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, 2001

     [ ]  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.)


300 N. Coit Rd., Suite 830
Richardson, Texas                                                  75080
(Address of principal executive offices)                         (Zip Code)


                    Issuer's telephone number: (972) 231-6204

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

Title of each class                    Name of each exchange on which registered

       None                                                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(including  discontinued  segment)for  its most
recent fiscal year: $1,123,561.

         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:  $2,112,269,  based on the $0.45
per share price at which common equity was sold on January 4, 2002.

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:  4,693,931 shares of Common
stock, $0.001 par value, as of January 4, 2002.

         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.........................................13
     Item 3.  Legal Proceedings...............................................13
     Item 4.  Submission of Items to a Vote of Security Holders...............13

PART II  .....................................................................13
     Item 5.  Market for Common Equity and Related Stockholder Matters........13
     Item 6.  Management's Discussion and Analysis or Plan of Operation.......16
     Item 7.  Financial Statements............................................18
     Item 8.  Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure........................................19

PART III .....................................................................19
     Item 9.  Directors, Executive Officers, Promoters and Control Persons;
              Compliance with Section 16(a) of the Exchange Act...............19
     Item 10. Executive Compensation..........................................20
     Item 11. Security Ownership of Certain Beneficial Owners and
              Management......................................................21
     Item 13. Exhibits and Reports on Form 8-K................................22

SIGNATURES....................................................................23

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
Richardson,  Texas owns and operates one loan servicing center in Dallas, Texas.
Through  the first  quarter  of fiscal  year  2001,  the  company  operated  one
independent  automobile dealership in Dallas, Texas. Through used car sales, the
dealership   originated  non-prime  retail  installment   contracts  secured  by
automobiles and light-duty  trucks.  As a result of the inability of the Company
to obtain financing to purchase used car inventories,  the Company  discontinued
its automobile operations as of the end of the fiscal first quarter. In previous
years the Company also purchased portfolios of non-prime automobile receivables,
although  none were  purchased  in fiscal  year 2001.  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.  At December 31, 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  Transaction).  The Company continues to seek, but has not
obtained,  sources of financing to re-enter the automobile  segment and purchase
portfolios of non-prime automobile receivables.

RISK FACTORS

         Limited  Operating  History  of  Present  Business;   No  Assurance  of
Profitability.  The  Company's  significantly  restructured  current  operations
commenced on October 1, 2000.  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, 2000 and 2001, the net operating
losses before  discontinued  operations and extraordinary items were $2,456,580,
and $882,311, 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        continue to reduce the overall cost structure of the organization;

o        purchase and resell pools of automobile receivables;

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

o        effectively  collect  payments  due on  the  portfolios  of  automobile
         receivables  serviced  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
         currently owned and serviced or those  automobile  receivables that may
         be purchased and/or serviced in the future;

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 planned future 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 of business 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.  Although not substantially  leveraged at the end
of fiscal year 2001, in order to meet the ongoing working  capital  requirements
of the  Company,  substantial  indebtedness  may  have to be  incurred,  perhaps
resulting in a highly  leveraged  capital  structure.  Substantial  indebtedness
related to holding additional automobile receivables may also be incurred in the
future. A 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  owns  and  services  automobile   receivables   acquired  in
connection with the  reorganization of the Company that took place on October 1,
2000. 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 or originate 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  automobile
dealerships and finance offices.  There can be no assurance that management will
successfully integrate the current operations of the Company 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  acquired an operating
interest in a new car  dealership  in Oklahoma  during  fiscal  2001,  it is the
intent to actively seek and investigate such opportunities on a limited basis in
the future.  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  used car
financing  and  servicing   operations  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.  If the
Company acquires or establishes additional used automobile  dealerships,  it may
compete 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 its servicing  operations 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 financing used cars.  Financing is 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  finance
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
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  may be
purchased.

         Seasonality;  Variability  of  Quarterly  Operating  Results.  The used
automobile  finance  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 if originated at a Company  dealership.  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.  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.

         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 entered into an employment  agreement with Mr. Norman,
however,  there is no 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. Competition to attract and retain such personnel
within  the  industry  is  intense.  There can be no  assurance  of  success  in
attracting and retaining qualified personnel in the future.

                                        6

<PAGE>

         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, and the 1,612,083 Series B Preferred
Stock issued in  connection  with the October 2001  restructuring  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 based on 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  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.

         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.

         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 an 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, a  restructuring
transaction that took place on the same date.

         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 were
subsequently issued in December 2001.

         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. In March of 2001 the company moved to Richardson, TX where it is currently
located.

         Through ACE, the Company owned and operated 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  originated  non-prime used car loan  contracts.  The
Company discontinued its used automobile operations in the second fiscal quarter
of 2001.  In  addition,  through  AFS,  portfolios  of  non-prime  used car loan
contracts  were  purchased  and one loan  servicing  center is operated.  During
fiscal year 2000 the Company also  consolidated the four loan servicing  centers
to one in Dallas,  Texas. The Company retains the loan servicing function of all
of the loans originated or purchased.

         Recent Restructuring Transaction

         At  September  30,  2000 the Company was  financially  distressed.  The
Company completed a restructuring  trasaction effective October 1, 2001 in order
to create an  organizational  and  financial  structure  that is  efficient  and
reflects the current business plans of the Company.

         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.


                                       9
<PAGE>

         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.

         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
                           $24,000,000 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.

                  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.

                  Renegotiated  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.

                                       10

<PAGE>


         Present Business Operations

         Currently,  the Company owns and operates one loan servicing  center in
Dallas, Texas. Although some car loan contracts were purchased during the fiscal
year ended September 30, 2001 in connection with discontinuing the operations of
Ace  Motor  Co.,  the  Company  may also buy,  service  and sell  portfolios  of
non-prime used car loan contracts as a part of its current business plan. 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") was sold at the end of the first fiscal
quarter of 2001 and has been reported as discontinued operations from that date.

         Another subsidiary of the Company,  AFS, prior to the fiscal year ended
September 30, 2000 bought  portfolios  of loan  contracts at a discount from net
principal balance,  usually ranging between 35% and 45%. Due to severe shortages
of working  capital  during the fiscal years ended  September  30, 2000 and 2001
respectively,  the Company did not purchase any new loan portfolios. The Company
did,  however,  acquire a number of new loans  from the new owners of ACE Motors
and sold a number of those loans during the fiscal year ended September 30, 2001
for working capital purposes.

         Prior to October 1, 2000,  there were additional  Servicing  Agreements
with AutoPrime under which the Company serviced 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 collection of retail consumer loans is highly regulated, the Company
employs experienced 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. In October of
2001,  the Company  terminated  its servicing  agreement  with AutoPrime and the
amount  decreased  to  approximately  $1,200,000.  Accordingly,  the  results of
operations and financial  condition depends, in part, on the ability to properly
service  these  automobile  receivables  in order to reduce  credit  losses  and
discussed elsewhere, to increase its serviced potfolio.

         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
to 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.

         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 was  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 matured on March 8, 2000. One note amounting to $400,000,
had 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   finance   companies,
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>

         Employees. At January 7, 2001 the Company employed a total of 8 people;
3 in AFS and 5 at the  headquarters  in  Richardson,  Texas.  No  employees  are
covered  by  a  collective  bargaining  agreement.  The  Company  considers  its
relations  with its  employees to be good.  In addition,  the Company  employs a
number of part-time employees in its collection operations.

         Seasonality.  The sub-prime  finance 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 300 N.
Coit Rd., Suite 830, Richardson, Texas 75080. Approximately 1,100 square feet of
leased  premises are at this location.  The rent is  approximately  $ 23,000 per
year. However, the lease expires in April 2002.

         As of  January 7,  2001,  The  Company  has two  leased  properties  in
addition to the corporate headquarters.  They are leased for 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.  624 So. Buckner Blvd., Dallas, Texas            5,600 sq ft    2004
         3.  300 N. Coit Rd., Richardson, Texas              1,100 sq ft    2002

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

Item 3.  Legal Proceedings

                  There are no current material legal proceedings.

Item 4.  Submission of Matters to a Vote of 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.


                                       13
<PAGE>

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



           Fiscal 2001:
                  First Quarter              $0.10           $0.25
                  Second Quarter              0.07            0.15625
                  Third Quarter               0.05            0.59
                  Fourth Quarter              0.075           0.17


           Fiscal 2000:
                 First Quarter                0.125           0.23
                 Second  Quarter              0.19            0.28
                 Third Quarter                0.188           0.468
                 Fourth Quarter               0.031           0.10


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

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

         At September 30, 2001, there were  approximately  434 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.

         From October 1, 1997 through  September 30, 2001,  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.


                                       14
<PAGE>

         (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.

         (5)      217,391  Common Shares during the third fiscal quarter 2001 to
                  Roy Pardini in an exchange of a $150,000 note  receivable from
                  Jim Miles  Chevrolet/Oldsmobile  in Guthrie,  OK. These shares
                  were issued under The Section 4(2) exemption of the Securities
                  Act.

         (6)      103,569  Common Shares during the third fiscal quarter 2001 to
                  various  employees  for services  rendered  during the current
                  valued at $6,215.  These  shares were issued under the Section
                  4(2) exemption of the Securities Act.

Summary of the Terms of  Convertibility  of the Series "B" Preferred  Shares. As
part of the October 1, 2000  transaction,  of the  10,000,000  Preferred  Shares
authorized  in the Company's  bylaws,  a total of 2,000,000 of those shares were
designated as Series "B" of which 1,612,083 Preferred Shares were issued as part
of the October 1, 2000 transaction. Additionally, the 6,578,485 Preferred Series
"A"  shares  that were to be issued to  AutoPrime  were  never  issued  and 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. The following 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.


                                       15
<PAGE>

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.

Results of Operations

Overview.

Beginning  in  the  second  fiscal  quarter  of  fiscal  2000,  as a  result  of
limitations  placed on the use of its' floor  plan line of credit by  AutoPrime,
Inc.  (AutoPrime),  the Company was unable to continue to purchase  cars for its
used car lots.  The  Company's  floor  plan line of credit was  liquidated  as a
result of the October 1, 2000 transaction with AutoPrime and it parent,  Pacific
Financial  Group  ("PFG")  (see form 8K filed  November 28,  2000).  The Company
generated  revenue from sales of used cars from its existing  inventory  through
January 1, 2001 when the used car operations were sold and continues to generate
revenues from financing  income from the  installment  contracts  purchased from
used  car  dealerships,  as well as  from  the  continued  servicing  of  retail
installment contracts.

Through the first quarter of fiscal 2001,  the Company  operated "Buy Here - Pay
Here" used car  dealerships  which  underwrote,  financed  and  serviced  retail
installment  contracts  generated  by  sales  of  used  cars  by  the  Company's
dealerships.  The installment contracts were sold, at a 45% discount to AutoCorp
Financial  Services,  a subsidiary  of the  Company,  which  retains  principal,
interest and earned  discount on the contracts.  Effective  January 1, 2001, the
Company sold the assets of the used car  dealerships  but  continued to purchase
contracts under the same terms.

General Discussion

Excluding discontinued operations,  revenues for the fiscal year ended September
30,  2001 were  $762,492  compared  with  $2,574,852  for the fiscal  year ended
September 30, 2000. The decrease in revenue over the prior year is  attributable
to a significant decrease in the overall size of the loan portfolio serviced for
AutoPrime.  The  reduction in the size of the portfolio was due to a sell-off of
accounts by AutoPrime in the first eight months of fiscal 2001 during which time
AutoPrime sold an estimated five thousand accounts to third parties.


                                       16
<PAGE>

Excluding discontinued operations, gross profit for the year ended September 30,
2001 was $724,888  compared to $2,487,583 for the year ended September 30, 2000.
Gross  profit as a  percentage  of net  revenues  was  95.0% for the year  ended
September 30, 2001. For the prior year,  this figure was 96.6%.  The margins for
the current year are substantiallly the same as those in the prior year.

Excluding  discontinued  operations,  selling,  general and other administrative
operating  expenses were 207.7% of net revenues for the year ended September 30,
2001  compared  to 86.1% for the prior  year.  Although  these  numbers  reflect
deterioration  in the  year-over-year  percentage  of  sales  relationship,  the
absolute level of spending decreased from approximately  $2,271,791 for the year
ended  September 30, 2000 to $1,583,441  for the year ended  September 30, 2001.
These  expenses  should  decrease  in the  future  in line  with  the  Company's
continued  reduction  in  personnel,  facilities,  general  operating  costs and
continued reduced operating levels.

The provision for recourse liability was liquidated as a part of the transaction
with AutoPrime on October 1, 2000.

Interest  expense  declined  from  $278,235 in fiscal 2000 to $11,937 for fiscal
2001  as  a  direct  result  of  the  October  1,  2000   transaction  in  which
substantially all of the Company's interest bearing debt was liquidated.

Bad debt expense declined from $3,628,526 in fiscal 2000 to zero in fiscal 2001.
This is a result of a write-off of the remaining automobile  receivables held by
the Company  immediately  prior to October 1, 2001. These  receivables were held
primarily  as a result of the  recourse  provisions  applicable  to the  funding
agreement with Autoprime and were determined to have no significant market value
at September 30, 2000.

As a result of various limitations placed on its ability to acquire new capital,
the  Company  entered  into an  agreement  with its primary  creditor  effective
October 1, 2000 to exchange  virtually all of its debt for preferred  stock. The
transaction  resulted in a gain on the  extinguishments of debt of approximately
$26,500,000.  In connection  with this  agreement the Company  issued  1,612,083
non-cumulative  5% preferred  shares with an estimated fair value of $352,643 in
exchange for the extinguishments of debt and the contribution of certain assets.
The  preferred  shares  have a  liquidation  value of  $14.64  per share and are
convertible  into  common  shares  at any time at the  option  of the  preferred
shareholders  on a one for one basis.  The shares  must be  converted  to common
shares if the  Company's  common  shares are  accepted for trading on the NASDAQ
National Market System or if the Company's  common shares are publicly traded at
a price of $14.64 per share or more. The agreement  provided for the forgiveness
of debt and assumption of liabilities of $24,269,147 by AutoPrime. In connection
with the agreement,  the Company also received  notes and  automobile  inventory
with an estimated fair value of $3,508,086 and the return of 1,817,000 shares of
the Company's common stock with an estimated fair value of $399,740.

As a result of continuing long-term losses, the Company sold its used automobile
dealership(s) to the existing management of this segment in exchange for a $716,
190  note  receivable.  The  transaction  resulted  in a net gain on the sale of
$330,231  in the fiscal  second  quarter of 2001.  During the fourth  quarter of
fiscal  2001 the  purchaser  of the  automobile  operations  was  dissolved  and
defaulted  on the  aforementioned  note  receivable.  As a result,  the  Company
ultimately  realized  a net loss on the  sale of the  automobile  operations  of
$318,844. Due to its inability to raise capital to purchase additional inventory
and resulting  declining sales as a result of limited  inventories,  the Company
believed  that  continued  operations in this segment would result in continuing
losses. As a result, the operations of this segment were discontinued.

Liquidity

As a result  of the  Company's  continuing  need to  improve  its cash  flow and
overall  liquidity,  the Company  completed the transaction with AutoPrime and a
subsidiary  of  its  parent,   Pacific   Financial   Group  (PFG),  to  exchange
substantially  all of its debt other than trade  accounts  payable  and  accrued
expenses for Preferred  Stock.  In  contemplating  the  transaction,  a thorough
review of the Company's  business model was  performed.  The conclusion was that
the Company's  business model with  AutoPrime was unable to generate  sufficient
cash flow to support the ongoing viability of the Company.


                                       17
<PAGE>

As a result of the completion of the exchange with AutoPrime and PFG, management
believes there will be opportunities  to acquire capital from alternate  sources
and proceed to implement  its current plan of acquiring  operating  interests in
small new and used auto  dealerships  regionally and  nationally,  acquiring and
selling not portfolios and increasing  servicing  income by offering  collection
services  to third  parties.  During the course of fiscal  2001 the  Company had
negotiated  agreements  with a number of private  institutional  and  individual
investors to raise additional working capital and investment  capital.  However,
as a result of the events on September  11, 2001 and  thereafter,  most of those
agreements were not  consummated.  In its continuing  effort to raise additional
capital,  as of the date of this filing, the Company has held discussions with a
large  regional  "Buy Here - Pay  Here"  used  automobile  company  regarding  a
possible merger and several private individuals and automobile finance companies
regarding  mergers  and/or  investment  but no definitive  agreements  have been
completed.  Since the end of the second  fiscal  quarter of 2001 the Company has
sold a very limited number of installment contracts to third parties and expects
that number to remain  relatively low until additional  financing or capital can
be  acquired.  In  addition,  the  Board  of  Directors  continues  to  consider
additional possibilities for developing new business opportunities and acquiring
new capital for working  capital  purposes and the  acquisition  of interests in
existing  profitable  businesses  whose  long term plans are  attractive  to and
consistent with those of the Company.

The Company's revenues have continued to decline during the first two months of
fiscal 2002 as a result of the normal decline in the size of its loan portfolio
and servicing base. The Company's sources of revenues at the present time are
servicing fees on contracts owned by third parties and interest income on notes
purchased from third parties. Primarily those purchased from AutoPrime in the
first quarter of 2001.

Cash provided from  continuing  operations  during the year ended  September 30,
2001 decreased to $98,931 from  $1,073,971 for the prior year. This reflects the
impact of the  re-capitalization  that took place in October 2000. Net cash used
in  investing  activities  increased  from $5,515 to $237,627 as a result of the
advances on the related party note  receivable and the purchase of various fixed
assets during fiscal year 2001.  Net cash provided by financing  activities  was
$125,000 for fiscal 2001 resulting from a note to supplement operating capital.

There can be no assurance  that the Company  will be able to meet its  operating
capital needs without the  acquisition of significant  additional  capital.  The
Company continues to investigate  sources of additional capital to supplement is
current  operating  capital  requirements  and to fully  implement  its  current
business  plan.  There is not  assurance  the  Company  will be able to  acquire
additional capital, or obtain it on terms favorable to the Company.

Effect of Inflation

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

Item 7.  Financial Statements

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

         Consolidated Balance Sheets - September 30, 2001 and 2000

         Consolidated Statements of Operations For the Years Ended September 30,
         2001 and 2000.

         Consolidated Statement of Changes in Shareholders' Equity For the Years
         Ended September 30, 2001 and 2000.

         Consolidated Statements of Cash Flows For the Years Ended September 30,
         2001 and 2000.

         Notes to Consolidated Financial Statements


                                       18
<PAGE>



Item  8.  Changes  in and  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 January 7,
2002, are:

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

Charles Norman       44       President and Chief Executive             1998
                              Officer; Director*


William O. Merritt   57       Director**                                2000


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

William G. Hamilton  51       Chief Financial Officer, Director****     2001

-----------------
*        Elected President and a Director in August 1998.
**       Elected a Director in May 2000.
***      Elected Vice President - Investor Relations in Jan 2001.
****     Elected Chief Financial  Officer in December 2000,  elected Director in
         September 2001

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

         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."


                                       19
<PAGE>

         William O. Merrit has been with the Company in various capacities since
1998 and was formerly  president  of the Merritt  Group which owned and operated
used  automobile  dealerships  in  Arizona  and New  Mexico.  He served as Chief
Executive  Officer of the Company from July through  December 1997 and from June
though August 1998.

         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.

         William  Hamilton,  a CPA,  has been with the Company  since April 2000
primarily as an independent contractor to help the Company with its SEC filings.
He was  elected  as an office  in  December  of 2000 and  became a  director  in
September 2001. Mr. Hamilton had been an independent accounting contractor since
June of 1996.

         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  should  a  2002  Annual  Meeting  of
Shareholders  be held,  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, 2001, received more than $100,000
for fiscal 2001.



Name and                             Fiscal             Consulting  Other Annual
Principal Position                    Year     Salary      Fees     Compensation
------------------                   ------  ---------  ----------  ------------
Charles Norman, President and         2001   $ 225,000   $     0      $107,200
Chief  Executive Officer              2000   $ 144,500   $     0      $ 48,266
(August 1998 to Present)
                                      1999   $ 123,689   $     0      $ 11,520


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.

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, 2001, 1,085,426 shares had been issued under the Plan, no
options were outstanding, and 914,574 shares were available for future issuance.

         Compensation  of Directors.  No Directors  fees were paid during fiscal
2001.


                                       20
<PAGE>

         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 2001. 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: William Hamilton when he became an officer;  Terri Ashley when she
became an officer;  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 a
restructuring 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 13.7%) of the outstanding  Common Shares.  The trusts were terminated during
the first quarter of fiscal 2002 and the shares returned to the treasury.

         As of September 30, 2001, Mr. Norman, in his capacity as Trustee of the
three trusts,  beneficially owns a total of 834,563 Common Shares. This is 17.8%
of the 4,683,234  Common Shares that,  according to the Company's stock transfer
agent, were outstanding as of September 30, 2001.


         The following table sets forth certain information, as of September 30,
2001,  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  4,683,234  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            834,563 (1)(2)             17.8%
         300 N. Coit Rd.
         Suite 830
         Richardson, Texas 75080


                                       21
<PAGE>

(1)      As part of a transaction on December 31, 1998, 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, 2001 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 134,563 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.)




Item 13. Exhibits and Reports on Form 10-K

         (a) Exhibits - N/A



                                       22
<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 21, 2002                  AUTOCORP EQUITIES, INC.

                                          (Registrant)


                                           /s/ Jerry Hamilton
                                          --------------------------------------
                                          Chief Financial Officer




================================================================================


<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                           September 30, 2001 and 2000



                                                                        Page No.
                                                                        --------

INDEPENDENT AUDITORS' REPORT                                               F-2

INDEPENDENT AUDITORS' REPORT                                               F-3

CONSOLIDATED FINANCIAL STATEMENTS

   Consolidated Balance Sheets                                             F-4

   Consolidated Statements of Operations                                   F-6

   Consolidated Statement of Changes in
     Shareholders' Equity (Deficit)                                        F-7

   Consolidated Statements of Cash Flows                                   F-9

   Notes to Consolidated Financial Statements                              F-11



                                      F-1

<PAGE>

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


The Board of Directors
AutoCorp Equities, Inc.

We  have  audited  the  accompanying  consolidated  balance  sheet  of  AutoCorp
Equities,  Inc. and  subsidiaries  (the "Company") as of September 30, 2001, and
the related  consolidated  statements of  operations,  changes in  shareholders'
equity  (deficit),  and cash flows for the year then ended.  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 audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
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 audit
provides 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, 2001 and the
results  of its  operations  and its  cash  flows  for the  year  then  ended in
conformity with accounting principles generally accepted in the United States.

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, 2001.  These
conditions raise  substantial doubt about the Company's 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.


                                                     KING GRIFFIN & ADAMSON P.C.

Dallas, Texas
January 8, 2002


                                      F-2

<PAGE>

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


The Board of Directors
AutoCorp Equities, Inc.

We have  examined  the  accompanying  consolidated  balance  sheet  of  AutoCorp
Equities,  Inc and subsidiaries (the "Company") as of September 30, 2000 and the
related consolidated statements of operations, changes in shareholders' deficit,
and cash flows for the year then ended. 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
audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit 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  audit  provides  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 the results
of its operations and its cash flows for the year then ended 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 those matters are also described in Note 3. The
consolidated  financial  statements  do not include any  adjustments  that might
result form the outcome of this uncertainty.



                                                                Hurley & Company

Granada Hills, California
January 5, 2001

                                      F-3

<PAGE>


                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           September 30, 2001 and 2000


                                     ASSETS
                                     ------

                                                            2001         2000
                                                         ----------   ----------
CURRENT ASSETS:
   Cash and cash equivalents                             $   39,960   $  106,174
   Notes receivable held for sale,
     net of allowances of $4,178,297
     and $7,746,442                                       1,442,592         --
   Prepaid expenses                                            --         16,974
                                                         ----------   ----------

       Total current assets                               1,482,552      123,148

PROPERTY AND EQUIPMENT:
   Furniture and fixtures                                     3,448        2,990
   Office equipment                                         191,597      192,269
   Computer equipment                                        20,356       20,356
   Automobiles                                               31,500         --
   Leasehold improvements                                     8,739        9,198
                                                         ----------   ----------

                                                            255,640      224,813
   Less accumulated depreciation
     and amortization                                       186,254      138,999
                                                         ----------   ----------

       Total property and equipment                          69,386       85,814

NOTE RECEIVABLE - OTHER                                     150,000         --

OTHER ASSETS                                                  2,812        4,197
                                                         ----------   ----------

           Total assets                                  $1,704,750   $  213,159
                                                         ==========   ==========


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

                                       F-4

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (Continued)
                           September 30, 2001 and 2000



                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

                                                        2001            2000
                                                   ------------    ------------
CURRENT LIABILITIES:
   Note payable to shareholder                     $    125,000    $       --
   Accounts payable and accrued expenses                247,251         205,828
   Sales tax payable                                     78,187            --
   Related party payables                                  --         4,358,401
   Other current liabilities                               --           199,297
   Note payable related party                              --         3,900,657
   Net current liabilities of discontinued
     Operations                                            --         7,129,753
                                                   ------------    ------------

       Total current liabilities                        450,438      15,793,936

ALLOWANCE FOR RECOURSE LIABILITY                           --           327,558

RELATED PARTY PAYABLE                                      --         6,578,485

NET LONG-TERM LIABILITIES OF DISCONTINUED
   OPERATIONS                                              --         1,608,909

COMMITMENTS AND CONTINGENCIES (NOTE 12)

SHAREHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, no par value,
   5% non-cumulative; liquidation preference
   of $14.64 per share; 10,000,000 shares
   authorized, 1,612,083 and no shares issued
   and outstanding at September  30, 2001
   and September 30, 2000, respectively                 352,643            --
Common stock, par value $.001; 110,000,000
   shares authorized, 6,510,931 and 6,189,971
   shares issued at September 30, 2001 and 2000           6,511           6,190
Additional paid-in-capital                           11,701,309      11,555,415
Treasury stock, at cost, 1,817,000 shares              (399,740)           --
Accumulated deficit                                 (10,178,911)    (35,419,834)
Shares in trust                                        (227,500)       (227,500)
Stock subscriptions receivable                             --           (10,000)
                                                   ------------    ------------

       Total shareholders' equity (deficit)           1,254,312     (24,095,729)
                                                   ------------    ------------

           Total liabilities and shareholders'
              equity (deficit)                     $  1,704,750    $    213,159
                                                   ============    ============


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

                                      F-5

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                 For the Years Ended September 30, 2001 and 2000



                                                      2001            2000
                                                 ------------    ------------

NET REVENUES                                     $    762,492    $  2,574,852
COST OF REVENUES                                       37,604          87,269
                                                 ------------    ------------

       Gross profit                                   724,888       2,487,583

SELLING, ADMINISTRATIVE AND OTHER
   OPERATING EXPENSES                               1,583,870       2,217,791

BAD DEBT EXPENSE                                         --         3,628,526

RECOVERY OF RECOURSE LIABILITY                           --        (1,221,142)

LOSS ON IMPAIRMENT OF ASSETS                             --            70,518
                                                 ------------    ------------

       Total operating expenses                     1,583,870       4,695,693
                                                 ------------    ------------

       Operating loss                                (858,982)     (2,208,110)

INTEREST EXPENSE                                      (11,937)       (278,235)

LOSS ON DISPOSAL OF ASSETS                            (11,392)           (235)
                                                 ------------    ------------

LOSS BEFORE DISCONTINUED OPERATIONS AND
   EXTRAORDINARY ITEM                                (882,311)     (2,486,580)

EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT       26,535,028            --

LOSS OF SALE OF ASSETS OF DISCONTINUED
   SEGMENT, net of taxes of $0                       (318,844)           --

LOSS FROM DISCONTINUED OPERATIONS, net of
   income taxes of $0                                 (92,950)     (6,579,385)
                                                 ------------    ------------

           Net income (loss)                     $ 25,240,923    $ (9,065,965)
                                                 ============    ============

NET LOSS FROM CONTINUING OPERATIONS PER SHARE,
   Basic and diluted                             $      (0.20)   $      (0.38)

LOSS FROM DISCONTINUED OPERATIONS                        (.09)          (1.00)

EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT             5.90            --
                                                 ------------    ------------

NET INCOME (LOSS) PER SHARE, basic and diluted   $       5.61    $      (1.38)
                                                 ============    ============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING,
   Basic and diluted                                4,495,468       6,555,036
                                                 ============    ============


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

                                      F-6

<PAGE>
<TABLE>
<CAPTION>


                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

       CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

                 For the Years Ended September 30, 2001 and 2000




                                 Preferred Stock                Common Stock
                           ---------------------------   ---------------------------    Additional         Stock          Shares
                                               Par                            Par        Paid-in       Subscriptions        in
                              Shares          Value         Shares           Value       Capital        Receivable        Trust
                           ------------   ------------   ------------   ------------   ------------    ------------    ------------
<S>                        <C>            <C>            <C>            <C>            <C>             <C>             <C>
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                                          --             --             --             --             --              --
                           ------------   ------------   ------------   ------------   ------------    ------------    ------------

Balance at
September 30, 2000                                --        6,189,971          6,190     11,555,415        (10,000)       (227,500)

Shares issued
in exchange for
note receivable                                   --          217,391            217        149,783           --              --

Shares issued
for services                                      --          103,569            104          6,111           --              --

Shares returned from
AutoPrime (see Note 5)             --             --             --             --             --              --              --

Shares issued to
AutoPrime (see Note 5)        1,612,083        352,643           --             --             --              --              --

Write-off of
subscriptions receivable           --             --             --             --          (10,000)         10,000            --

Net income                         --             --             --             --             --              --              --
                           ------------   ------------   ------------   ------------   ------------    ------------    ------------

Balance at
September 30, 2001            1,612,083   $    352,643      6,510,931   $      6,511   $ 11,701,309    $       --      $   (227,500)
                           ============   ============   ============   ============   ============    ============    ============

</TABLE>



The accompanying notes are an integral part of this consolidated financial
statement.
                                       F-7

<PAGE>


                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
                                  (Continued)

                 For the Years Ended September 30, 2001 and 2000





                             Treasury      Accumulated
                              Stock          Deficit        Total
                           ------------   ------------   ------------
Balance at
September 30, 1999         $       --     $(26,353,869)  $(15,048,514)

Shares issued
for services                       --             --           18,750

Net loss                           --       (9,065,965)    (9,065
                           ------------   ------------   ------------

Balance at
September 30, 2000                 --      (35,419,834)   (24,09

Shares issued
in exchange for                    --
note receivable                                   --          150,000

Shares issued
for services                       --             --            6,215

Shares returned from
AutoPrime (see Note 5)         (399,740)          --         (399,740)

Shares issued to
AutoPrime (see Note 5)             --             --          352,643

Write-off of
subscriptions receivable           --             --             --

Net income                         --       25,240,923     25,240,923
                           ------------   ------------   ------------

Balance at
September 30, 2001         $   (399,740)  $(10,178,911)  $  1,254,312
                           ============   ============   ============




The accompanying notes are an integral part of this consolidated financial
statement.

                                      F-8

<PAGE>
<TABLE>
<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 For the Years Ended September 30, 2001 and 2000



                                                           2001            2000
                                                      ------------    ------------
<S>                                                   <C>             <C>
Cash Flows From Operating Activities:
Net income (loss)                                     $ 25,240,923    $ (9,065,965)
Income (loss) from discontinued operations                 (92,950)     (6,579,385)
Adjustments to reconcile net income (loss)
   to net cash provided by operating activities:
     Depreciation and amortization                          48,508          46,475
     (Loss)/gain on disposal of assets                     (11,392)            235
     Loss on impairment of assets                             --            70,518
     Gain on extinguishment of debt                    (26,535,028)           --
     Loss on sale of assets of discontinued
       segment                                            (318,844)           --
     Stock issued for services                               6,215          18,750
     Provision for doubtful accounts                          --         3,628,566
     Provision for (recovery of) recourse liability           --        (1,221,142)
     Changes in:
       Notes receivable                                  1,659,568         346,482
       Related party payables                                 --        13,679,350
       Prepaid expenses                                      7,123          18,512
       Other assets                                          1,150            (365)
       Accounts payable and accrued expenses                15,471         (90,919)
       Sales tax payable                                    78,187         222,859
                                                      ------------    ------------

   Net cash provided by continuing
     operating activities                                   98,931       1,073,971

   Net cash used in discontinued operations                (52,518)       (377,440)
                                                      ------------    ------------

   Net cash provided by operating activities                46,413         696,531

Cash flows from investing activities:
   Capital expenditures                                    (45,588)         (5,515)
   Net advances on note receivable, related party         (192,039)           --
                                                      ------------    ------------

   Net cash used in investing activities                  (237,627)         (5,515)
</TABLE>



The accompanying notes are an integral part of these consolidated financial
statements.
                                       F-9

<PAGE>


                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                 For the Years Ended September 30, 2001 and 2000




                                                        2001         2000
                                                      ---------    ---------
Cash flows from financing activities:
   Principal payments on long-term debt               $    --      $(549,001)
   Proceeds from shareholder note payable               125,000         --
                                                      ---------    ---------

   Net cash provided by (used in) financing
     activities                                         125,000     (549,001)
                                                      ---------    ---------

Net decrease (increase)in cash and cash equivalents     (66,214)     142,015

Cash and cash equivalents, beginning of year            106,174      (35,841)
                                                      ---------    ---------

Cash and cash equivalents, end of year                $  39,960    $ 106,174
                                                      =========    =========


Supplemental disclosures of cash flow information:
   Cash paid for interest                             $  11,937    $ 440,474
                                                      =========    =========

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


Noncash investing and financing transactions:
     During  the  year  ended  September  30,  2001 and in  connection  with the
     restructuring  transaction  with  AutoPrime,  the Company issued  1,612,083
     shares of  preferred  stock with a fair value of $352,643  in exchange  for
     forgiveness of debt and the assumption of liabilities of  $24,269,147.  The
     Company  received notes  receivable and auto inventory with a fair value of
     $2,218,784.  The Company  received,  1,817,000  shares of its common  stock
     which were placed in treasury.  These  returned  shares had a fair value of
     $399,740 at October 1, 2000. This entire transaction  resulted in a gain of
     $26,535,028.

     Also during the year ended  September 30, 2001, the Company  acquired notes
     receivable  of $314,385  in exchange  for  reduction  in notes  receivable,
     related party.

     In addition,  during the year ended  September 30, 2001, the Company issued
     320,960  shares of common  stock valued at $156,215 of which $6,215 was for
     employee compensation and $150,000 was for a note receivable.

     The Company also received a $716,190 note receivable  during the year ended
     September  30,  2001 in  connection  with the  disposition  of its used car
     operations segment.

     During the year ended  September 30, 2000,  the Company issued common stock
     in exchange for $18,750 in services.



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

                                      F-10


<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                               September 30, 2001



NOTE 1. 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.  After several name changes,  in 1996 the Company changed its name
to AutoCorp  Equities,  Inc. and began  selling and  financing  automobiles.  In
December 2000, the Company  discontinued its automobile  selling  operations and
currently operates a corporate office and collection center in the Dallas, Texas
area. The Company  finances used cars and services notes  receivable  owned 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
concentration of servicing activity with one client.


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Notes Receivable
----------------

Specific valuation allowances are provided for impaired notes receivable when it
becomes probable that all of the respective principal and interest payments will
not be received as  scheduled  in the loan  agreement  (excluding  insignificant
delays or payment  shortfalls).  In addition to specific  allowances,  a general
allowance  may be  provided  for  future  losses  based on  evaluations  of note
portfolios  and  prevailing  market  conditions.  Additions to the allowance are
charged to expense.

Property and Equipment
----------------------

Property and equipment are recorded at cost.  Depreciation  and  amortization 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  computer  equipment,  and seven  years for
furniture  and  fixtures  and the  lesser of seven  years or the lease  term for
leasehold improvements.


                                      F-11

<PAGE>

Recourse Liability
------------------

Prior to January 2001,  the Company sold used  automobiles  using auto financing
contracts.  The Company then sold the contracts to a finance company,  generally
under a recourse agreement,  whereby the Company guaranteed the repayment of the
note. If the note holder defaulted, the Company was 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.

Revenue Recognition
-------------------

Revenues from automobile sales were generally  recognized when possession of the
automobile  was effected.  Service fees are based on a percentage of collections
and are  earned  over the life of the  notes.  In  accordance  with the  service
contracts,  service fee revenue is recognized as notes are  collected.  Interest
income is recognized as collected rather than on the interest income method,  as
ultimate collection of notes receivable are uncertain.

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.

Stock Based Compensation
------------------------

The Company  accounts  for stock based  employee  compensation  arrangements  in
accordance  with the provisions of Accounting  Principles  Board ("APB") Opinion
No. 25,  "Accounting  for Stock  Issued to  Employees,"  and  complies  with the
disclosure   provisions   of  SFAS  No.   123,   "Accounting   for  Stock  Based
Compensation."  Under APB Opinion No. 25, compensation  expense for employees is
based on the excess, if any on the date of grant,  between the fair market value
of the stock over the exercise price.


                                      F-12
<PAGE>

The  Company  accounts  for  equity   instruments  issued  to  non-employees  in
accordance  with the  provisions of SFAS No. 123 and Emerging  Issues Task Force
("EITF") Issued No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring,  or in  Conjunction  with Selling,  Goods or
Services."  All  transactions  in which goods or services are the  consideration
received for the issuance of equity  instruments  are accounted for based on the
fair  value  of the  consideration  received  or the fair  value  of the  equity
instrument issued,  whichever is more reliably measurable.  The measurement date
of the fair value of the equity  instrument issued is the earlier of the date on
which the  counterparty's  performance  is  complete  or the date on which it is
probable that performance will occur.

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
for both periods presented.

Fair Value of Financial Instruments
-----------------------------------

The carrying amount of cash and cash equivalents is assumed to be the fair value
because of the liquidity of these  instruments.  The notes  receivable  held for
sale have been  reduced to their  estimated  fair value.  The Note  Receivable -
Other's recorded value  approximates fair value based on the underlying  current
interest rate. The recorded  balance of note payable is estimated to be the fair
value since the rates specified in the notes approximate current market rates.

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.

Recently Issued Accounting Standards
------------------------------------

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 141 "Business  Combinations" which requires
the  purchase  method  of  accounting  for  business  combination   transactions
initiated after June 30, 2001.

                                      F-13
<PAGE>

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 142 "Goodwill and Other Intangible Assets."
The statement requires that goodwill recorded on acquisitions completed prior to
July 1, 2001 be amortized  through December 31, 2001.  Goodwill  amortization is
precluded on acquisitions  completed after June 30, 2001.  Effective  January 1,
2002,  goodwill will no longer be amortized but will be tested for impairment as
set forth in the  statement.  The new standards  have not impacted the Company's
financial  condition,   results  of  operations,  and  accounting  policies  and
procedures.

Consolidated Basis
------------------

The  consolidated  financial  statements of the Company  include the accounts of
AutoCorp  Equities,  Inc.,  ("AutoCorp"),  AutoCorp  Financial Services ("AFS"),
Circus Motors ("Circus") through December 31, 2000 and ACE Motors,  Inc. ("ACE")
through December 31, 2000. All material  intercompany  accounts and transactions
have been eliminated in consolidation.

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

Certain  reclassifications  have been made to the 2000  financial  statements to
conform with the 2001 presentation.


NOTE 3. GOING CONCERN UNCERTAINTY

During the two years ended September 30, 2001 and 2000, the Company's operations
were  negatively  impacted by the poor  performance of its automobile  sales and
financing  subsidiaries.  As a result the Company  discontinued  its  automobile
operations  effective  December 31, 2000. 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's  loss  from  continuing  operations  was  $882,311  and
$2,486,580 for the years ended September 30, 2001 and 2000.

Management  plans to return to  profitability by continuing its efforts to raise
additional capital to purchase,  service and sell new sub-prime notes and retain
new servicing clients. In addition the Company, depending upon the amount of new
capital acquired, may re-enter the used automobile segment.

It is not  possible to predict the  success of  management's  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.

                                      F-14

<PAGE>

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.


NOTE 4. IMPAIRMENT OF LONG-LIVED ASSETS

During the year ended  September  30,  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  evaluation,  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.  No such write down was  necessary  during the year ended
September 30, 2001.


NOTE 5. RESTRUCTURING TRANSACTION

On October 1, 2000,  the  Company  entered  into an  agreement  with its primary
financing  company,  AutoPrime,  Inc.  ("AutoPrime").  In  connection  with this
agreement the Company issued 1,612,083  non-cumulative  5% preferred shares with
an estimated fair value of $352,643 in exchange for the  extinguishment  of debt
and the contribution of certain assets resulting in a net gain on extinguishment
of debt of $26,535,028.  See Note 15 which details the individual  components of
debt which were  forgiven.  The  preferred  shares have a  liquidation  value of
$14.64  per  share and are  convertible  into  common  shares at any time at the
option of the preferred  shareholders on a one for one basis. The shares must be
converted  to common  shares if the  Company's  common  shares are  accepted for
trading on the NASDAQ National  Market System or if the Company's  common shares
are publicly traded at a price of $14.64 per share or more.

This agreement  provided for the  forgiveness of debt and related  assumption of
liabilities of $24,269,147 by AutoPrime.  In connection with the agreement,  the
Company also received  notes and  automobile  inventory  with an estimated  fair
value of $3,508,086 and the return of 1,817,000  shares of the Company's  common
stock with an estimated fair value of $399,740.

                                      F-15


<PAGE>

NOTE 6. DISCONTINUED OPERATIONS

Effective  January 1, 2001 the Company sold  substantially  all of the assets of
its used car  operations to the existing  management of this segment in exchange
for a $716,190 note receivable. During the quarter ended September 30, 2001, the
Company  determined  this note to be  uncollectible  and therefore wrote off the
remainder  of  approximately  $650,000  that  had not yet  been  collected.  The
disposition took place as a result of continuing  losses in that segment and the
Company's  inability to raise the capital required to continue the operations of
the segment on a profitable  basis. This disposition has been accounted for as a
discontinued  operation  and the results of  operations  have been excluded from
continuing  operations in the  consolidated  statements  of  operations  for all
periods presented. The sale of the assets and transfer of the liabilities to the
purchaser resulted in a net loss of approximately $319,000.

At January 1, 2001 (the date of the disposition) and September 30, 2000, the net
current  assets  (liabilities)  and net long-term  assets  (liabilities)  of the
discontinued segment were as follows:

                                                January 1,    September 30,
                                                    2001            2000
                                              -------------   -------------

Cash                                          $       9,060   $       5,347
Accounts receivable                                 245,636            --
Inventory                                           274,504         396,469
Other assets                                         29,387          29,536
                                              -------------   -------------

           Total current assets                     558,587         431,352

Accounts payable                                     37,105          38,006
Accrued expenses                                    147,433         182,400
Sales tax payable                                      --         1,200,000
Floor plan payable                                     --           125,450
Related party payables                                 --         6,015,249
                                              -------------   -------------

           Total current liabilities                184,538       7,561,105
                                              -------------   -------------

   Total net current assets (liabilities)
     of discontinued operations               $     374,049   $  (7,129,753)
                                              =============   =============


Property & equipment, net                     $      11,910   $      14,190

Contingent liabilities                                 --         1,623,099
                                              -------------   -------------

   Total net long-term assets (liabilities)
     of discontinued operations               $      11,910   $  (1,608,909)
                                              =============   =============

                                      F-16
<PAGE>


The operating results of this segment are:

                                                      Three          Twelve
                                                      months         months
                                                      ended          ended
                                                   January 1,    September 30,
                                                       2001            2000
                                                 -------------   -------------

Net revenues                                     $     361,069   $   9,790,142
Cost of revenues                                       266,429       9,494,567
                                                 -------------   -------------

Gross profit                                            94,640         295,575

Selling, administrative and other
   operating expenses                                  187,590       2,210,739
Bad debts                                                 --         4,117,916
Provision for recourse liability                          --           288,098
Loss on impairment of assets                              --            80,395
                                                 -------------   -------------

Operating loss                                          92,950       6,401,573

Interest expense                                          --           156,989
Loss on disposal of assets                                --            20,823
                                                 -------------   -------------

Net loss from discontinued operations            $      92,950   $   6,579,385
                                                 =============   =============


NOTE 7.       NOTES RECEIVABLE

Notes receivable consist of the following at September 30, 2001 and 2000:

                                                       2001            2000
                                                 -------------   -------------

Notes receivable from individuals, secured by
   by autos, interest from 24% to 27% in
   36-month terms                                $   5,620,889   $   7,746,442

Provision for doubtful accounts and discounts       (4,178,297)     (7,746,442)
                                                 -------------   -------------

                                                 $   1,442,592   $        --
                                                 =============   =============

Note receivable from third party, unsecured,
interest free through December 31, 2001;
   12% annually thereafter, due in full
   July 13, 2005                                 $     150,000   $        --
                                                 =============   =============

                                      F-17

<PAGE>


NOTE 8. 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 estimates, and has recorded,
a sales tax liability of $78,187 and $1,200,000  for the remaining  balances due
on the related  installment  note  portfolio at September 30, 2001 and 2000. The
balance recorded at September 30, 2000 related to the discontinued  segment. The
Company  currently pays sales taxes as proceeds are collected from the financing
agreements.


NOTE 9. INCOME TAXES

The Company  has  incurred  net tax losses of  approximately  $10,000,000  since
inception.  The  Company has not yet filed tax  returns  and  therefore  has not
determined the amount of loss which may be used to offset future taxable income.

The deferred tax asset recorded at statutory rates for the net operating  losses
is  approximately  $3,000,000 at September 30, 2001. The Company's net operating
loss  carryforwards  expire  by 2020.  The  Company  has  provided  a  valuation
allowance for the total 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 10. LINES OF CREDIT

Through  September  30,  2000,  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 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,  $125,450 was outstanding  under the lines of credit.  These
lines  were  retired  effective  October  1,  2000  as  part  of  the  AutoPrime
transaction discussed in Note 5.


NOTE 11. NOTE PAYABLE TO SHAREHOLDER

Effective March 1, 2001, the Company entered into a note payable with one of its
shareholders to provide working capital. The note is dated March 1, 2001, totals
$125,000,  requires  interest  payments monthly at 12% and is secured by 181,159
shares of the Company's common stock. The principal is due on demand,  but as of
the date of these financial  statements,  no demand for payment has been made by
the shareholder.

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<PAGE>


NOTE 12. COMMITMENTS AND CONTINGENCIES

The Company leases office space, a collection center and certain equipment under
noncancelable operating lease agreements which expire on various dates through
June 2004. Future minimum annual payments required under the leases are as
follows as of September 30, 2001:

        Years ending
        September 30,

            2002                                                  $      146,535
            2003                                                          83,194
            2004                                                          64,756
                                                                  --------------

                                                                  $      294,485
                                                                  ==============

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.


NOTE 13. 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.  The
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, 2001 and 2000, there were no options outstanding
and there were 917,311 options available for future issuance.


NOTE 14. SHARES HELD IN TRUST

Effective  December  31,  1998,  the Company  created a trust  account  that was
granted  350,000  shares of voting common stock which were recorded at $0.65 per
share (approximate market price at December 31, 1998) and were to be distributed
to employees  of  AutoPrime  for  services.  No shares have been issued  through
September 30, 2001.



                                      F-19

<PAGE>

NOTE 15. RELATED PARTY TRANSACTIONS

During the year ended September 30, 1999, the Company issued promissory notes to
AutoPrime  totaling  $4,935,620 to consolidate and  restructure  certain amounts
payable to AutoPrime.  These notes required monthly payments totaling  $100,000,
were due June 1, 2000,  and bore interest at 9% per annum.  These notes were not
paid at September  30, 2000,  and were  included as part of the debt  conversion
transaction  with  AutoPrime on October 1, 2000 (see Note 5). At  September  30,
2000, the balance on these notes was $3,900,657.

In the normal course if business,  the Company incurred  operating payables with
AutoPrime totaling $10,373,650 at September 30, 2000.

During the year ended September 30, 1999, 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  accordingly,  the
related debt was still being  carried on the September 30, 2000 balance sheet as
a related  party  payable.  This  payable was  relieved in  accordance  with the
October 1, 2000 agreement (see Note 5).



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