginning of period                                 347,046         51,979        153,667
                                                     -----------    -----------    -----------
Cash and cash equivalents
  at end of period                                   $   111,521    $   347,046    $    51,979
                                                     ===========    ===========    ===========

Supplemental disclosures of cash flow information:

  Cash paid for interest                             $   440,474    $   149,424    $   215,143
                                                     ===========    ===========    ===========

  Cash paid for income taxes                         $      --      $      --      $      --
                                                     ===========    ===========    ===========

</TABLE>



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        8

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
              For the Years Ended September 30, 2000, 1999 and 1998


                                  2000          1999          1998
                               ----------    ----------    ----------
Non-cash investing and
  financing activities:
  Stock issued to former
   officer for services              --            --         110,200
  Stock issued to convert
   debt to equity, net of
   $119,584 of costs relating
   to conversion                     --            --       1,839,890
  Company cars transferred
   to inventory                      --          14,500          --
  Debt issued to acquire
   notes receivable                  --         473,445          --
  Stock issued to

   acquire subsidiary                --          50,000          --

During  December 1998, the Company  combined  certain  liabilities to AutoPrime,
Inc. and tendered  preferred  stock totaling  $6,578,448 and net other equity of
$355,803 in exchange for the  extinguishments of $2,223,159 of debt,  $4,278,068
of related party payables and $1,028,306 of other liabilities resulting in a net
gain on disposition of subsidiaries of $565,648.  The other equity  consisted of
$1,724,775  in treasury  stock  obtained  in the  disposition  of the  Company's
subsidiaries,  $227,500 of treasury stock received into a trust,  other treasury
stock of  $2,293,775  issued  in  extinguishments  of debt and  liabilities  and
$14,303  for  22,000  shares of common  stock  converted  from debt at $0.65 per
share.






The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                        9

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000

NOTE 1.     NATURE OF ACTIVITIES

   Organization
   ------------

       AutoCorp  Equities,  Inc. (the "Company") was incorporated in Colorado on
       January 2, 1986 under the name  Vivatae,  Inc. and  completed its initial
       public offering in May, 1986. In November 1986, the Company  acquired all
       of the  outstanding  stock of Eagle  Entertainment,  Inc. and changed its
       name to Eagle Entertainment,  Inc. ("EEI"). Through its subsidiaries, EEI
       provided performance guarantees for motion picture productions.

       In September  1990, the Company  divested its  subsidiaries  and acquired
       Arizona  based  corporations  engaged in retailing and financing of motor
       vehicles.

       On January 3, 1992, the Company changed its name to Eagle Holdings,  Inc.
       On October 20, 1993, the Company formed a Nevada  Corporation named Eagle
       Automotive  Enterprises,  Inc. Eagle Holdings,  Inc. was then merged into
       Eagle  Automotive  Enterprises,  Inc.,  a shell  corporation  without any
       substantial assets or equity.

       On March 28, 1994, the Company  divested its automotive  subsidiaries and
       acquired Diamond  Entertainment II, Inc., a Utah corporation  licensed by
       the Samuel  Goldwyn  Company to produce  live  productions  of  "American
       Gladiators".  On April 6, 1994,  the Company  changed its name to Chariot
       Entertainment, Inc.

       On December 31, 1994,  the licensing  agreement  with the Samuel  Goldwyn
       Company  expired  and  the  Company  divested  its  subsidiaries  to seek
       business combination candidates as it re-entered the business development
       stage.

       On September 30, 1996, the Company changed its name to AutoCorp Equities,
       Inc. and began selling and financing  automobiles.  In January 1997,  the
       Company organized a subsidiary, Lenders Liquidation Center Reconditioning
       ("Recon"),  to provide  reconditioning  services to used cars obtained by
       purchase and trade-in at the Company's automobile lots. In July 1997, the
       Company  acquired 100% of the  outstanding  stock of Consumer  Investment
       Corporation ("CIC"), Consumer Insurance Services,  Inc.("CIS") (including
       Consumer Insurance Company (Cayman)),  and Lenders  Liquidation  Centers,
       Inc. ("LLC") in exchange for stock.

       This transaction  resulted in the shareholders of the acquired  companies
       becoming  the  majority  shareholders  of  AutoCorp  Equities,  Inc.  The
       acquired  companies are engaged in the sales,  financing and insurance of
       used cars.

                                       10

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000

NOTE 1.     NATURE OF ACTIVITIES (continued)

   Organization (continued)
   ------------

       In August 1998, the Company  purchased the assets of Suburba  Acquisition
       Company,  which sells and finances used  automobiles,  for cash and notes
       payable.  In November 1998,  Suburba  Acquisition  Company  separated the
       finance  servicing  arm of its  business  into  a new  corporation  named
       AutoCorp Financial Services,  and changed the name of the used automobile
       purchase and sales arm segment of its business to Ace Motors, Inc.

       In December 1998, the Company disposed of its subsidiaries  CIC, CIS, LLC
       and Recon in exchange for the  Company's  common stock and  assumption of
       debt.

       In April 1999, the Company  acquired certain assets of Horizon Auto Sales
       for stock.

       In June 1999, the Company  acquired retail  installment  contracts from a
       dealer in Lufkin,  Texas in exchange for notes payable. In July 1999, the
       Company began operating a car lot in Lufkin as Circus Motors.

       In August, 2000, the Company ceased its Lufkin operations and transferred
       all of its inventory to ACE Motors, Inc.

       The Company currently operates an office, a car lot and collection center
       in the Dallas,  Texas area.  The Company  sells and finances used cars to
       customers and services notes receivables held by a related party.

       There are significant concentrations of credit risk with respect to notes
       receivable due to the sub-prime credit of the Company's customers and its
       reliance on the financing provided by a related party.


NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Consolidated basis
   ------------------

       The consolidated financial statements of the Company include the accounts
       of AutoCorp  Equities,  Inc.,  ("AutoCorp"),  AutoCorp Financial Services
       ("AFS"),  Circus Motors  ("Circus")  and ACE Motors,  Inc.  ("ACE").  All
       material  intercompany  accounts and transactions have been eliminated in
       consolidation.


                                       11

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

   Use of estimates
   ----------------

       The  preparation of the Company's  consolidated  financial  statements in
       conformity  with generally  accepted  accounting  principles  necessarily
       requires  management to make  estimates and  assumptions  that affect the
       reported  amounts of assets and  liabilities and disclosure of contingent
       assets  and  liabilities  at  the  date  of  the  consolidated  financial
       statements and the reported  amounts of revenues and expenses  during the
       reporting period. Actual results could differ from those estimates.

   Fair value of financial instruments
   -----------------------------------

       Statement of Financial  Accounting  Standards No. 107, "Disclosures about
       Fair Value of Financial  Instruments", requires that the Company disclose
       estimated  fair  values  for its  financial  instruments.  The  following
       summary presents a description of the  methodologies and assumptions used
       to determine such amounts.

       Fair value  estimates are made at a specific  point in time and are based
       on  relevant  market  information  and  information  about the  financial
       instrument;  they are subjective in nature and involve  uncertainties and
       matters of judgment and, therefore,  cannot be determined with precision.
       These  estimates do not reflect any premium or discount that could result
       from  offering for sale at one time the  Company's  entire  holdings of a
       particular instrument.  Changes in assumptions could significantly affect
       the estimates.

       Since the fair value of financial  instruments is estimated,  the amounts
       that will actually be realized or paid at  settlement of the  instruments
       could be significantly different.

       The  carrying  amount of cash and cash  equivalents  is assumed to be the
       fair  value  because  of the  liquidity  of these  instruments.  Accounts
       payable,  accrued expenses and other accrued liabilities approximate fair
       value because of the short  maturity of these  instruments.  The recorded
       balance  of notes  payable  less the amount  discounted  at  issuance  is
       estimated  to be the fair value  since the rates  specified  in the notes
       approximate  current market rates. It was not practicable to estimate the
       fair value of related party payables as payments on these obligations are
       not based on fixed payment terms.

   Revenue recognition
   -------------------

       Revenue from automobile sales is generally  recognized when possession of
       the  automobile  changes.  Service  fees  are  based on a  percentage  of
       collections  and are  earned  over the  life of the  notes.  Service  fee
       revenue is recognized as notes are collected.

                                       12

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

   Cash and cash equivalents
   -------------------------

       Cash and cash equivalents  include cash on hand and on deposit and highly
       liquid debt instruments with original maturities of three months or less.

   Property and equipment
   ----------------------

       Property and  equipment are stated at cost.  Depreciation  is computed on
       property and equipment using the  straight-line  method over the expected
       useful  lives  of  the  assets,  which  are  generally  three  years  for
       automobiles, five years for office and computer equipment and seven years
       for  furniture  and fixtures,  leasehold  improvements  and machinery and
       equipment.

   Inventory
   ---------

       Inventories consist principally of cars available for sale and are stated
       at the lower of cost (specific identification method) or market.

   Income taxes
   ------------

       The Company  records its taxes in accordance  with Statement of Financial
       Accounting  Standards No. 109 "Accounting  for Income Taxes".  Under this
       method,  deferred  income taxes,  deferred tax assets and liabilities are
       recognized for the future tax  consequences  attributable  to differences
       between the financial  statement  carrying  amount of existing assets and
       liabilities and their respective tax bases,  including operating loss and
       tax  credit  carryforwards.  Deferred  tax  assets  and  liabilities  are
       measured  using enacted tax rates  expected to apply to taxable income in
       the  years  in which  those  temporary  differences  are  expected  to be
       recovered or settled.

       The effect on  deferred  tax assets  and  liabilities  of a change in tax
       rates is  recognized  in income in the period that includes the enactment
       date.  Valuation  allowances  are  established  when  necessary to reduce
       deferred tax assets to the amount expected to be realized.

   Advertising and promotional costs
   ---------------------------------

       Advertising and promotional  costs are expensed as incurred.  Advertising
       and promotional expenses were $19,419, $47,699 and $680,058 in 2000, 1999
       and 1998, respectively.

                                       13

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000

NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

   Net loss per common share
   -------------------------

       Basic net loss per share is computed by dividing net loss by the weighted
       average  number of shares of common  stock  outstanding  during the year.
       Diluted  net  loss  per  share  is  computed  by  dividing  the net  loss
       applicable  to common  shareholders  by the  weighted  average  number of
       common shares and common equivalent shares  outstanding  during the year.
       Common  equivalent  shares  are  not  included  as the  effect  would  be
       anti-dilutive.

   Reclassifications
   -----------------

       Certain  prior year amounts in the  accompanying  consolidated  financial
       statements  have been  reclassified  to  conform  to the  current  year's
       presentation.


NOTE 3.     BASIS OF PRESENTATION

       During the two years ended  September  30, 2000 and 1999,  the  Company's
       operations  were  negatively  impacted  by the  poor  performance  of its
       automobile sales and financing subsidiaries.  Such performance during the
       year  ended  September  30,  2000  resulted  primarily  from  AutoPrime's
       decision  not to renew the  Company's  line of credit and to  discontinue
       purchasing  notes  receivable  from  the  Company.   The  Company  has  a
       shareholders' deficit of approximately  $24,100,000 at September 30, 2000
       and a history of operating  losses.  At September  30, 2000,  the Company
       also had a working capital deficit of approximately $15,700,000.

       Management  plans to  return  to  profitability  by  consummating  a debt
       restructuring agreement with AutoPrime,  Inc. ("API"). This restructuring
       involves the  conversion of  $22,929,198  of debt and  liabilities to API
       into  1,612,083  shares  of  the  Company's  Series  B  Preferred  Stock,
       authorized  by  the  Company  on  October  1,  2000.  As a part  of  this
       agreement, the Company will continue servicing notes for API and retain a
       portion of the proceeds as servicing income (see Note 17).

       It is not  possible  to predict the  success of  management's  subsequent
       efforts to achieve profitability.  If management is unable to achieve its
       goals,  the Company may find it necessary to undertake  other  actions as
       may be appropriate to continue operations and meet its commitments.

       The  accompanying  consolidated  financial  statements do not include any
       adjustments  relating to the  recoverability  and  classification  of the
       recorded asset amounts or the amounts and  classification  of liabilities
       that might be  necessary  should the  Company  be unable to  continue  in
       existence.

                                       14

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 4.     IMPAIRMENT OF LONG-LIVED ASSETS

       During 2000, after  considering the Company's history of operating losses
       and the  uncertainty  of the  continuation  of  operations,  the  Company
       evaluated  the  ongoing  value of its  long-lived  assets.  Based on this
       valuation,  the Company  determined  that assets with a carrying value of
       $250,913  were  impaired  according  to the  provisions  of  Statement of
       Financial Accounting Standards No. 121 ("Accounting for the Impairment of
       Long-Lived Assets and for Long-Lived Assets to Be Disposed Of") and wrote
       down the carrying  value of these assets by $150,913 as of September  30,
       2000 to their estimated fair value.


NOTE 5.     RECENT PRONOUNCEMENTS

       In June 1998,  the FASB issued SFAS No. 133,  "Accounting  for Derivative
       Instruments and Hedging  Activities"  ("SFAS 133").  SFAS 133 establishes
       new   accounting  and  reporting   standards  for  derivative   financial
       instruments and for hedging  activities.  The Company will adopt SFAS 133
       in  fiscal  year  2001,  the  effective  date  of  SFAS  133.  It is  not
       anticipated  that this  adoption  will have a  material  effect  upon the
       financial statements.


NOTE 6.     NOTES RECEIVABLE

       Notes receivable consist of the following at September 30, 2000 and 1999:

                                                      2000            1999
                                                 ------------     ------------
         Notes receivable, secured by autos,
          interest from 24% to 27% in 36
          month terms.                           $  7,746,442     $  1,217,317
         Allowance for doubtful accounts           (7,746,442)         (79,926)
         Provision for discount on sale
          of notes receivable                             -           (400,000)
                                                 ------------     ------------
                                                 $        -       $    737,391
                                                 ============     ============

NOTE 7.     SALES TAX PAYABLE

       In the  process  of  selling  cars,  sales tax is added to the  financing
       agreements  between the Company and its customers.  The Company currently
       estimates,  and has  recorded,  a sales tax  liability  of  approximately
       $1,200,000 for the remaining balances due on the related installment note
       portfolio  at  September  30. The Company  currently  pays sales taxes as
       proceeds  are  collected  from the  financing  agreements.  The sales tax
       liability  accrued has provided for any contingent  liabilities which may
       arise  from  the  sale  of  the  Company's   installment  notes  and  any
       acceleration of the sales taxes due.

                                       15

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 8.     INCOME TAXES

       The Company has incurred net book tax operating  losses of  approximately
       $35,000,000  since  inception.  The Company has not yet filed tax returns
       and therefore has not  determined the amount of those losses which may be
       used to offset future taxable income.

       The  deferred  tax  asset  recognized  at  statutory  rates  for  the net
       operating losses is approximately  $12,000,000 at September 30, 2000. The
       Company's net operating  loss  carryforwards  expire by 2020. The Company
       has  provided a valuation  allowance  in the amount of the  deferred  tax
       asset.  Since the Company has not yet  developed a history of  profitable
       operations,  utilization of the loss  carryforwards  cannot be reasonably
       assured.


NOTE 9.     LINE OF CREDIT

       The Company had two lines of credit totaling $1,400,000 with AutoPrime to
       purchase used and repossessed cars for resale on the Company's lots. Both
       lines of credit,  or flooring  plans,  were secured 100% by the Company's
       vehicle inventory.  The line to purchase used cars was for $1,000,000 and
       bore  interest  at a rate of  14.75%  per  annum.  The  line to  purchase
       repossessed cars was for $400,000 and bore interest at 12% per annum. The
       agreements  expired  on March 8,  2000,  and no  additional  funding  was
       available  on the lines.  At  September  30, 2000 and 1999,  $125,450 and
       $995,745,  respectively,  of the line had been used with $0 and $404,255,
       respectively, available. Also, at September 30, 1999 there were drafts on
       the line  totaling  $201,176  which had not yet been  paid by  AutoPrime,
       bringing the total line payable at September 30, 1999 to $1,196,921.


NOTE 10.    LONG-TERM DEBT

       Long-term debt at September 30, 2000 and 1999 consisted of the following:

                                                     2000              1999
                                                ------------      ------------
         Note payable, unsecured, for
          acquisition of car lot, payable
          in quarterly installments of
          $50,000.  No interest is charged
          on note.  Matured March 2000          $        -        $    134,000
         Note payable, secured by retail
          installment notes receivable,
          payable at maturity.  Interest on
          matured, unpaid principal at 12%
          per annum.  Matured December 1999              -             473,445


                                       16

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 10.    LONG-TERM DEBT
                                                     2000               1999
                                                ------------      ------------
         Note payable, unsecured, for
          acquisition of finance servicing
          facility, payable in monthly
          installments of $9,444.  No
          interest is charged on note.
          Matured May 2000.                     $        -        $     75,556
                                                ------------      ------------
                                                         -             683,001
         Less current portion                            -             683,001
                                                ------------      ------------
                                                $        -        $        -
                                                ============      ============


NOTE 11.    COMMITMENTS AND CONTINGENCIES

       The  Company  leases  office  space  and auto lots  under  noncancellable
       operating lease  agreements  which require  payments of $17,109 per month
       and expire in June 2004.  Future minimum annual  payments  required under
       the leases are as follows as of September 30, 2000:

                     September 30, 2001                $ 205,992
                     September 30, 2002                   98,660
                     September 30, 2003                   42,000
                     September 30, 2004                   31,500
                     September 30, 2005                      -
                                                       ---------
                                                       $ 378,152
                                                       =========

       The Company sells used automobiles  using auto financing  contracts.  The
       Company then sells the contracts to a finance company,  generally under a
       recourse  agreement,  whereby the Company guarantees the repayment of the
       note.  If the note  holder  defaults,  the  Company  is  responsible  for
       repossessing  the  automobile  and then either  paying the amount due the
       finance company or substituting a new loan for the one in default.

       In October 1997, the Company  entered into an agreement with AutoPrime to
       provide  financing  for  the  Company's  automobile   transactions.   The
       agreement  allowed  AutoPrime  to buy the notes at a  percentage  of face
       value (ranging from 55% to 70%) and then to pay the Company an additional
       percentage  less  the  service  fee  (ranging  from  20% to  37%)  on all
       principal  collections.  The loss ratios of the notes sold have been much
       greater than expected to date. The servicing agreement with


                                       17

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000

NOTE 11.    COMMITMENTS AND CONTINGENCIES (continued)

         AutoPrime  was revised as a part of the Master  Agreement on October 1,
         2000 (see note 17). The loan balances and  contingent  losses  reserved
         are as follows:

                                                     2000              1999
                                                ------------      ------------
         Total liability, including
          the contracts sold by

          related parties                       $  4,502,000      $ 11,536,000
         Recorded allowance for
          recourse liability, estimated
          at 0% and 43% of total contracts
          outstanding, respectively             $  1,950,956      $  2,884,000


NOTE 12.    STOCK OPTION PLAN

       The Company has a  non-qualified  stock option plan (the "Plan") that was
       adopted by the Board of Directors in March 1997. The Plan, as authorized,
       provides  for the  issuance of up to  2,000,000  shares of the  Company's
       stock. Persons eligible to participate in the Plan as recipients of stock
       options include full and part-time  employees of the Company,  as well as
       officers,  directors,  attorneys,  consultants  and other advisors to the
       Company or  affiliated  corporations.  Options  issued under the Plan are
       exercisable  at a price that is not less than twenty percent (20%) of the
       fair market value of such shares (as defined) on the date the options are
       granted.  The non-qualified stock options are generally  non-transferable
       and are  exercisable  over a period not to exceed ten (10) years from the
       date of the grant.  Earlier expiration is operative due to termination of
       employment  or death of the issuee.  The entire Plan expires on March 20,
       2007, except as to non-qualified  stock options then  outstanding,  which
       will remain in effect until they have expired or have been exercised.

       Accounting  for the stock option plan is in  accordance  with  Accounting
       Principles  Board Opinion 25,  Accounting  for Stock Issued to Employees.
       Since common stock,  rather than stock  options,  has been issued for the
       full value of services rendered,  there is no additional  compensation to
       be  disclosed  under the  Company's  stock-based  compensation  plan,  as
       required by the  disclosure  provisions of SFAS No. 123,  Accounting  for
       Stock-Based  Compensation.  As of September 30, 2000 and 1999, there were
       no options  outstanding and 979,120 shares had been issued.  At September
       30,  2000 and 1999,  there were  1,020,880  shares  available  for future
       issuance.

                                       18

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 13.    STOCK TRANSACTIONS

       The Company  issued  52,787 and 2,737 shares of common stock at $0.36 and
       $1.00,  respectively,  for accounting and  consulting  services  totaling
       $18,750 and $2,737 at September 30, 2000 and 1999, respectively.

       During 1999,  the Company  issued  50,000 shares of common stock at $1.00
       per share for the acquisition of a car lot.

       During 1999, the Company  authorized the issuance of 9,000,000  shares of
       convertible  Series A 5%  non-cumulative  preferred stock. This preferred
       stock has no par value and a liquidation preference of $1.00 per share.

       In January 1998, CIC started delivering shares of AutoCorp Equities, Inc.
       common stock to holders of its  unsecured  notes payable as the unsecured
       notes began to mature.  As of September 30, 1999,  22,000 shares had been
       issued  for  $57,200,  which  converted  $88,000  of CIC's  notes.  As of
       September 30, 1998,  490,076 shares had been issued for $1,839,890  which
       converted  $1,400,570 of CIC's notes, which were in default,  $255,297 of
       accrued interest,  and resulted in a loss on conversion of $184,023.  The
       Company  expects all of the CIC notes to be converted to stock by January
       31, 2000, and has set aside approximately  654,000 shares of common stock
       for this conversion of notes.

       Also during 1998,  the Company  issued  172,000 shares of common stock at
       par value ($.001 per share) to a former officer of the Company as part of
       his  severance  agreement  with the Company and 110,200  shares of common
       stock at $1.00 per share to another  former officer as part of a separate
       agreement.


NOTE 14.    RELATED PARTY TRANSACTIONS

       In April and  September  1999,  the Company  issued  promissory  notes to
       AutoPrime totaling $4,935,620 to restructure payables to AutoPrime. These
       notes required monthly payments totaling $100,000,  were due June 1, 2000
       and bore  interest  at 9% per  annum.  These  notes  had not been paid at
       September 30, 2000,  and were  included as a part of the debt  conversion
       with  AutoPrime on October 1, 2000 (see note 17). At  September  30, 2000
       and 1999 the  balance  on these  notes  was  $3,900,657  and  $4,590,617,
       respectively.

       In the normal course of business, the Company had operating payables with
       AutoPrime  totaling  $10,373,650  and $538,847 at September  30, 2000 and
       1999, respectively.


                                       19

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 14.    RELATED PARTY TRANSACTIONS (continued)

       As a part of the  December  30, 1998  transaction,  the Company  tendered
       6,578,485  shares  of  Series A  preferred  stock in  payment  of debt to
       AutoPrime. At September 30, 2000, this stock had not yet been accepted by
       AutoPrime,  and is being  carried on the balance sheet as a related party
       payable. This payable will be relieved with the October 1, 2000 agreement
       (see note 17).

       Certain former officers of the Company had various contingent  agreements
       with the Company. Management believes that no additional payments will be
       made on these agreements in excess of what has been accrued.


NOTE 15.    LITIGATION

       From time to time in the  ordinary  course of  business,  the  Company is
       involved in litigation.  In the  estimation of both  management and legal
       counsel,  the ultimate result of any litigation would not have a material
       adverse effect on the consolidated  financial  statements  beyond what is
       already accrued on the balance sheet.


NOTE 16.    SHARES HELD IN TRUST

       The Company created three trusts to distribute the shares previously held
       in treasury and the shares obtained from the Merritt group  executives as
       part of the  December 31, 1998  transaction.  One trust,  with  2,517,000
       shares,  was designated to assist in satisfying  portions of the debts of
       the  Merritt  Group and the  Company.  These  shares  were  allocated  as
       follows:  1,091,113  shares of common stock were tendered to AutoPrime as
       compensation  for certain debt relief,  653,925 shares were designated to
       allow  CIC to  convert  notes to equity  and the  remaining  shares  were
       designated for general Merritt Group liabilities.  The treasury shares in
       this trust are part of the cost of the  disposition of the  subsidiaries.
       At  September  30, 2000,  all of the CIC note  holders were  converted to
       594,641  shares of common stock.  At September  30, 2000,  the trust held
       1,922,359  shares of common stock  (1,091,113  tendered to AutoPrime  and
       771,962  available for general Merritt Group liabilities and 59,284 to be
       returned  to the  Company as shares not issued in the  conversion  of CIC
       notes.)

       The second  trust  account was granted  350,000  shares of voting  common
       stock,  valued at cost, which  approximates  market price at December 31,
       1998 of $0.65 per share,  to be distributed to employees of AutoPrime for
       past services.  These shares are considered  part of the  compensation to
       AutoPrime in exchange for the debt relief.

                                       20

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 16.    SHARES HELD IN TRUST (continued)

       The third trust account was granted 350,000 shares of voting common stock
       to be  distributed to current or future  employees of the Company.  These
       shares  are also  valued  at cost,  which  approximates  market  price at
       December 31, 1998 of $0.65 per share. Management has a plan to distribute
       these shares within the current fiscal year, but until  distributed,  the
       shares will remain as a contra equity account.

       All three trusts are controlled by the president of the Company.


NOTE 17.    SUBSEQUENT EVENTS

       On  October 1, 2000,  the  Company  entered  into an  agreement  with its
       primary financing company, AutoPrime, Inc. This agreement converts all of
       the Company's  debt and other  liabilities  to AutoPrime  into  1,612,083
       shares of the Company's Series B Preferred Stock. This Series B Preferred
       Stock  has been  issued in place of the  Series A  Preferred  Stock.  The
       Series B stock has no voting rights, non-cumulative dividend rights of 5%
       per  annum  payable  on  January  31 of  each  year,  has  a  liquidation
       preference  equal to $14.64 per share and may be converted into one share
       of common  stock at any time.  The  Corporation  may elect to require the
       conversion of the Preferred  shares upon the occurrence of either (a) the
       Company's  common  stock is accepted  for trading in the NASDAQ  National
       Market System or (b) the price of the Company's  common stock is equal to
       $14.64 per share or more.

       As part of the agreement,  AutoPrime engaged the Company to service notes
       totaling  $2,458,548  for a  servicing  fee of  26.25%  of gross  amounts
       collected,  and notes totaling  $1,006,293 for a sliding servicing fee of
       100% to 75% of gross amounts collected until $227,168 has been collected,
       and 26.25% thereafter.

       Also  as  part  of  the  agreement,  AutoPrime  indemnified  the  Company
       regarding any sales tax  liability  relating to notes sold by the Company
       prior to October 1, 2000.

       The Company received from AutoPrime $1,950,956 of active notes originally
       sold by the Company to AutoPrime to hold and service itself.

       After the closing of the agreement,  the Company's proforma balance sheet
       will appear as follows:

       Current assets              $3,505,456     Total liabilities   $  824,993
       Property and equipment, net    100,000     Total shareholders'
       Other assets                     3,962        equity            2,784,425
                                   ----------                         ----------
                                   $3,609,418                         $3,609,418
                                   ==========                         ==========


                                       21

<PAGE>
<TABLE>
<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


NOTE 18.    BUSINESS SEGMENTS

       The  principal  business of the Company is the selling and  financing  of
       automobiles.  At  September  30,  2000 and 1999,  the  Company  had three
       subsidiaries,  respectively. (1) ACE Motor Company and (2) Circus Motors,
       which sell automobiles and (3) AutoCorp Financial Services,  which serves
       as the financing and servicing arm of the Company.

                                                                                            Capital     Depreciation/
                                            Revenues        Net Loss         Assets      Expenditures   Amortization
                                          ------------    ------------    ------------   ------------   ------------
<S>                                       <C>             <C>             <C>            <C>            <C>
       Year ended September 30, 2000:
         Automobile retail lots           $  9,790,142    $ (6,401,615)   $    445,642   $      2,011   $     26,840
         Financing and servicing             2,574,852      (2,208,068)        212,820          3,504         48,469
                                          ------------    ------------    ------------   ------------   ------------
                                          $ 12,364,994      (8,609,683)   $    658,462   $      5,515   $     75,309
                                          ============                    ============   ============   ============
      Interest expense and other                              (456,282)
                                                          ------------
                                                          $ (9,065,965)
                                                          ============
      Year ended September 30, 1999:
         Automobile retail lots           $ 11,580,947    $ (3,328,698)   $  2,554,156   $    102,758   $     14,839
         Financing and servicing             1,775,662        (396,752)        552,176        197,518         21,127
                                          ------------    ------------    ------------   ------------   ------------
                                          $ 13,356,609      (3,725,450)   $  3,106,332   $    300,276   $     35,966
                                          ============                    ============   ============   ============
      Interest expense and other                               285,884
                                                          ------------
                                                          $ (3,439,566)
                                                          ============
      Year ended September 30, 1998:
         Automobile retail lots           $  3,881,748    $(11,415,610)   $    177,066   $    102,072   $    147,191
         Reconditioning center                 213,349        (134,450)          4,146           --              698
         Insurance service                       2,977        (141,801)            171           --             --
                                          ------------    ------------    ------------   ------------   ------------
                                          $  4,098,074     (11,691,861)   $    181,383   $    102,072   $    147,889
                                          ============                    ============   ============   ============
      Interest expense and other                              (812,609)
                                                          ------------
                                                          $(12,504,470)
                                                          ============

</TABLE>


                                       22