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, 1998

     [   ]   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.)


  5949 Sherry Lane, Suite 525
  Dallas, Texas                                                 75225
 (Address of principal executive offices)                     (Zip Code)



                    Issuer's telephone number: (214) 378-8271

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

    Title of each class               Name of each exchange on which registered

       None

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

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

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

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

         State issuer's revenues for its most recent fiscal year: $4,098,074.

         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:  $2,152,638,  based on the $0.75
per share price at which common equity was sold on June 23, 1999.

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:  6,087,184 shares of Common
Stock, $.001 par value, as of May 31, 1999.

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


<PAGE>

<TABLE>

<CAPTION>

                                TABLE OF CONTENTS
                                                                                                          Page
<S>                                                                             <C>                        <C>

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

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

PART I.....................................................................................................10
         Item 1.   Description of Business.................................................................10
         Item 2.   Description of Property.................................................................19
         Item 3.   Legal Proceedings.......................................................................20

PART II....................................................................................................21
         Item 5.   Market for Common Equity and Related Stockholder Matters................................21
         Item 6.   Management's Discussion and Analysis or Plan of Operation...............................23
         Item 7.   Financial Statements....................................................................26
         Item 8.   Changes in and Disagreements with Accountants on Accounting and Financial
                    Disclosure.............................................................................27

PART III...................................................................................................27
         Item 9.   Directors, Executive Officers, Promoters and Control Persons; Compliance with
                    Section 16(a) of the Exchange Act......................................................27
         Item 10.  Executive Compensation..................................................................28
         Item 11.  Security Ownership of Certain Beneficial Owners and Management..........................30
         Item 12.  Certain Relationships and Related Transactions..........................................32
         Item 13.  Exhibits and Reports on Form 8-K........................................................33

SIGNATURES.................................................................................................36

INDEX TO FINANCIAL STATEMENTS..............................................................................37

</TABLE>


<PAGE>




         In this report,  the words "we",  "our",  "ours",  "us", and "Company",
refer to AutoCorp  Equities,  Inc. and the  subsidiaries we own at May 31, 1999.
They do not include any of the subsidiaries we disposed of on December 30, 1998,
unless we specifically refer to them.

         This  report  includes  statements  that  are  based on  forecasts  and
intentions concerning our operations, capital requirements, economic performance
and financial condition, in particular,  statements regarding our intended plans
for future operations and our 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

         As of May 31, 1999, we are headquartered in Dallas,  Texas. We, and our
subsidiaries,  own and operate three independent automobile dealerships in Texas
and four loan servicing  centers in Texas and Kentucky.  Through used car sales,
our dealerships  originate  non-prime retail  installment  contracts  secured by
automobiles  and light-duty  trucks.  The Company also  purchases  portfolios of
non-prime  automobile  receivables.  In both cases, we retain the loan servicing
function and service all of the loans either  originated  or acquired by us (see
Item 1, Description of Business - Development of Our Current Business).

         During the fiscal year ended September 30, 1998, we were  headquartered
in Phoenix,  Arizona and had our business  operations in Arizona and New Mexico.
Effective at the end of fiscal 1998, we ceased to operate those  businesses  and
transferred their management and operation to our controlling  shareholders,  as
part of a change of control,  which was formalized on December 30, 1998. On that
date, we transferred  the ownership of those  businesses to the  shareholders as
part of a restructuring  transaction and related  business  reorganization  (see
Item 1,  Description of Business - The Business  Operations We Had During Fiscal
1998). In addition, at December 30, 1998, we, and our consolidated subsidiaries,
were financially distressed companies.  We restructured our Company on that date
in order to create an  organizational  structure  that is efficient and reflects
our business plans (see Item 1,  Description of Business - Recent  Restructuring
Transaction).

                                  RISK FACTORS

         Limited  Operating  History  of  Present  Business;   No  Assurance  of
Profitability. We commenced our significantly restructured current operations on
December 30, 1998. Our relatively  brief operating  history of our  restructured
operations provides only a limited basis upon which to evaluate our prospects.

         Our  prospects  must be  considered  in light of the  risks,  expenses,
difficulties and problems frequently encountered in an industry characterized by
intense competition. For the year ended September 30, 1997, we had a net loss of
approximately  $1,520,000.  For the year ended September 30, 1998, and the three
months ended December 31, 1998, we had net losses of  approximately  $12,504,000
and $50,000, respectively.

         There can be no assurance that we will be profitable in the future. Our
ability to operate profitably will depend primarily on our ability to:

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

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

     o    effectively  collect  payments  due on the  portfolios  of  automobile
          receivables   we  service  (we  have   recourse   liability  on  these
          receivables   even   though  we  no  longer  own  them)  and   control
          delinquencies and losses on our automobile receivables portfolio;

                                       1

<PAGE>


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

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

     o    adapt to the increasingly competitive market in which we operate.

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

         Capital Intensive Business;  Need for Substantial Additional Financing.
Our operations are capital intensive.  We will be required to expend substantial
amounts  of  working  capital  in order to  purchase  additional  inventory,  to
generate  retail  installment  sale  contracts  and to support our  portfolio of
automobile  receivables.  In order to finance  our  operations  in the  ordinary
course and to implement  our growth  strategy,  we believe we may 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 our business.
There can be no assurance that any such  additional  financing will be available
or, if available,  that its terms will be  satisfactory to us. Failure to obtain
additional  financing,  if needed, would have a materially adverse effect on our
results of operation.  In such event,  we may be required to materially  curtail
all or a portion of our operations.

         Liquidity and Need for Additional  Funds. We need to obtain  additional
capital in order to increase our asset base and the volume of our operations. We
may pursue various types of debt  financing such as additional  lines of credit.
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 to
us.










                                       2


<PAGE>


         Substantial  Leverage.  To   meet  our   ongoing   working      capital
requirements,  we have incurred substantial indebtedness,  resulting in a highly
leveraged capital structure. At March 31, 1999, we had approximately  $3,746,217
of outstanding indebtedness.  We expect to incur substantial indebtedness in the
future  related to holding  additional  automobile  receivables.  Our  leveraged
capital structure could have adverse consequences, including:

     o    limiting our ability to obtain additional financing;

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

     o    increasing our vulnerability to changes in general economic conditions
          and competitive pressures;

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

         In addition, any indebtedness we incur is expected to contain covenants
that limit,  among other things,  our ability to incur additional  indebtedness,
engage in mergers and  acquisitions,  pay  dividends  to or take other  actions.
These  covenants  may also  require us to meet  certain  financial  tests and to
maintain a certain minimum level of collateral and may give the lender the right
to  periodically  audit  us to  ensure our  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 our
financial condition, results of operations and prospects.

         Interest Rate Fluctuations. Our profitability is based, in part, on the
difference  between the interest  rate we charge our  customers  with respect to
automobile  receivables  and  the  interest  rate  we  pay  on  our  outstanding
indebtedness  (the  "spread").  The interest  rates we charge our  customers are
fixed, and currently range from 13.20% to 35.00%. Interest rates with respect to
outstanding indebtedness or indebtedness we may incur 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. As a
result,   increases  in  market   interest  rates  we  pay  on  our  outstanding
indebtedness would reduce or, possibly,  eliminate the spread. We cannot seek to
limit this risk by  increasing  the  interest  rate we charge on our  automobile
receivables since the interest charged is at or near the maximum permitted under
the laws of the state(s) in which we operate. Further, increasing competition in
the used car financing market may cause downward  pressure on the interest rates
we charge on our  automobile  receivables.  As a result,  increases  in interest
rates  we  pay  on our  outstanding  indebtedness  would  adversely  affect  our
business, results of operations or financial condition.

         Poor  Creditworthiness  of Borrowers;  High Risk of Credit  Losses.  We
currently sell and service the automobile  receivables we generate in connection
with the sale of used cars at our  Dallas  and  Austin,  Texas  dealerships.  In
addition,  we own and service a portfolio of loans  acquired in the  Louisville,
Kentucky area. These receivables are payable by customers with non-prime credit.










                                       3


<PAGE>


         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.  Our ability to operate profitably
depends, in part, on our ability to accurately evaluate the  creditworthiness of
our customers in Dallas and Austin and to minimize losses following defaults. As
a  result,  we  believe  it is likely  that  delinquency  and loss  rates in our
portfolio will fluctuate in the near term and may increase as a greater  portion
of our portfolio of automobile  receivables matures. A significant  variation in
the timing of or increases in credit  losses we  experience  on our portfolio of
automobile receivables could have a materially adverse effect on the Company. If
we  experience  greater  credit  losses in the future,  it will be  necessary to
increase our reserves for bad debts, thereby reducing our overall profitability.
There can be no assurance  that any loans we make to customers will be repaid in
whole or in part or that we will have  adequate  reserves for such credit risks.
Any loans that are in default may need to be written off.

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

         Risks Inherent in Automobile  Finance  Business.  We intend to purchase
high yield  loans,  usually  made to persons with  non-prime  credit.  Extending
credit to retail used car buyers with such credit standing is inherently  risky.
The borrowers on loans we make or those acquired by us will either be first time
buyers or buyers who have  previous  negative  credit.  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 against us claims and defenses that it has against the
seller of the financed vehicle.  We cannot attempt to minimize this risk because
we will not be originating every loan at our own dealership operations.  Certain
states also impose  requirements and restrictions  relating to foreclosure sales
of used cars and on obtaining  deficiency judgments following such sales. We 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  we originate,  buy, sell or service 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.


                                       4


<PAGE>


         Failure to  properly  perfect a lien or to  otherwise  comply  with the
requirements  of the relevant  statute would impair the priority of our security
interest  and our  ability  to  enforce  those  liens  by  either  collecting  a
deficiency  judgment or repossessing the financed vehicle and could also subject
us to a claim by the debtor for tortious  conversion in our 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 our control,  may
have priority over the security  interest granted to us even if such liens arise
subsequent to our security interest and we do not receive 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 our ability to (a)  repossess and resell used cars
in which we have a validly perfected  security interest (b) enforce a deficiency
judgment,  or (c) limit our ability to collect the amount due. In  addition,  we
may  determine,  at  our  discretion,  that  a  deficiency  judgment  is  not an
appropriate or economically  viable remedy.  We may also settle at a significant
discount any claim that we have or any deficiency  judgment we obtain. We do not
have, and do not intend 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 our
business, operations or financial condition.

         Risk Associated with Expansion.  We have recently established the three
independent  dealerships  we are  operating  as of May 31,  1999,  in Dallas and
Austin,  Texas. As part of our growth  strategy,  we intend to seek to establish
and/or  acquire  additional  dealerships  and finance  offices.  There can be no
assurance that we will successfully  integrate the operations of the dealerships
we have  recently  established,  with those we may acquire or  establish  in the
future,  and effectively manage the combined  enterprise.  We will need to limit
increasing overhead as we acquire additional  operations while still maintaining
sufficient staff to effectively collect any additional  receivables.  Failure to
do so  would  have  a  materially  adverse  effect  on our  business,  financial
condition and results of operations.  (see Item 1, Description of Business - Our
Present Business Operations).

         Unspecified  Acquisitions.  Although we presently have no agreements or
understandings  to acquire any specific  dealerships,  we have acquired numerous
automobile  receivables  from outside sellers and may continue to purchase pools
of contracts  from these  sellers from time to time.  In addition,  we intend to
actively seek and investigate other such opportunities as they become available.






                                       5


<PAGE>


         We would likely finance any such transaction with cash; the issuance of
equity  or  debt  securities;   by  incurring  additional  indebtedness  or  any
combination  of the  foregoing.  There  is no  assurance  we will  make any such
acquisitions.  If we do make one or more acquisitions,  there is no assurance we
can make any of them on terms that are favorable to us, or that the  acquisition
will prove to be profitable. Failure to make future acquisitions would limit our
growth  potential  and could cause a failure to support  our  current  operating
conditions

         Geographic  Concentration.  Our  direct  used car sales  are  currently
conducted  in the Dallas and  Austin,  Texas  metropolitan  areas.  Our used car
financing and  servicing  operations  are located in Dallas,  Austin and Lufkin,
Texas, and in Louisville,  Kentucky. Because of this concentration, our business
may be  adversely  affected in the event of a downturn  in the general  economic
conditions  existing  in either  Texas or  Kentucky.  We  intend  to expand  our
operations  to  other  areas,  to  minimize  our  risk of an  isolated  economic
downturn;  however, we cannot be assured that we will be successful in expanding
our  operations,  or that our expansion  will have a  significant  impact on our
overall reliance on limited geographic economies.

         Competition.  The automobile industry is highly competitive. We 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  vehicles  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 we are.

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

         Although recent  high-profile  losses in non-prime  lending have caused
many conventional lenders to pull out of this market,  competition for financing
customers with non-prime credit is still quite strong.  Our 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 our  competitors  are larger  and have  greater
financial and marketing  resources than we do.  Historically,  commercial banks,
savings and loan associations,  credit unions,  captive finance  subsidiaries of
automobile  manufacturers  and  other  consumer  lenders,  many  of  which  have
significantly  greater resources than we do, 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, our 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 our
leases for used car dealerships are for short occupancy  terms. If we are unable
to renew such leases, or continue to occupy premises on a month-to-month  basis,
we will be forced to enter into  arrangements to occupy new premises.  There can
be no assurance that we 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 our business, financial condition and results of operations.

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

                                       6

<PAGE>

         Seasonality; Variability of Quarterly Operating Results. The automobile
industry is subject to substantial  seasonal variations in revenues.  Demand for
used cars is generally  lower in the winter than in other seasons.  In addition,
our  experience  has been that  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, our
growth  strategy  may  subject  us and  our  operating  results  to  substantial
variables and changes each quarter.  Accordingly,  given the possibility of such
fluctuations,  we  believe  that  quarterly  comparisons  of the  results of our
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.  Our  industry  is subject to
extensive regulation, supervision and licensing under various federal, state and
local  laws.  Among  other  things,  these  laws  require  that  our  dealership
operations  obtain and maintain  certain licenses and  qualifications;  limit or
prescribe  terms  of the  contracts  that  we  originate  or  purchase;  require
specified  disclosures  to  customers  and  borrowers;   impose  finance  charge
ceilings; limit our right to repossess and resell collateral; and restrict where
we may locate our used car sales operations.

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











                                       7

<PAGE>


         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 us and could have a
materially  adverse  effect on our  ability  to meet our  obligations  and could
materially  and  adversely  affect  our  business,  results  of  operations  and
financial condition.

         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 we acquire  retail  installment
contracts  from  third  parties,  we may be  liable  for any  violations  of law
committed by such third parties as a successor-in-interest. Currently, we charge
a maximum  fixed  interest  rate of  approximately  26% per  annum on  contracts
originated at our dealerships. At May 31, 1999, all three of our dealerships are
located in Texas.  This state  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  we  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 affect our business,  financial  condition
and results of operations.

         Dependence on Management Information Systems; Year 2000 Compliance. Our
future  success  depends  in  part on our  ability  to  continue  to  adapt  our
technology,  on a timely and cost-effective basis, to meet changing customer and
industry  standards  and  requirements.  We  depend  on our loan  servicing  and
collection  software to monitor our  portfolio of  automobile  receivables.  Any
failure in our loan  servicing  hardware or software  could cause a lapse in the
Company's ability to promptly address  delinquent  accounts.  The failure by the
Company to meet  changing  customer  and industry  requirements,  or to promptly
resolve all  technology  issues,  could have a materially  adverse effect on our
business,  operations  and  financial  condition.  We are working to address and
prepare  for  the  potential  impact  of the  year  2000 on the  ability  of our
computerized  information  systems to accurately process information that may be
date-sensitive. Any of our programs that recognize a date using "00" as the year
1900 rather  than the year 2000 could  result in errors or system  failures.  We
utilize a number of computer programs across our entire operation.



                                       8

<PAGE>


         We have not completed our assessment, but currently we believe that the
costs of addressing this issue will not have a materially  adverse impact on our
financial  position.  However, if we and/or third parties upon which we rely are
unable to address and adequately resolve this issue in a timely manner, it could
result in a material financial risk to us. In order to assure that this does not
occur, we plan to devote all resources  required to resolve any significant year
2000 issues in a timely manner.

         Continued Control by an Insider. Approximately 52.8% of our outstanding
voting  securities  are  controlled by Mr.  Charles W. Norman,  as Trustee under
three  voting  trusts (see Item 11,  Security  Ownership  of Certain  Beneficial
Owners and Management).  Mr. Norman is the President and Chief Executive Officer
and a Director, of our Company. Accordingly, Mr. Norman will retain the power to
approve or disapprove  matters  submitted to a vote of the  shareholders  and to
elect the  entire  Board of  Directors  who  shall,  in turn,  have the power to
appoint the officers of our Company and to determine the  direction,  objectives
and policies of our Company.

         Dependence on Key Personnel. We are highly dependent on the services of
Mr. Charles W. Norman, the Company's  President and Chief Executive Officer.  We
have not entered into an employment  agreement with Mr. Norman. In addition,  we
do not have any key-man life insurance on Mr. Norman.  The loss of Mr.  Norman's
services  could have a materially  adverse effect on our business and operations
(see Item 9,  Directors,  Executive  Officers,  Promoters  and Control  Persons;
Compliance With Section 16(a) of the Exchange Act). In addition,  we believe our
future  success  depends  upon our  ability  to  attract  and  retain  qualified
personnel,  including  managers  for  each of our  dealerships.  Competition  to
attract and retain such personnel  within the vehicle sales industry is intense.
There can be no assurance we will be  successful  in  attracting  and  retaining
qualified personnel in the future.

         Risks From Commitment to Maintain Value on Certain  Preferred Stock. On
December 30, 1998, as part of the Transaction  described in Item 1, "Description
of Business - Recent Restructuring Transaction," we issued 3,500,000 shares of a
new issue of Series "A"  Preferred  Stock.  We issued these shares at a value of
$1.00 per share and agreed to maintain their value at not less than that amount.
This  agreement  could  result in us  issuing  additional  shares of Series  "A"
Preferred  Stock or issuing other  securities  without  receiving any additional
consideration.  This would  dilute the holders of Common Stock  accordingly  and
could  dilute them  substantially.  We might also  choose to provide  additional
value by paying cash or  transferring  assets  without  receiving any additional
consideration.  This  could  theoretically  deplete  our  assets  by as  much as
$3,500,000.

         The December 30, 1998 Transaction.  Certain of our Preferred and Common
Shares were  tendered to AutoPrime in the  December 30, 1998,  Transaction  (see
Item 1,  Description  of  Business - How the  Purpose of the  Restructuring  Was
Achieved).  AutoPrime is majority owned by a regulated financial institution and
can  lawfully  own our stock only after  receiving  approval  from the Office of
Thrift  Supervision  and perhaps other  governmental  regulatory  agencies.  The
Transaction also allowed AutoPrime to defer taking ownership of any of our stock
until  receipt of approval from the Office of Thrift  Supervision  and any other
governmental approval that may be necessary.






                                       9

<PAGE>


         If  approval  is not  received  by December  31,  1999,  and  AutoPrime
determines not to accept the tender, then the tender is rejected.  In this case,
the credits  AutoPrime  issued on December 30, 1998, as part of the  Transaction
will be withdrawn.

         In addition,  the debts for which  credit was given will be  reinstated
and will be  immediately  due and  payable,  with  interest at 10% per year from
December 31, 1998. We and AutoPrime have agreed to renegotiate  the  Transaction
if this  event  occurs.  There is no  assurance  as to the  outcome  of any such
renegotiation, and it could have a materially adverse effect on our Company.

         Market  for  Common Stock;  Volatility  of  Prices.  There  has  been a
limited public trading market for our Common Shares. 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
our  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.  We have not paid any dividends on our
Common Stock and anticipate that future earnings, if any, will be used to reduce
our  debt or  finance  future  growth  and  that  dividends  will not be paid to
shareholders.  There can be no  assurance  that our  operations  will  result in
sufficient  revenues to enable us to operate at profitable levels or to generate
a positive cash flow. In addition,  the 6,578,485 shares of Series "A" Preferred
Stock  issued on  December  30,  1998,  have an annual  non-cumulative  dividend
preference of $328,924 (5% of  $6,578,485).  Accordingly,  we anticipate we will
not pay 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 our  beliefs  as well as
assumptions made by and information currently available to us. 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 our results are competitive  practices
in the used car financing and sales  industry,  our ability to meet our 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  affecting  our
operations.

         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

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

         On January 3, 1992,  we changed  our name to Eagle  Holdings,  Inc.  On
October 20, 1993, we changed our corporate  domicile  from  Colorado  to Nevada.

                                       10

<PAGE>

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

         On December 31, 1994, the Goldwyn  Licensing  Agreement  expired and we
divested  our  subsidiaries  to  seek  business  combination  candidates  as  we
re-entered the business development stage.

         On September 30, 1996, we changed our name to AutoCorp  Equities,  Inc.
On July  21,  1997,  we  acquired  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. Our former president 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 our  Company.  The
acquired  companies  were engaged in the sale,  financing and insurance of  used
cars.

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












                                       11


<PAGE>


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

         We, AutoCorp Equities,  Inc., are a holding company and have been since
July 1997. In August 1998, we formed Suburba  Acquisition  Company.  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.

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

         As of May 31, 1999, ACE owns and operates three used car dealerships in
Texas - two in  Dallas  and  one  in  Austin.  Through  used  car  sales,  these
dealerships  originate non-prime used car loan contracts.  In addition,  through
AFS, we buy  portfolios  of non-prime  used car loan  contracts and operate loan
servicing centers. In all cases, we retain the loan servicing function of all of
the loans we originate or purchase.

                        Recent Restructuring Transaction

         At  December  30,  1998,  we and  our  consolidated  subsidiaries  were
financially  distressed  companies.  We restructured our Company on that date in
order to create an  organizational  structure that is efficient and reflects our
business plans.

We accomplished the following through the restructuring:

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

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

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

     o    changed the control of our Company.

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

         How the Purpose of the Restructuring Was Achieved

         The purpose of the restructuring was achieved by the following:

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

               This  was  achieved  by  transferring   them,  along  with  other
               interests,  to Merritt and Miller in exchange for the  redemption
               of 2,653,500  Common Shares.  These represent 43.6% of the Common
               Shares now  outstanding.  Merritt and Miller (or their assignees)
               combined   still  own  600,000   Common  Shares  (  9.9%  of  the
               outstanding).

                                       12

<PAGE>


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

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

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

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

o    The change of control of our Company

     This took place through:

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

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

     (c)  The establishment of the three trusts, and the transfer to them of the
          reissued 3,217,000 Common Shares.  These represent 52.8% of the Common
          Shares now outstanding.

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

          o    We tendered  Preferred and Common Shares to AutoPrime in exchange
               for  AutoPrime  releasing  us  from  liability  on a  substantial
               portion of our indebtedness.

          o    AutoPrime  declined to accept the tender  until after  receipt of
               any necessary  regulatory  approvals  (There is no assurance they
               will be received);

          o    We placed  these  securities  in the Exchange  Trust  pending the
               outcome  of  the  tender.  If the  necessary  approvals  are  not
               received,  the  parties to the  Transaction  presently  intend to
               renegotiate some of the debt release portions of its terms.

          In addition,  the parties anticipate that some number of Common Shares
          will  remain in the  Exchange  Trust after the earlier to occur of the
          retirement  of the CIC notes or December 31,  1999.  These shares will
          first be available to AutoPrime for  satisfaction  of our and/or CIC's
          obligations to AutoPrime. However, the Trustee will not transfer these
          shares to AutoPrime unless the tender has been accepted.

If approval is not received by December 31, 1999 and AutoPrime determines not to
accept the tender,  then the tender is rejected.  In this case, the credits will

                                       13

<PAGE>

be  withdrawn  and the debts for which credit was given will be  reinstated  and
will be immediately due and payable, with interest at 10% per year from December
31, 1998. We and AutoPrime  have agreed to renegotiate  the  Transaction if this
event occurs.  There is no assurance as to the outcome of any such renegotiation
and it could have a materially adverse effect on our Company.

                      Development of Our Present Businesses

         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.

         As of May 31, 1999, ACE operates  three used car  dealerships in Texas,
two in  Dallas  and  one in  Austin.  These  were  established  as a  result  of
negotiations  with the owners of three operating  dealerships to acquire certain
assets of nominal value from them. We then opened our own dealership  operations
at these three locations, and they are now operated by ACE.

















                                       14


<PAGE>


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

         Our Present Business Operations

         As of May 31, 1999,  we own and operate three used car  dealerships  in
Texas.  Through used car sales, these dealerships  originate  non-prime used car
loan contracts.  We also buy portfolios of non-prime used car loan contracts. In
both  cases,  we retain the loan  servicing  function  and  service the loans we
originate or  acquired.  As the loan  servicer,  we are  responsible  for record
keeping and collection of payments, and general enforcement of the used car loan
contracts.

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

         Our  subsidiary,   AutoCorp  Financial  Services,   Inc.("AFS"),   buys
portfolios of loan contracts at a discount from net principal  balance,  usually
ranging between 35% and 45%. Since we and AFS do not have the necessary  capital
to carry a portfolio  of  contracts  ourselves,  AFS  re-sells  the loans,  with
recourse,  to AutoPrime at a lower  discount  from net principal  value.  A sale
"with recourse"  means that if a loan contract  becomes  delinquent,  the seller
becomes  obligated  to pay the  purchaser  an  amount  equal to the  purchaser's
unrecovered  purchase  price,  plus accrued  interest on that  amount.  AFS also
retains the loan servicing function.  AFS operates four loan servicing centers -
three in Texas and one in Kentucky.

         ACE and AFS have each entered into a Master Purchase and Sale Agreement
with AutoPrime.  ACE entered into this on January 12, 1999, and AFS also entered
into their  agreement on January 12, 1999. We are a guarantor on both agreements
to  AutoPrime.  AutoPrime  is  engaged  in the  business  of  purchasing  retail
installment  contracts  secured  by  automobiles  and light  duty-trucks,  which
include  contracts for non-prime credit customers.  Under these agreements,  ACE
and AFS sell contracts to AutoPrime, with recourse, at an average price equal to
approximately 75% of the current net principal balance of the contract.  We, ACE
and AFS have joint and several liability to AutoPrime for the recourse liability
on all  contracts  the  three  of us  sell to  AutoPrime  Like  many  investors,
AutoPrime does not want to be in the business of servicing the contract loans in
its  investment  portfolio.  Therefore,  we ACE and AFS have each entered into a
Servicing Agreement with AutoPrime.  We did this on the same dates as the Master
Purchase and Sale Agreements were signed.  Under these  agreements,  ACE and AFS
each retain the servicing of the contracts we have sold to AutoPrime. We do this
for a fee of 20% of the cash we collect from  servicing  contracts.  As the loan
servicer,  we collect the  payments  due,  retain an amount  equal to 20% of the
gross amounts collected as a servicing fee, and remit the balance to AutoPrime.













                                       15


<PAGE>


         In the  event  payments  on a  contract  become  delinquent,  the  loan
servicer is responsible to make the collections and, if necessary, repossess the
used car involved.  We recondition the car and attempt to resell it,  generally,
through one of the three dealerships.  If the net recoupment on this delinquency
collection/recovery   process   (collection   efforts  on  the  contract   after
delinquency,  repossessing  the used car and  disposing of it) is less than what
AutoPrime  was  paid on the  recourse  liability,  we  experience  a loss on our
recourse liability obligation.

         In addition,  we have  additional  Servicing  Agreements with AutoPrime
under which we service portfolios,  owned by AutoPrime, for a fee. The servicing
fee we retain on  payments  collected  ranges  between  12% to 20%. We intend to
actively seek and investigate other such servicing  opportunities as they become
available.  Our  staffing  infrastructure  and systems  will allow us to service
multiple  portfolios  for  outside  lenders.  Because the  collection  of retail
consumer loans is highly regulated,  we and our subsidiaries  employ 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.  All of
our  collections  personnel  follow our  policies as  outlined in the  Company's
complete Manual for Collections.

         At March  31,  1999,  we were the  servicing  agent  for  approximately
$8,720,000 of automobile receivables. Accordingly, the results of our operations
and our financial condition depends, in part, on our ability to properly service
automobile receivables in order to reduce credit losses.

         Our 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.

         If a customer's  account becomes more than 30 days past due, we seek 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,"  we retain an independent  firm to repossess the
vehicles pursuant to prescribed legal procedures.  If we repossess a vehicle, we
allow  the  customer  a  minimum  ten  days  to  redeem  the  vehicle.  In  some
circumstances,  we may allow the customer the  opportunity to redeem at any time
until the vehicle has been sold to a third party.  After repossessing a vehicle,
we will have the vehicle reconditioned by a third party. We will then sell it at
retail through one of our dealerships or in the wholesale market.

       Having retail  capability  allows us to quickly resell  vehicles that  we
repossess and avoid certain  expenses that a stand-alone  finance  company would
incur in connection  with  repossessing  and reselling a vehicle.  Vehicles that
cannot be sold retail,  are sold at auction or to wholesalers.  We estimate that
we recover approximately 95% of the vehicles we attempt to repossess.




                                       16

<PAGE>


         ACE has a revolving  line of credit with  AutoPrime  for the purpose of
purchasing inventory of used vehicles, a "floor plan," which we have guaranteed.
Previously  we had a floorplan  with Auto Finance  Corporation  (AFC),  which is
affiliated with Adesa Auto Auction. Our floorplan limit with AFC was $1,500,000.
During the Transition we changed our floorplan. The floorplan 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%. By changing to
this floorplan source, we were able to reduce our floor fees.

         The amount of the  floorplan  was  increased to  $1,000,000 on June 17,
1999, at the same variable rate of interest,  initially 14.25%.  The new note is
also a demand note and matures on January 17, 2000,  if no demand is made before
then. Interest is payable monthly beginning July 1, 1999. All principal together
with accrued interest is due on demand or at maturity.

                                   Competition

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

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

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







                                       17


<PAGE>


         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, high-risk period of the first three months have passed.

                The Business Operations We Had During Fiscal 1998

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

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

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

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

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

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


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

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

          CIC had also purchased,  and assumed  recourse  liability with respect
to, a portfolio of non-prime  loan  contracts  from  AutoPrime in October  1997,
which had been  originated by a dealer that had gone out of business.  AutoPrime
had no mechanism to service or collect these loans.  The loan  contracts in that
portfolio had originated  from sales of used cars in Austin,  Texas.  Due to the
recourse  obligation,  CIC then needed an operation in Austin similar to the one
provided  by LLCI in Arizona and New  Mexico.  Some or all of the Merritt  Group
formed a corporation  that  established a similar business in Austin to act as a
reconditioning  center and resale outlet for used cars  repossessed  by CIC. The


                                       18

<PAGE>

corporation was Lenders Auto Resale Centers of Texas,  Inc., and it did business
under the assumed name of "Lenders  Auto Resale  Centers"  ("Lenders of Texas").
During fiscal 1998,  Lenders of Texas  established and operated four dealerships
and one reconditioning  center in Austin to re-market used cars repossessed as a
result of  delinquent  loans in that  portfolio as well as to originate  its own
automobile receivables.

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

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

         Our subsidiary,  ACE Motor Company,  acquired certain assets of Lenders
of Texas on December 30, 1998.  This  transaction was separate from, but related
to,  the  restructuring  Transaction  that  took  place on the same  date.  This
transaction is a related party transaction and is described in Item 12, "Certain
Relationships  and  Related  Transactions."  We  subsequently  closed the Austin
locations  that  were not  profitable,  consolidated  our sales  staff  into one
dealership location sufficient to also house the collection staff, thus reducing
our operating overhead. In addition,  as the portfolio stabilized,  we were able
to eliminate the service center  operating in Austin,  and instead contract with
outside  service vendors to service and recondition our financed and repossessed
vehicles at a lower cost to us.

         Employees.  At the beginning of fiscal 1998, our corporate headquarters
were located in Phoenix, Arizona. Until October 1998, we employed 60 persons, of
which 10 were employed at our Phoenix headquarters.

         In October 1998, we moved our corporate  headquarters to Dallas, Texas.
This reduced the number of employees we had, as we divested  ourselves of all of
the  Arizona  and New Mexico  operations  and had not yet  acquired  many of our
present  locations.  At May 31, 1999, we had 57 employees,  of which, seven were
employed  at  our  Dallas  headquarters.  We  have  no  employees  covered  by a
collective bargaining agreement. We consider our relations with our employees to
be good.

         Seasonality.  We have not experienced  any  significant  differences in
revenues  reflecting  any  seasonal  buying  or  borrowing  patterns.   Although
collections  and sales on used cars do fluctuate  during the last quarter of the
calendar  year, we were able to avoid a significant  impact due to  acquisitions
and our ability to manage delinquencies.

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


                          Item 2. Description Property

         Our principal  executive offices have been located at 5949 Sherry Lane,
Suite 525,  Dallas,  Texas 75225,  since November 1998. We occupy  approximately
2,500 square feet of leased premises at this location.  The rent is $ 58,315 per
year, and the lease expires on June 30, 1999.

         We have sub-leased  approximately 2,600 square feet of new office space
in an office  building  also  occupied by  AutoPrime.  The address is 2740 North
Dallas Parkway,  Suite 110, Plano, Texas 75093. We anticipate moving to this new
location on or about June 28, 1999.  The rent is $ 56,760 per year,  and the new
lease will expire on May 31, 2002.

         As of April 30,  1999,  we leased  five  properties  in addition to our
corporate  headquarters.  We leased  them for ACE and AFS  operations.  They are


                                       19

<PAGE>



listed in the following table together with the year the lease expires:



         1.   3821 So. Buckner Blvd, Dallas, Texas           2,500 sq ft    2001
         2.   212 So. Buckner Blvd, Dallas, Texas            3,300 sq ft    2002
         3.   6318 Burnet Rd, Austin, Texas                  2,800 sq ft    2004
         4.   9922 Linn Station Rd, Louisville, Kentucky     3,000 sq ft    2004
         5.   2101 So. First St, Lufkin, Texas                 750 sq ft    2000

         We believe  our  facilities  and  equipment  are in good repair and are
adequate for our current needs.

         Until October 1998, our corporate  headquarters were located at 2980 E.
Northern Avenue, Suite B-1. We occupied approximately 1,500 square feet of space
there.  That lease  commenced in November,  1995 and was  scheduled to expire in
1999.  We  transferred  that lease to some or all of the  Merritt  Group when we
moved our headquarters to Dallas.

         During fiscal 1998, we leased six additional  properties in Arizona and
New  Mexico.  We  leased  them for  LLCI's  operations.  They are  listed in the
following table together with the year the leases expire:

         1.   9650 N. Cave Creek Road, Phoenix, Arizona     3,800 sq. ft.   1999
         2.   1244 W. Broadway, Mesa, Arizona               3,000 sq. ft.   2000
         3.   502 N. Scottsdale Road, Scottsdale, Arizona   3,500 sq. ft.   1999
         4.   5201 W. Glendale, Glendale, Arizona           4,000 sq. ft.   2000
         5.   8813 Central Avenue, Albuquerque, New Mexico  3,000 sq. ft.   2001
         6.   1918 Cerrillos Road, Santa Fe, New Mexico     2,500 sq. ft.   2000


                            Item 3. Legal Proceedings

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

         The suit involves activities that took place during 1994.  At that time
we  were  under   different   management   and  control  and  known  as  Chariot
Entertainment, Inc. ("Chariot").

         In 1994 Chariot had a license to stage live  performances  of "American
Gladiators"  behind the Imperial Palace Hotel in Las Vegas.  The SEC's complaint
alleges that Chariot and several individuals violated the anti-fraud, securities
registration and corporate record keeping  provisions of the federal  securities
laws in an effort to market the  securities  of Chariot and  maintain  Chariot's
listing  on  NASDAQ.  The  SEC's  complaint  seeks to  enjoin  us and the  other
defendants  permanently  from  violating  specified laws in the future and seeks
additional relief against the other defendants.

         We have denied the  allegations of the complaint and believe the relief
sought against our Company is inappropriate.  It would be a permanent injunction
against our Company for activities allegedly occurring in 1994. At that time, we
had totally different business operations,  management and control than we do at
the present time. We intend to vigorously  defend  against the relief the SEC is
seeking against our Company in this lawsuit.

         There are no other material legal proceedings.


            Item 4. Submission of Matter to Vote of Security Holders

         Not Applicable.


                                       20

<PAGE>


                                     PART II

        Item 5. Market for Common Equity and Related Stockholder Matters

         Our Common Stock 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
we can determine by combining information from several sources.

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

Fiscal 1999:
   First Quarter                $0.25      $  0.63
   Second Quarter                0.56         1.75

Fiscal 1998:
   First Quarter                 0.72         2.88
   Second Quarter                0.88         2.38
   Third Quarter                 0.88         2.63
   Fourth Quarter                0.38         0.81

Fiscal 1997:
   First Quarter                 0.12         0.12
   Second Quarter                0.12         0.12
   Third Quarter                 0.12         0.12
   Fourth Quarter                0.25         4.00

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

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

     At May 31, 1999, we had  approximately  380 holders of record of our Common
     Shares.

         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 6,578,485 shares of Series "A" Preferred Stock, issued
on December 30,  1998,  have an annual  non-cumulative  dividend  preference  of
$328,924 (5% of $6,578,485). Accordingly, the Company does not anticipate paying
any dividends on Common Stock for the foreseeable future.









                                       21


<PAGE>


         From October 1, 1997 through September 30, 1998, we sold the following
securities without registration under the Securities Act of 1933:

          (1)  On several  occasions  from January 13 to  September  30, 1998, a
               total of 490,076 Common Shares were delivered to approximately 46
               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  $1,400,570,  together  with
               accrued  interest of  $255,297,  were  canceled.  We issued these
               Common Shares under the Section 4(2)  exemption of the Securities
               Act.

          (2)  216,969 Common Shares, in April,  May, June and September,  1998,
               for  accounting and consulting  services  valued at $200,302.  We
               issued  these Common  Shares under the Section 4(2)  exemption of
               the Securities Act.

          (3)  172,000 Common Shares,  in March and in June, 1998, to Stanley F.
               Wilson,  as part of our severance  agreement with him. Mr. Wilson
               had served as a Vice  President and a Director from December 1997
               to August  1998.  We issued  these  shares under the Section 4(2)
               exemption of the Securities Act.

         Summary of the Terms of  Convertibility  of the  Series  "A"  Preferred
Shares.  As part of the  Transaction,  we  established  a  series  of  9,000,000
authorized  shares of Series "A"  Non-Cumulative  Convertible  Preferred  Stock.
Then,  we  issued a total  of  6,578,485  new  Preferred  Shares  as part of the
Transaction.

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

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

          o    They have a liquidation preference of $1.00 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 starting January 1, 2002. They will also become  convertible
               prior to that date if any of certain specified events take place.
               Here  is  a   summary   of  the   events   that  can   accelerate
               convertibility:

               (a)  If we issue any shares of any kind of capital stock,  or any
                    securities   convertible   into,    exchangeable   for,   or
                    exercisable to purchase any shares of capital stock, without
                    AutoPrime's  consent.  (We also made a specific covenant not
                    to do any of these things  before  January 1, 2002,  without
                    AutoPrime's consent.)

               (b)  If anyone  other  than our  current  Board of  Directors  is
                    elected  to our  Board  of  Directors,  without  AutoPrime's
                    consent.

               (c)  If CIC or LLCI default in the payment or  performance of any
                    of a number of obligations to AutoPrime or to us.

               (d)  If Merritt or Miller breach any  representation  or warranty
                    made by them.

         We issued  3,237,956 (of the 6,578,485) new Preferred  Shares to CIC as
part of the  December  30, 1998,  Transaction.  CIC then  pledged the  3,237,956
Preferred  Shares to  AutoPrime  to secure  certain  debt.  So that Auto Prime's
pledge is  protected,  we also  agreed  in the  "Agreement  to Issue  Additional

                                       22

<PAGE>

Preferred  Stock" that we will not issue any kind of preferred  stock to any one
other than CIC/LLCI until after February 1, 2002.  Before that date, we can only
issue Preferred Shares to CIC/LLCI in amounts required by the Agreement,  and we
can only issue them for the benefit of AutoPrime, our primary creditor.


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

           Overview

          The Company operates "Buy Here-Pay Here" used car dealerships
and underwrites, finances and services retail installment contracts generated by
sales of used  cars by the  Company's  dealerships.  In  addition,  the  Company
purchases  portfolios of loan contracts  purchased from third party  dealerships
and services these loan portfolios.  The Company targets the non-prime borrowing
segment of the automobile  financing industry.  The Company financed much of its
operations  by  selling  the  contracts  to  various  lending  sources on a full
recourse basis. The contracts were sold at a 20% to 30% discount and the Company
retains certain servicing income from collection of the contracts.

         The Company began its used car operations in 1996 with the  acquisition
for a car lot in Phoenix, Arizona. By 1997, the Company had seven car lots, five
in Arizona  and two in New  Mexico.  The  Company  had  opened a  reconditioning
facility to service cars both purchased by the Company as well as by others. The
Company also began to establish an insurance subsidiary in the Cayman Islands to
offer insurance to customers.

                                      1997

         During 1997, the Company began to expand its operations  significantly.
By the end of the year,  the  Company  had five auto  resale lots in the greater
Phoenix area and 2 lots in northern New Mexico.  As a result,  revenue increased
from  approximately  $150,000 in 1996 to over  $3,000,000  in 1997.  The Company
opened a reconditioning  center, not only to service its own vehicles,  but also
to service those of other dealers. By late 1997, the Company also began to offer
insurance to its  customers  through a  subsidiary  company  established  in the
Cayman Islands.













                                       23



<PAGE>


         In addition to vehicle  sales,  the  Company  began  to purchase  notes
from other  automobile  dealers at a discount,  with the  intention of reselling
them to outside  finance  companies  at a profit.  The  Company  also sold notes
generated by their own retail sales  operations.  The majority of the notes were
sold to  Travelers  Acceptance  Corp.  (TAC),  for  which the  Company  received
approximately  70% of the net  principal  balance  at the time of the  sale.  In
return,  the  agreement  provided that the Company would receive 20% of payments
received  by TAC. If a note became  delinquent  beyond 90 days,  the Company was
responsible  for  repurchasing  the note  from TAC.  The  Company  had  recourse
liability for the notes at TAC and the default rate increased over the course of
the year from  approximately  25% to over 50%. This had a negative impact on the
Company's  cash flow as notes were  repurchased  and the servicing fees from TAC
were withheld and applied to the outstanding liability.  The Company repossessed
certain  vehicles,  reconditioned  them when possible,  and resold the vehicles.
However,  the Company did not pursue default judgments on the difference between
the  balance  of the note  and the net  amount  realized  on the  resale  of the
vehicle.  By the end of 1997, the Company switched financing  companies from TAC
to AutoPrime

         Although sales increased significantly during 1997, the Company was not
profitable  and  therefore  needed cash for  inventory  and  operating  expenses
(including  labor  costs and  reconditioning  of  vehicles).  In  addition,  the
expansion of operations  required the Company to spend in excess of $100,000 for
capital expenditures to support its growth. Selling,  general and administrative
expenses exceeded gross profit by over $1,200,000.

         The  Company  primarily  obtained  cash  from  debt financing  of  over
$2,700,000 and approximately  $380,000 from the issuance of common stock.  Loans
from  independent  investors were obtained at rates varying from 8% to 14%, with
the majority in the 12-14% range.  As a result of the increased  debt,  interest
expense increased by approximately $240,000 in 1998.

                                      1998

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

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

         The Company  was a  guarantor  on loans made by other car lots owned by
certain  officers.  As those lots were also  closed,  the lenders  looked to the
Company as a repayment source. By year end, the Company was contingently  liable
for  over  $7,730,000  in used  car  contracts  and  had  direct  debts  of over
$4,000,000 to the various financing sources and bond holders.

         Effective  at the  end  of  fiscal  1998,  we  ceased  to  operate  the
locations we had operated during fiscal 1998. We transferred the management and

                                       24

<PAGE>

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

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

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

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

         The automobile  industry is subject to substantial  seasonal variations
in revenues. Demand for used cars is generally lower in the winter than in other
seasons.  In addition,  our  experience has been that 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 spring and through the summer  months.
We were able to avoid a significant  impact  through the holiday  season of 1998
due to acquisitions and our ability to manage delinquencies.

         Year 2000 Compliance

         We are working to address and prepare for the  potential  impact of the
year 2000 on the ability of our computerized  information  systems to accurately
process  information  that  may be  date-sensitive.  Any of  our  programs  that
recognize  a date  using "00" as the year 1900  rather  than the year 2000 could
result in errors or system  failures.  We utilize a number of computer  programs
across our entire operation. We have not completed our assessment, but currently
we believe  that the costs of  addressing  this issue will not have a materially
adverse impact on our financial position.


         Liquidity

As of  September  30,  1998,  the  Company  has a  working  capital  deficit  of
$8,200,000.  The  Company  is  reliant on  outside  financing  sources,  such as
AutoPrime,  to provide the working  capital  needed for near term  operations as
well as to meet its mid term  goals.  As the Company  rebuilds,  it will need to
fund an increase in inventory to a level sufficient to support  operations,  the
acquisition of operating  assets,  and the working capital needed to support the
sales cycle.  Management  believes the line of credit  secured by the  inventory
(the flooring  plan) will provide enough  financing for the necessary  number of
used cars to be held on the lots.  The Company  believes  the  agreement to sell
both the bulk portfolios and the internally generated auto contracts,  with full
recourse,  to AutoPrime will support the operations until sales volume reaches a
sufficient  level.  The longer term goals of the Company  will be  dependent  on
attaining  profitable  operations in order to generate  sufficient  cash flow to
meet those  obligations.  The Company's  current agreement with AutoPrime is due
for review by December  31, 1999.  Should the  December 30, 1998  debt-for-stock
transaction with AutoPrime not be approved by regulators, then the Company would
have significantly more debt to retire.

         Discontinued operations

The Company recorded a charge of $174,354 to reflect the  discontinuance  of its
entertainment  operations in 1996 when it entered into the automobile  sales and
financing  businesses.  The  Company  has  continued  in the used car  sales and
financing business since then despite the closing of certain lots and operations
and the change in management.

         Income taxes

The Company has a significant  net operating  loss  carryforward.  However,  the
Company's  ability to utilize the tax benefits of the prior losses is limited by
the amount of profit  generated  from  operations  and  further  limited  due to
certain statutory  restrictions  created by the change in ownership.  Management
has fully  reserved  any future tax benefits  due to the  uncertainty  regarding
utilization.







                                       25

<PAGE>


                          Item 7. Financial Statements

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

                  Consolidated Balance Sheets - September 30, 1998 and 1997

                  Consolidated  Statements  of  Operations  For the Years  Ended
                  September 30, 1998, 1997 and 1996

                  Consolidated  Statement of Changes in Shareholders' Equity For
                  the Years Ended September 30, 1998, 1997 and 1996

                  Consolidated  Statements  of Cash  Flows For the  Years  Ended
                  September 30, 1998, 1997 and 1996

                  Notes to Consolidated Financial Statements


Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         On February  2, 1999,  we engaged  Hurley & Company as our  independent
auditors to conduct  audits of our  consolidated  financial  statements  for the
fiscal years ended  September 30, 1996,  1997 and 1998. On the same date, we and
Evers & Company, LTD, terminated our previous audit relationship, and we engaged
Evers & Company, LTD. to assist us with our internal accounting for the audits.

         There were no disagreements with Evers & Company, LTD. on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure  during our two most recent  fiscal years and any  subsequent
interim period preceding such resignation.

         We have previously  reported this in our Form 8-K filed on February 17,
1999.















                                       26



<PAGE>


                                    PART III

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

         Our current executive officers and Directors, as of May 31, 1999, are:

         Name          Age         Position                       Director Since

Charles Norman         41          President and Chief Executive          1998
                                   Officer; Director*

Darr Heath             39          Director**                             1999

Hunter Ennis           29          Secretary and Treasurer;
                                   Director***                            1999
----------------
*        Elected President and a Director in August 1998.
**       Elected a Director in April 1999.
***      Elected Secretary and Treasurer in December 1998 and a Director in
         April 1999.

         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,  he 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 owned and operated a group of
independent  automobile  dealerships  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.  Prior to 1994,  from 1992 until 1994,  Mr. Norman was the
Regional  Manager of Dealer  Development for Union Federal Savings Bank where he
was hired to develop and co-manage an indirect lending program.

         A detailed  resume of his experience is attached as Exhibit 99.1 to our
Form 8-K filed March 11, 1999.  Certain  additional  information  concerning Mr.
Norman is set forth in Item 11, "Security Ownership of Certain Beneficial Owners
and Management."

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

                                       27

<PAGE>


         Darr Heath has been with the  Company  since  October  1998.  He became
Director of Operations for ACE Motor Company in November 1998. In this capacity,
he is responsible for the supervision of all day-to-day  operations in sales and
servicing.  From November 1996 to 1998, Mr. Heath was Director of Operations and
General Manager of Fiesta Motors,  a Dallas,  Texas,  automobile  dealership and
subsidiary of Sovereign  Finance  Corporation.  From February 1994 to the end of
1996, he served as Director of Operations of Public Auto Sales, which is engaged
in used automobile sales and financing in Dallas, Texas.

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

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

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

         o        Charles Norman
         o        William O. Merritt

         During April 1999, Merritt and Norman elected Mr. Ennis as a  Director.
Mr. Merritt  resigned on April 28, 1999.  Messrs.  Norman and Ennis elected Darr
Heath as a Director.  Messrs.  Ennis and Heath were and continue to be employees
of AutoCorp Financial and/or ACE Motor Company. The Board of Directors held four
meetings during fiscal year 1998. The Board of Directors had no Audit Committee,
Compensation or Nomination  Committees during fiscal 1998 and does not currently
have any committees.

         Our governing documents  provide  that our  Company must  have at least
three Directors. 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.

         The term of the present  Directors  will expire  concurrently  with the
election of Directors at the  forthcoming  1999 Annual Meeting of  Shareholders.
Management will propose at that meeting that Messrs.  Norman, Heath and Ennis be
re-elected  as Directors  for the coming year.  Mr.  Norman,  in his capacity as
Trustee of the three voting  trusts,  controls 52.8% of the  outstanding  Common
Shares. He presently intends to vote these shares in favor of the re-election of
these three  Directors.  The Directors  elected at the  forthcoming  1999 Annual
Meeting of Shareholders will serve until the next Annual Meeting of Shareholders
and until their successors have been duly elected and qualified.

         We  presently  contemplate  that  after  the  1999  Annual  Meeting  of
Shareholders,  the newly elected Directors will hold a regular annual meeting of
the Board of Directors.  If a regular  meeting is not held,  the Directors  will
sign a unanimous  consent in lieu of holding the meeting and will  re-elect  the
current officers to the same positions for the coming year.


                         Item 10. Executive Compensation

         Executive  Officers.  The table below shows cash and stock compensation
paid  during the last  three  years to each of the three  persons  who served as
Chief  Executive  Officer during fiscal 1998.  None of the next four most highly
compensated  officers serving on September 30, 1998, received more than $100,000
for fiscal 1998.


<TABLE>

Name and                             Fiscal Year      Salary       Consulting    Other Annual
Principal Position                                                 Fees          Compensation
<S>                                    <C>             <C>           <C>           <C>


Charles Norman, President              1998            $ 0           $0            $ 0
and Chief Executive Officer
(August 1998 to Present)


                                       28

<PAGE>

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

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

</TABLE>

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

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

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

         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 May 31, 1999,  981,857  shares had been issued under the Plan, no
options  were  outstanding,  and  1,018,143  shares  were  available  for future
issuance.



                                       29

<PAGE>


         Compensation of Directors. Directors received a fee of $300 per meeting
for serving as Directors during fiscal 1998. This compensation continues for all
formal meetings held in fiscal 1999.

         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 and does not find that any Forms 3, 4 or 5 were  furnished to
the Company during or with respect to fiscal 1998.


     Item 11. Security Ownership of Certain Beneficial Owners and Management

         On December 30, 1998, we established three trusts naming Charles Norman
as Trustee of each of them.  We did this as part of the  Transaction  and placed
certain shares of stock in them. As a result, Mr. Norman acquired control of our
Company from William O. Merritt, Dennis W. Miller and others in the Transaction.
Messrs.  Merritt and Miller continue to have beneficial  ownership of a total of
600,000 (or 9.9%) of the outstanding Common Shares.

          As of May 31,  1999,  Mr.  Norman,  in his  capacity as Trustee of the
three trusts,  beneficially  owns a total of 3,217,000  Common  Shares.  This is
52.8% of the  6,087,184  Common  Shares that,  according  to our stock  transfer
agent, were outstanding as of May 31, 1999.

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

         The following table sets forth certain information, as of May 31, 1999,
concerning  the  beneficial  ownership  of  Common  Stock by all  Directors  and
nominees,  certain executive  officers,  all Directors and executive officers of
the Company,  as a group, and each person who beneficially  owns more than 5% of
the  6,087,184  outstanding  shares of Common  Stock,  $.001 par  value.  Unless
otherwise indicated, each person named has sole voting and investment power over
the shares indicated.

<TABLE>


         Name and Address                  Amount and Nature of              Percent
         of Beneficial Owner               Beneficial Ownership (1)          of Class (1)
         -------------------               ------------------------          ------------
<S>                                             <C>                             <C>

         Charles Norman, Trustee                3,217,000 (1)(2)                52.8%
         5949 Sherry Lane, Suite 525
         Dallas, Texas  75225

         All directors and officers             3,217,000 (1)(2)                52.8%
         as a group (3 persons)

</TABLE>

(1)      As part of the transaction  described in Item 1, above, we 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. We placed certain shares 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 May 31, 1999, are:

<TABLE>


    Name of Trust                  Beneficiaries                             Securities Held
<S>                           <C>                                          <C>


   Voting Trust I             Executive officers of ours to                350,000 Common Shares
                              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 Trust        (a) Consumer Investment Corporation           up to 700,000 Common
                                    ("CIC")  (for the benefit of the       Shares (all unused shares
                                      holders of the CIC notes)            will first be available toAutoPrime
                                                                           for satisfaction of our and/or CIC's
                                                                           obligations to them)

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

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

</TABLE>


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

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

         Possible Change of Control.  The 700,000 Common Shares held in Exchange
Trust,  as of May 31, 1999,  for the benefit of the holders of the CIC notes are
scheduled to be released from Exchange  Trust by December 31, 1999. In addition,
AutoPrime  may be  able to  lawfully  accept  by that  date  the  tender  of the
1,091,113  Common Shares held in Exchange  Trust for its benefit.  Further,  the
725,887 Common Shares held to satisfy our and/or CIC's  obligations to AutoPrime
may have been utilized by December 31, 1999.

         The  occurrence  of these events would reduce Mr.  Norman's  beneficial
ownership to 700,000  Common Shares (11.5% of the  outstanding  Common  Shares).

                                       31

<PAGE>

Simultaneously,  AutoPrime  would  become  the  beneficial  owner  of  at  least
1,091,113 Common Shares (18% of the outstanding Common Shares),  and perhaps the
additional  725,887  shares,  as  well.  In the  latter  case,  AutoPrime  would
beneficially own 1,817,000 (29.8%) of the outstanding Common Shares.


             Item 12. Certain Relationships and Related Transactions

         During fiscal 1998,  our CIC  subsidiary  purchased a telephone  system
from Advisory  Services,  Inc., an affiliate of Andrew Kacic. The purchase price
was $4,500 cash.  We believe  that amount did not exceed its fair market  value,
but we do not know what the cost of the equipment was to Mr. Kacic. At the time,
Mr.  Kacic was our  President  and a  Director.  He held  these  positions  from
December 1997 to August 1998. We disposed of our CIC  subsidiary in the December
30, 1998 Transaction.

         In addition,  in  September,  1999,  our former CIC  subsidiary  leased
computer  equipment  and  software  from Mr.  Kacic on a lease  that  expires in
September 1999. The amount  financed was $65,000 and the outstanding  balance at
June 20,  1999,  was $8,020.  The lease  payments  during  fiscal  1998  totaled
$28,800. The equipment is to be returned to Mr. Kacic at the end of the lease.

         We have received advances from and made payments for a company known as
"CIC Fund V." During that time, CIC Fund V was an affiliate of ours. It is owned
by William O. Merritt and Dennis Miller,  who were, at that time, also Directors
and officers of our Company.  The amounts  advanced by us to (or due to us from)
CIC Fund V at September 30, 1998 and 1997 were $0 and $45,709, respectively.

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

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

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

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

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





                                       32

<PAGE>


                    Item 13. Exhibits and Reports on Form 8-K

         (a)      Exhibits

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

          2.1  Master  Agreement  dated as of  December  30,  1998 by and  among
               AutoPrime,  Inc.,  AutoCorp Equities,  Inc.,  Consumer Investment
               Corporation,   Lenders  Liquidation  Centers,  Inc.,  William  O.
               Merritt,  Dennis W. Miller, Andrew J. Kacic, Vincent W. Bustillo,
               Wayne McLaws and Efrain Diaz.*

          2.2  Unconditional  Tender of  AutoCorp  Preferred  and Common  Stock,
               effective  December 30, 1998, by and between  AutoCorp  Equities,
               Inc. and AutoPrime, Inc.*

          2.3  Agreement to Issue  Additional  Preferred Stock between  AutoCorp
               Equities, Inc., AutoPrime, Inc., Consumer Investment Corporation,
               and Lenders  Liquidation  Centers,  Inc.  effective  December 30,
               1998.*

          2.4  Pledge  Agreement  dated as of December 30, 1998,  from  Consumer
               Investment  Corporation and Lenders Liquidation Centers,  Inc. to
               AutoPrime, Inc.*

          2.5  Pledge  Agreement  dated as of December 30, 1998, from William O.
               Merritt and Dennis W. Miller to AutoPrime, Inc.*

          2.6  General  Indemnity  Agreement dated as of December 30, 1998, from
               Consumer Investment  Corporation and Lenders Liquidation Centers,
               Inc. to AutoCorp Equities, Inc.*

          2.7  Ratification  of Obligations  dated as of December 30, 1998, from
               Consumer Investment  Corporation and Lenders Liquidation Centers,
               Inc. to AutoPrime, Inc.*

          2.8  Release of Pledge  Agreement  dated as of December 30, 1998, from
               AutoPrime, Inc. to the Merritt Group.*

          3.1  Certificate  of  Designation  of the  Series  "A"  Non-Cumulative
               Convertible Preferred Stock of AutoCorp Equities, Inc.*

          9.1  Voting Trust  Agreement I dated as of December 30, 1998,  Charles
               Norman,  Trustee  (When  this  document  has  been  appropriately
               amended,  it  will  contain  a  management  compensatory  plan or
               arrangement).*

          9.2  Voting Trust Agreement II dated as of December 30, 1998,  Charles
               Norman, Trustee.*















                                       33

<PAGE>




          9.3  Exchange Trust Agreement  dated as of December 30, 1998,  Charles
               Norman, Trustee.*

          10.1 Master Purchase and Sale Agreement dated October 6, 1997, between
               AutoPrime, Inc. and Consumer Investment Corporation.

          10.2 Guaranty  dated October 6, 1997,  executed by AutoCorp  Equities,
               Inc.  with respect to Master  Purchase and Sale  Agreement  dated
               October 6, 1997.

          10.3 Servicing  Agreement  dated October 6, 1997,  between  AutoPrime,
               Inc. and Consumer Investment Corporation.

          10.4 Master  Purchase  and Sale  Agreement  dated  January  22,  1998,
               between AutoPrime, Inc. and Lenders Auto Resale Centers of Texas,
               Inc.

          10.5 Servicing  Agreement dated January 22, 1998,  between  AutoPrime,
               Inc. and Lenders Auto Resale Centers of Texas, Inc.

          10.6 Master  Purchase  and Sale  Agreement  dated  January  12,  1999,
               between AutoPrime, Inc. and ACE Motor Company.

          10.7 Guaranty dated January 12, 1999,  executed by AutoCorp  Equities,
               Inc., ACE Motor Company,  and AutoCorp Financial Services,  Inc.,
               with respect to Master  Purchase and Sale Agreement dated January
               12, 1999.

         10.8  Servicing  Agreement dated January 12, 1999,  between  AutoPrime,
               Inc. and ACE Motor Company.

         10.9  Master  Purchase  and Sale  Agreement  dated  January  12,  1999,
               between AutoPrime, Inc. and AutoCorp Financial Services, Inc.

         10.10 Guaranty dated January 12, 1999,  executed by AutoCorp  Equities,
               Inc., ACE Motor Company,  and AutoCorp Financial Services,  Inc.,
               with respect to Master  Purchase and Sale Agreement dated January
               12, 1999.

         10.11 Servicing  Agreement dated January 12, 1999,  between  AutoPrime,
               Inc. and AutoCorp Financial Services.

         10.12 Business Loan  Agreement  dated October 26, 1998 between  Suburba
               Acquisition Company, Inc. d/b/a ACE Motor Co. and AutoPrime, Inc.

         10.13 Promissory  Note dated October 26, 1998, in the principal  amount
               of $750,000 executed by Suburba Acquisition  Company,  Inc. d/b/a
               ACE Motor Co. in favor of AutoPrime, Inc.

         10.14 Commercial  Security  Agreement  dated October 26, 1998,  between
               Suburba Acquisition Company, Inc. and AutoPrime, Inc.

         10.15 Promissory Note dated April 26, 1999, in the principal  amount of
               $750,000 executed by Suburba Acquisition Company,  Inc. d/b/a ACE
               Motor Co. in favor of AutoPrime, Inc.

         10.16 Business Loan  Agreement  dated June 17, 1999,  between ACE Motor
               Co. (formerly known as Suburba  Acquisition  Company,  Inc. d/b/a
               ACE Motor Co.) and AutoPrime, Inc.

         10.17 Promissory  Note dated June 17, 1999, in the principal  amount of
               $1,000,000,  executed by ACE Motor Co. (formerly known as Suburba
               Acquisition  Company,  Inc.  d/b/a  ACE  Motor  Co.) in  favor or
               AutoPrime, Inc.

         10.18 Commercial  Security  Agreement dated June 17, 1999,  between ACE
               Motor Co. (formerly known as Suburba  Acquisition  Company,  Inc.
               d/b/a ACE Motor Co.) and AutoPrime, Inc.

         10.19 Asset  Purchase   Agreement   dated  December  30,  1998  between
               AutoCorp  Financial  Services,  Inc.  and ACE Motor  Company,  as
               Buyer, and Lenders Auto Resale Center of Texas,  Inc. and Lenders
               Liquidation Centers, Inc., as Seller.

                                       34

<PAGE>



          21   List of Subsidiaries.

          27   Financial Data Schedule.

          99.1 Resume of Experience of Charles  Norman (This relates to "Item 9.
               Directors,  Executive  Officers,  Promoters and Control  Persons;
               Compliance  With Section  16(a) of the Exchange Act" in this Form
               10-KSB).*

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

          *    Incorporated  by  reference to the exhibit with the same name and
number attached to the Form 8-K  filed by AutoCorp Equities,  Inc. on  March 11,
1999.



         (b)      Reports on form 8-K

         No report on Form 8-K was filed during the fourth (last) quarter of the
fiscal year ended September 30, 1998.
















                                       35



<PAGE>


                                   SIGNATURES



         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




                                             AUTOCORP EQUITIES, INC.

                                             Registrant





Date: June 25, 1999                          By  /s/  Charles Norman
                                                 -----------------------------

                                                 Charles Norman, President and
                                                 Chief Executive
                                                 Officer (Principal Executive
                                                 Officer, Principal Financial
                                                 Officer and Director)



         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.






Date: June 25, 1999                          By: /s/ Hunter Ennis
                                                     ----------------------
                                                     Hunter Ennis, Director





Date:                                        By:
                                                     ----------------------
                                                      Darr Heath, Director













                                       36

<PAGE>


                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 1998 and 1997

                                                             Page No.


CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITORS' REPORT                                       1

         Consolidated Balance Sheets                               2

         Consolidated Statements of Operations                     4

         Consolidated Statements of Changes in
          Shareholders' Equity (Deficit)                           5

         Consolidated Statements of Cash Flows                     7

         Notes to Consolidated Financial Statements               10






















                                       37






<PAGE>


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

The Board of Directors
AutoCorp Equities, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets  of  AutoCorp
Equities,  Inc. and  subsidiaries  (the  "Company") as of September 30, 1998 and
1997,  and  the  related  consolidated  statements  of  operations,  changes  in
shareholders'  equity  (deficit),  and cash flows for each of the three years in
the period ended September 30, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these  consolidated  financial  statements based on our audits. We
did not audit the financial statements of Consumer Insurance Company (Cayman), a
wholly-owned  subsidiary of a  wholly-owned  subsidiary,  for September 30, 1997
which statements reflect total assets and revenues  constituting 9 percent and 2
percent, respectively, of the related consolidated totals at September 30, 1997.
Those  statements were audited by other auditors whose report has been furnished
to us,  and our  opinion,  insofar as it relates  to the  amounts  included  for
Consumer Insurance Company (Cayman),  is based solely on the report of the other
auditors.

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

In our opinion,  based on our audits and the report of the other  auditors,  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, 1998 and 1997, and the results of its
operations  and its cash  flows  for the years  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 2 to the
financial statements,  the Company has suffered recurring losses from operations
and has negative  working  capital at September 30, 1998 that raise  substantial
doubt about its ability to continue as a going  concern.  Management's  plans in
regard to these matters are also  described in Notes 2 and 12. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


                                         Hurley & Company
Granada Hills, California
March 19, 1999

                                        1


<PAGE>


                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1998 and 1997

                                                          1998           1997
                                                       ----------     ----------
ASSETS

CURRENT ASSETS:
         Cash and cash equivalents                     $   51,979     $  153,667
         Accounts receivable, net of
          allowance for doubtful accounts
          of $0 and $139,222 respectively                     468        817,324
         Loans receivable - officers, net                      --         47,677
         Inventory                                         95,297        946,378
         Prepaid expenses                                      --        406,685
                                                       ----------     ----------
                  Total current assets                    147,744      2,371,731

PROPERTY AND EQUIPMENT
         Furniture and fixtures                             5,500         62,198
         Office equipment                                   4,220         25,225
         Automobiles                                       14,500             --
         Machinery and equipment                           10,780          7,251
         Leasehold improvements                                --         20,561
                                                       ----------     ----------
                                                           35,000        115,235
         Less accumulated depreciation
          and amortization                                  1,361          9,494
                                                       ----------     ----------
                                                           33,639        105,741

OTHER ASSETS
         Deposits                                              --         22,118
         Financing costs, net                                  --         49,913
         Other                                                 --         66,962
                                                       ----------     ----------
                                                               --        138,993
                                                       ----------     ----------
                  Total assets                         $  181,383     $2,616,465
                                                       ==========     ==========


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


                                       2

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1998 and 1997

                                                      1998              1997
                                                -------------     -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Current portion, long-term debt               $     987,153     $     502,482
  Accounts payable                                    346,625           188,747
  Accrued expenses                                  1,143,336           413,961
  Related party payables (Note 10)                  5,678,208            45,709
  Other current liabilities                           188,943           182,507
  Deferred income                                           -            74,099
                                                -------------     -------------
         Total current liabilities                  8,344,265         1,407,505

Long-term debt, net of current portion
 and net of discounts of $5,733 and
 $28,878, respectively                              1,534,606         2,884,714

Provision for recourse liability (Note 6)           2,320,000                --

Commitments and contingencies                              --                --

SHAREHOLDERS' DEFICIT:

Common stock,  par value $.001; 110,000,000
 shares authorized, 6,099,435 and 5,100,018
 shares issued and outstanding at September
 30, 1998 and 1997, respectively                        6,099             5,100
Additional paid-in-capital                         11,469,716         9,309,979
Accumulated deficit                               (22,914,303)      (10,409,833)
Less treasury stock                                  (569,000)         (569,000)
Less stock subscriptions receivable                   (10,000)          (12,000)
                                                -------------     -------------
         Total shareholders' deficit              (12,017,488)       (1,675,754)
                                                -------------     -------------
         Total liabilities and
          shareholders' deficit                 $     181,383     $   2,616,465
                                                =============     =============





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

                                       3

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended September 30, 1998, 1997 and 1996

                                          1998         1997         1996
                                     ------------  -----------  -----------
Net Revenues                         $  4,098,074  $ 3,177,217  $   150,501

Cost of sales                           3,517,643    2,370,098       29,741
                                     ------------  -----------  -----------
      Gross profit                        580,431      807,119      120,760

Selling, administrative
 and other operating expenses           9,952,292    2,023,249      909,212

Provision for recourse liability        2,320,000            -            -
                                     ------------  -----------  -----------
Operating loss                        (11,691,861)  (1,216,130)    (788,452)

Other expense:
  Interest expense                       (478,621)    (283,479)     (43,229)
  Miscellaneous                            (5,225)           -            -
  Costs of abandoned business
   combination agreements                       -      (20,750)           -
  Loss on lot closings                   (144,740)           -            -
  Loss on conversion of
   debt to equity                        (184,023)           -            -
                                     ------------  -----------  -----------
Loss before
  discontinued operations             (12,504,470)  (1,520,359)    (831,681)

Discontinued operations                         -            -     (174,354)
                                     ------------  -----------  -----------
Net loss                             $(12,504,470) $(1,520,359) $(1,006,035)
                                     ============  ===========  ===========

Net loss per share before
 discontinued operations,
 basic and diluted                   $      (2.28) $      (.30) $     (5.32)
Discontinued operations,
 basic and diluted                              -            -        (1.11)
                                     ------------  -----------  -----------
Net loss per share,
 basic and diluted                   $      (2.28) $      (.30) $     (6.43)
                                     ============  ===========  ===========

Weighted average number
 of shares outstanding,
 basic and diluted                      5,484,807    5,098,584      156,532
                                     ============  ===========  ===========

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

                                        4


<PAGE>

<TABLE>

<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
              For the Years Ended September 30, 1998, 1997 and 1996

                              Common         Stock        Additional       Stock
                                              Par          Paid-In     Subscriptions     Treasury     Accumulated
                              Shares         Value         Capital       Receivable       Stock         Deficit         Total
                          -------------  -------------  -------------  -------------  -------------  -------------  -------------
<S>                       <C>            <C>            <C>            <C>            <C>            <C>            <C>
Balance at
 October 1, 1995                156,532  $         156  $   8,931,793  $    (652,000) $           -  $  (7,883,439) $     396,510

Net loss for the year
 ended September 30, 1996            -               -              -              -              -     (1,006,035)    (1,006,035)
                          -------------  -------------  -------------  -------------  -------------  -------------  -------------
Balance at
 September 30, 1996             156,532            156      8,931,793       (652,000)             -     (8,889,474)      (609,525)

Issuance of stock for
 cash and subscription          130,666            131         81,869        (12,000)             -              -         70,000

Issuance of stock to former
 officer for reduction
 of note payable                405,000            405        149,445              -              -              -        149,850

Issuance of stock
 for services                   126,820            127        146,872              -              -              -        146,999

Cancellation of stock
 subscription agreement               -              -              -        652,000       (569,000)             -         83,000

Stock issued in acquisition
 of subsidiaries              4,281,000          4,281              -              -              -              -          4,281

Net loss for the year
 ended September 30, 1997             -              -              -              -              -     (1,520,359)    (1,520,359)
                          -------------  -------------  -------------  -------------  -------------  -------------  -------------
Balance at
 September 30, 1997           5,100,018  $       5,100  $   9,309,979  $     (12,000) $    (569,000) $ (10,409,833) $  (1,675,754)

</TABLE>

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

                                        5

<PAGE>

<TABLE>

<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)(CONTINUED)
              For the Years Ended September 30, 1998, 1997 and 1996

                              Common         Stock        Additional       Stock
                                              Par          Paid-In     Subscriptions     Treasury     Accumulated
                              Shares         Value         Capital       Receivable       Stock         Deficit         Total
                          -------------  -------------  -------------  -------------  -------------  -------------  -------------
<S>                       <C>            <C>            <C>            <C>            <C>            <C>            <C>
Balance at
 September 30, 1997           5,100,018  $       5,100  $   9,309,979  $     (12,000) $    (569,000) $ (10,409,833) $  (1,675,754)

Shares issued to
 convert debt
 to equity                      490,076            490      1,839,400              -              -              -      1,839,890

Shares issued for
 services                       227,141            227        212,227              -              -              -        212,454

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

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

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

Net loss for the year
 ended September 30, 1998             -              -              -              -              -    (12,504,470)   (12,504,470)
                          -------------  -------------  -------------  -------------  -------------  -------------  -------------
Balance at
 September 30, 1998           6,099,435  $       6,099  $  11,469,716  $     (10,000) $    (569,000) $ (22,914,303) $ (12,017,488)
                          =============  =============  =============  =============  =============  =============  =============




</TABLE>





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

                                        6


<PAGE>

<TABLE>

<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended September 30, 1998, 1997 and 1996

                                            1998           1997           1996
                                       ------------    -----------    -----------
<S>                                    <C>             <C>            <C>

Net loss                               $(12,504,470)   $(1,520,359)   $(1,006,035)

Adjustments to reconcile
 net loss to net cash used
 in operating activities:
   Depreciation and
    amortization                            147,889         58,649         21,129
   Deferred income                          (74,099)      (352,799)       426,898
   Loss on lot closings                     144,740             --             --
   Loss on conversion of
    debt to equity                          184,023             --             --
   Interest on related
    party debt                               69,230             --             --
   Provision for
    recourse liability                    2,320,000             --             --
 Changes in:
   Accounts receivable                      816,856        360,155     (1,177,479)
   Related party payables                 5,563,269         45,709             --
   Receivables from officers                 47,677        (37,652)       (10,025)
   Prepaid expenses                         406,685         (6,685)             -
   Inventory                                851,081       (902,677)       (43,701)
   Accounts payable                         575,425         47,669         34,206
   Accrued expenses                         898,573       (235,200)     1,103,291
   Barter credits                                --             --         94,606
   Other                                     26,976        (94,066)        51,852
                                       ------------    -----------    -----------
         Total adjustments               11,978,325     (1,116,897)       500,777
                                       ------------    -----------    -----------
         Net cash used in
          operating activities             (526,145)    (2,637,256)      (505,258)
                                       ------------    -----------    -----------

Cash flows from investing activities:
  Capital expenditures                     (102,072)      (102,667)       (12,568)
                                       ------------    -----------    -----------
         Net cash used in
          investing activities             (102,072)      (102,667)       (12,568)
                                       ------------    -----------    -----------
</TABLE>



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

                                        7

<PAGE>

<TABLE>

<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
              For the Years Ended September 30, 1998, 1997 and 1996


                                                         1998          1997            1996
                                                     -----------    -----------    -----------
Cash flows from financing activities:
<S>                                                  <C>            <C>            <C>
  Principal payments
   on long-term debt                                 $  (466,767)   $   (54,080)   $        --
  Additional borrowings                                  993,124      2,751,575        713,921
  Proceeds from issuance
   of common stock                                           192             --             --
  Cancellation of stock
   subscription agreement                                    (20)            --             --
                                                     -----------    -----------    -----------
         Net cash provided by
           financing activities                          526,529      2,697,495        713,921
                                                     -----------    -----------    -----------
Net increase/(decrease) in
  cash and cash equivalents                             (101,688)       (42,428)       196,095

Cash and cash equivalents
  at beginning of period                                 153,667        196,095             --
                                                     -----------    -----------    -----------
Cash and cash equivalents
  at end of period                                   $    51,979    $   153,667    $   196,095
                                                     ===========    ===========    ===========

Supplemental disclosures of cash flow information:

  Cash paid for interest                             $   215,143    $    25,319    $     2,182
                                                     ===========    ===========    ===========

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


</TABLE>







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

                                        8

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
              For the Years Ended September 30, 1998, 1997 and 1996


                                  1998         1997          1996
                             ------------  ------------  ------------
Non-cash transactions

  Stock issued for services  $    212,454  $   146,999              -

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

  Stock issued to former
   officer for reduction
   of note payable                      -      149,850              -

  Stock issued to convert
   debt to equity, net of
   $119,584 of costs relating
   to conversion                1,839,890            -              -

  Treasury stock obtained
   in cancellation of
   subscription agreement               -      569,000              -

  Services provided for
   cancellation of stock
   subscription agreement               -       83,000              -

  Stock subscription
   issued for stock                     -       12,000              -
















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

                                        9

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

         The  consolidated  financial  statements  of the  Company  include  the
         accounts of AutoCorp Equities, Inc., ("AutoCorp"), and its wholly owned
         subsidiaries,   Consumer  Investment   Corporation  ("CIC"),   Consumer
         Insurance Services, Inc. ("CIS"),  Lenders Liquidation Centers ("LLC"),
         Lenders  Liquidation  Center   Reconditioning   ("Recon")  and  Suburba
         Acquisition  Company  ("Suburba").  CIS also  includes its wholly owned
         subsidiary,  Consumer Insurance Company Cayman ("Cayman"). All material
         intercompany   accounts  and  transactions   have  been  eliminated  in
         consolidation.

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

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

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

         Statement of  Financial Accounting Standards No. 107, Disclosures about
         Fair  Value  of   Financial  Instruments,  requires  that  the  Company
         disclose estimated fair values for its financial

                                       10

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 Fair value of financial instruments (continued)
 -----------------------------------

         instruments.  The  following  summary  presents  a  description  of the
         methodologies and assumptions used to determine such amounts.

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

         Since the fair value is estimated at  September  30, 1998,  the amounts
         that will actually be realized or paid at settlement of the instruments
         could be significantly different.

         The carrying  amount of cash and cash  equivalents is assumed to be the
         fair value  because of the  liquidity  of these  instruments.  Accounts
         receivable,  accounts  payable and accrued  expenses  approximate  fair
         value because of the short maturity of these instruments.  The recorded
         balance of notes  payable  less the amount  discounted  at issuance are
         estimated  to be the fair value since the rates  specified in the notes
         approximate current market rates.

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

         Due to the high losses from the notes secured by  automobiles  and sold
         with  recourse,  management  has decided to record revenue from sale of
         the notes only when collected.  Management has established a  provision
         for recourse liability of 30% of the total portfolio sold with recourse
         (see Note 6 below).  Management will review the loss ratio continuously
         to  both  measure the  improvement of  the screening  process  and  the
         collections procedures  and will  adjust  the expected  loss ratio when
         the actual losses differ from the estimate.



                                       11
<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 Revenue recognition (continued)
 -------------------

         The Company is paid to serve as the collection  agent for AutoPrime,  a
         third party  creditor which  purchased all the notes  receivable of the
         Company's subsidiaries under an agreement by which the Company factored
         the notes  receivable.  The  service  revenue  fee earned is based on a
         percentage of collections and is earned over the life of the notes. The
         Company will record the revenue as notes are collected.

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

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

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

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

 Inventory
 ---------

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

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

         The Company records its taxes in accordance with Statement of Financial
         Accounting  Standards No. 109 "Accounting for Income Taxes". Under this
         method,  deferred 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

                                       12

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 Income taxes (continued)
 ------------

         expected  to apply  to  taxable  income  in the  years  in which  those
         temporary  differences  are expected to be  recovered  or settled.  The
         effect in deferred tax assets and  liabilities of a change in tax rates
         is recognized in income in the period that includes the enactment date.
         Valuation  allowances are established when necessary to reduce deferred
         tax assets to the amount expected to be realized.

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

         Advertising and promotional costs are expensed as incurred. Advertising
         and  promotional  expenses were $680,058 and $128,872 in 1998 and 1997,
         respectively.

 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.

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

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


NOTE 2.  BASIS OF PRESENTATION

         During the two years ended  September 30, 1998 and 1997,  the Company's
         operations  were  negatively  impacted by the poor  performance  of the
         automobile  sales  and  financing  subsidiaries.   The  Company  has  a
         shareholders'  deficit of  approximately  $12,000,000  at September 30,
         1998 and a history of  operating  losses.  At September  30, 1998,  the
         Company also had negative


                                       13

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


NOTE 2.  BASIS OF PRESENTATION (continued)

         working  capital of  approximately  $8,200,000.  Management's  plans to
         return to profitability are three-fold.  First, to divest itself of the
         non-productive  subsidiaries  by exchanging  them for stock held by the
         Merritt  Group,  a related party  comprised of certain  officers of the
         Company.  Second,  to reduce debt and make  arrangements  to reduce the
         Company's  exposure to further liability by tendering equity securities
         to AutoPrime in satisfaction of the Company's obligations to AutoPrime.
         Third,  to  achieve   operational   profitability   by  purchasing  and
         generating higher quality notes receivable.

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

         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 3.  INCOME TAXES

         The Company has incurred  net book  operating  losses of  approximately
         $23,000,000 and corresponding tax net operating losses of approximately
         $15,000,000 since inception.  The Company has not yet filed tax returns
         and therefore has not  determined  the amount of those losses which may
         be used to offset future taxable income.  The Company plans to file all
         tax returns that are delinquent.

         Any tax benefit from the loss carryforwards at September 30, 1998 would
         be  totally  offset by a  valuation  allowance.  Any  changes  of stock
         ownership  exceeding 50% would limit the  Company's  ability to use the
         loss  carryforwards.  Since the Company has not yet developed a history
         of profitable operations,  utilization of the loss carryforwards cannot
         be reasonably assured.



                                       14

<PAGE>
                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


NOTE 4.  DISCONTINUED OPERATIONS

         In 1996, the Company completed the discontinuation of its entertainment
         operations resulting in a loss from discontinued operations of $174,354
         due to the write-off of remaining assets deemed to be worthless.


NOTE 5.  LONG-TERM DEBT

         Long-term  debt  at  September 30, 1998  and   1997  consisted  of  the
         following:
                                                September 30,     September 30,
                                                      1998             1997
                                                -------------     -------------
         Notes payable, unsecured, payable
          at maturity plus accrued interest
          at 14% per annum.  Converted to
          stock December 1998                   $   1,221,559     $   1,633,045

         Notes payable, unsecured, payable
          at maturity plus accrued interest
          at 12% per annum. Converted to
          stock December 1998                         462,074           934,680

         Notes payable, unsecured, payable
          at maturity plus accrued interest
          at 10% per annum. Converted to
          stock December 1998                         302,445           456,220

         Note payable, unsecured, for
          acquisition of car lot, payable
          in quarterly installments of
          $50,000.  No interest is charged
          on note.  Matures March 2000                284,000                 -

         Notes payable, unsecured, payable
          at maturity plus accrued interest
          at 15% per annum. Converted to
          stock December 1998                         155,446           281,446




                                       15

<PAGE>
                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998

NOTE 5.  LONG-TERM DEBT (continued)
                                                  September 30,    September 30,
                                                       1998             1997
                                                  ------------     ------------

         Note payable, unsecured, payable
          in quarterly installments of
          $10,049 principal plus interest
          at 24% per annum. Converted to
          stock December 1998                     $     55,868     $     79,072

         Note payable, unsecured, payable
          at maturity plus interest
          at 8% per annum.  Fully due and
          payable, matured September 1998               20,492           20,864

         Capital lease, secured by
          equipment, payable in monthly
          installments of $848 plus
          interest at 14% per annum.
          Matures August 2000                           16,685                -

         Capital lease, secured by
          equipment, payable in
          monthly installments of $277
          plus interest at 16% per annum.
          Matures September 1999                         8,923           10,747

         Unamortized discounts                          (5,733)         (28,878)
                                                  ------------     ------------
                                                     2,521,759        3,387,196
         Less current portion                          987,153          502,482
                                                  ------------     ------------
                                                  $  1,534,606     $  2,884,714
                                                  ============     ============

         Maturities of this debt are as follows:

                  Year ended September 30, 1999                     $   987,153
                                           2000                       1,524,606
                                           2001                          10,000
                                                                    -----------
                                                                    $ 2,521,759
                                                                    ===========

                                       16

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


NOTE 6.  COMMITMENTS AND CONTINGENCIES

         The  Company  leases  office  space and auto lots under  noncancellable
         operating lease  agreements which require payments of $12,719 per Month
         and expire in August 1999.  Future  minimum  annual  payments  required
         under the leases are $101,034 at September 30, 1998.

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

         In  December  1995,  the  Company's  subsidiary,  CIC,  entered  into a
         factoring agreement with Travelers Acceptance  Corporation ("TAC"). The
         agreement  allowed TAC to buy the Company's notes  receivable at 70% of
         the face value of the notes. TAC would then remit to the Company 20% of
         the customer payments received. The Company stopped submitting notes to
         TAC in October  1997. At September  30, 1998,  TAC held notes  totaling
         $681,141,  of which the Company would be  contingently  liable to repay
         approximately   $480,000  to  TAC  if  the  various  note  holders  all
         defaulted. However, in management's estimate, the Company will not have
         to repay or replace these notes, nor does management expect the Company
         to receive any contingent revenue. As of December 31, 1998, the Merritt
         Group assumed responsibility for this liability.

         In October 1997,  the Company  entered into an agreement with AutoPrime
         to provide  financing for the Company's  automobile  transactions.  The
         agreement  allows  AutoPrime to buy the notes at a  percentage  of face
         value  (averaging  approximately  75%) and then to pay the  Company  an
         additional  percentage  less the service fee  (averaging  approximately
         15%) on all  principal  collections.  The loss ratios of the notes sold
         have been much greater than expected to date. However, with a change in
         management and changes in the Company's  lending  criteria,  management
         expects to have better loan collection  results in future periods.  The
         loan balances and




                                       17

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


NOTE 6.  COMMITMENTS AND CONTINGENCIES (continued)

         contingent losses reserved are as follows:
                                         September 30,       September 30,
                                              1998                1997
                                         ------------        ------------
         Total liability, including
          the contracts sold by
          related parties.               $  7,730,000        $          -

         Recorded provision for
         recourse liability, estimated
          at 30% of total contracts
          outstanding                    $  2,320,000        $          -


NOTE 7.  STOCK OPTION PLAN

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

         Accounting for the stock option plan is in  accordance  with Accounting
         Principles   Board  Opinion  25,   "Accounting  for  Stock   Issued  to
         Employees."  Since common stock,  rather than stock options,  has  been
         issued for the full value of services rendered, there is no  additional
         compensation   to  be  disclosed   under   the  Company's   stock-based
         compensation  plan, as required by the  disclosure  provisions  of SFAS
         No. 123, "Accounting  for Stock-Based  Compensation".  As of  September
         30, 1998 and 1997, there were no

                                       18

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


NOTE 7.  STOCK OPTION PLAN (continued)

         options outstanding and 979,120 and 611,348 shares,  respectively,  had
         been issued.  At September 30, 1998 and 1997,  there were 1,020,880 and
         1,388,652 shares available for future issuance, respectively.


NOTE 8.  CONCENTRATION OF CREDIT RISK

         The  Company is reliant on the  financing  supplied  by  AutoPrime.  At
         September  30,  1998,  substantially  all of the auto loans made by the
         Company were financed by AutoPrime.  Subsequent to year end,  AutoPrime
         was tendered all of the issued preferred shares and  approximately  18%
         of the Company's common stock outstanding in exchange for certain debts
         and  other  consideration.  Management  believes  that  because  of the
         related  party  relationship,  the Company  will be able to continue to
         finance its automobile transactions.


NOTE 9.  STOCK TRANSACTIONS

         In July 1997,  the Company  acquired its  subsidiaries  in exchange for
         4,281,000  shares of its  common  stock at $1.00 per  share.  3,677,500
         shares were issued to the  shareholders  of the acquired  companies and
         603,500 shares were issued to related parties.

         In January 1998, CIC started  delivering  shares of AutoCorp  Equities,
         Inc.  common  stock to holders of its  unsecured  notes  payable as the
         unsecured  notes began to mature.  As of September  30,  1998,  490,076
         shares had been issued for  $1,839,890  which  converted  $1,400,570 of
         CIC's notes, which were in default,  $255,297 of accrued interest,  and
         resulted in a loss on conversion of $184,023.

         During 1998, the Company issued 160,474 shares of common stock at $1.00
         per share  and  66,667  shares of common  stock for $0.78 per share for
         accounting and consulting services totaling $212,454.

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

                                       19

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


NOTE 10. RELATED PARTY TRANSACTIONS

         The Company has received advances from and made payments  for a company
         that was related during the period known as CIC Fund V, which  is owned
         by the Merritt Group (see Note 2 above). AutoPrime  also sold contracts
         to  the  Merritt  Group  and  affiliates  in  an  aggregate  amount  of
         approximately  $3,000,000,  and advanced  certain additional funds, all
         represented by promissory  notes  accruing  interest  at 10% per annum.
         The Company was a co-maker of the notes and  AutoPrime  offset interest
         due on the loans and principal payments due from the Merritt Group  and
         CIC Fund V with funds due to the Company.  The amounts advanced  by CIC
         Fund  V  at  September   30,  1998  and  1997  were   $0  and  $45,709,
         respectively.  The balances of amounts owed to AutoPrime, primarily  as
         a result of  repurchase  obligations,  at September  30, 1998 and  1997
         were $5,678,208 and $0, respectively.

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

NOTE 11. LITIGATION

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

NOTE 12. SUBSEQUENT EVENTS

         In  November,   1998,  one  of  the  Company's  subsidiaries,   Suburba
         Acquisition  Company,   split  its  finance  serving  arm  into  a  new
         corporation  named AutoCorp  Financial  Services,  Inc. and changed the
         name  of the  used  automobile  purchase  and  sales  arm to ACE  Motor
         Company.

         In December,  1998, the Board of Directors authorized a new issuance of
         series A  non-cumulative  convertible  preferred  stock  of  10,000,000
         shares.  The preferred shares pay non-cumulative 5% dividends per year,
         have a liquidation  preference  of $1.00 per share,  and have no voting
         rights,  sinking fund provisions or redemption  rights.  The shares are
         convertible to common shares of the Company's  stock on a 1-for-1 basis
         at any time after December 31, 2001.

                                       20

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998


NOTE 12. SUBSEQUENT EVENTS (continued)

         The Company  disposed of certain  subsidiaries  in December  1998.  The
         transaction  resulted in the buying and selling of automobile financing
         contracts and the purchase of four used  automobile  lots.  The Company
         received  2,653,500 shares of its common stock from the former majority
         shareholders   of  thee  Company  in  exchange  for  the  wholly  owned
         subsidiaries  CIC, CIS, LLC and Recon. As part of the transaction,  the
         Company  restructured  its debt  with  AutoPrime,  tendering  6,578,485
         shares of preferred  stock and 1,091,113  shares of common stock in the
         Company for a $6,081,042  reduction in debt. The Company further agreed
         to put certain  shares of the Company's  common stock in trust accounts
         to help settle other liabilities and  contingencies,  including certain
         long-term  bondholders.  The overall effect of the transaction resulted
         in a gain on disposition of subsidiaries of approximately $600,000.



























                                       21


<PAGE>

<TABLE>

<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998

NOTE 13. BUSINESS SEGMENTS

         The  principal  business of the Company is the selling and financing of
         automobiles.  At September 30, 1998, the Company had five subsidiaries.
         (1) Consumer Investment Corporation (2) Lenders Liquidation Centers and
         (3) Suburba Acquisition Company which all sell automobiles, (4) Lenders
         Liquidation  Center  Reconditioning  which reconditions and makes ready
         for resale  cars  acquired  by trade in,  repossession  or  purchase at
         auction, and (5) Consumer Insurance Services, Inc.
         which offers insurance to customers of its automobile retail lots.

                                                                                                           Capital    Depreciation/
                                                                Revenues      Net Loss       Assets     Expenditures  Amortization
                                                              ------------  ------------  ------------  ------------  ------------
<S>                                                           <C>           <C>           <C>           <C>           <C>
         Year ended September 30, 1998:
           Automobile retail lots                             $  3,881,748  $(11,415,610) $    177,066  $    102,072  $    147,191
           Reconditioning center                                   213,349      (134,450)        4,146             -           698
           Insurance service                                         2,977      (141,801)          171             -             -
                                                              ------------  ------------  ------------  ------------  ------------
                                                              $  4,098,074   (11,691,861) $    181,383  $    102,072  $    147,889
                                                              ============                ============  ============  ============
         Net interest expense and other                                         (812,609)
                                                                            ------------
                                                                            $(12,504,470)
                                                                            ============
         Year ended September 30, 1997:
           Automobile retail lots                             $  2,988,073  $ (1,024,794) $  2,330,926  $     99,042  $     58,649
           Reconditioning center                                    96,416      (172,271)       15,820         3,625             -
           Insurance service                                        92,728       (19,065)      269,719             -             -
                                                              ------------  ------------  ------------  ------------  ------------
                                                                $3,177,217    (1,216,130) $  2,616,465  $    102,667  $     58,649
                                                              ============                ============  ============  ============
         Net interest expense and other                                         (304,229)
                                                                            ------------
                                                                            $ (1,520,359)
                                                                            ============
         Year ended September 30, 1996:
           Automobile retail lots                             $    150,501  $   (772,944) $  1,801,556  $     12,568  $     21,129
           Insurance service                                             -       (15,508)      127,488             -             -
                                                              ------------  ------------  ------------  ------------  ------------
                                                              $    150,501      (788,452) $  1,929,044  $     12,568  $     21,129
                                                              ============                ============  ============  ============
         Net interest expense and discontinued operations                       (217,583)
                                                                            ------------
                                                                            $ (1,006,035)
                                                                            ============

</TABLE>

                                       22




<PAGE>

<TABLE>

<CAPTION>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998

NOTE 14.  UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

         The following  unaudited pro forma combined condensed balance sheet and
         combined  condensed   statement  of  operations  reflect  the  combined
         financial  position and operations of AutoCorp  Equities,  Inc. and the
         companies  acquired  as of July 21,  1997.  This  unaudited  pro  forma
         combined information gives effect to the acquisition using the purchase
         method of  accounting.  This  unaudited  pro forma  combined  condensed
         balance  sheet should be read in  conjunction  with the  unaudited  pro
         forma  combined  condensed  statement  of  operations  and the separate
         consolidated financial statements and notes of AutoCorp Equities,  Inc.
         and subsidiaries.

                             AUTOCORP EQUITIES, INC.
              UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                                  July 21, 1997

                                                     AutoCorp                 Combined
                                                     Equities    Acquired     Pro Forma
                                                       Inc.      Companies     Results
                                                   -----------  -----------  -----------
                                    ASSETS
                                    ------
<S>                                                <C>          <C>          <C>
         CURRENT ASSETS:
         Cash                                      $        42  $   371,441  $   371,483
         Accounts receivable                                 -    1,185,881    1,185,881
         Loans receivable-officers                           -       26,525       26,525
         Inventory                                           -    1,223,144    1,223,144
         Prepaid expenses                              400,000            -      400,000
                                                   -----------  -----------  -----------
            Total current assets                       400,042    2,806,991    3,207,033

         Property and equipment, net                         -       89,774       89,774
         Other assets                                        -      226,774      226,774
                                                   -----------  -----------  -----------
                                                   $   400,042  $ 3,123,539  $ 3,523,581
                                                   ===========  ===========  ===========

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

         CURRENT LIABILITIES:
         Current portion, long-term debt           $         -  $   465,631  $   465,631
         Accounts payable and accrued expenses         208,651      820,779    1,029,430
                                                   -----------  -----------  -----------
            Total current liabilities                  208,651    1,286,410    1,495,061

         Long-term debt, net of current portion              -    2,718,729    2,718,729

         Deferred income                                     -      431,186      431,186

         SHAREHOLDERS' EQUITY (DEFICIT):
         Common stock                                      686        6,000        6,686
         Additional paid-in capital                  8,592,113            -    8,592,113
         Accumulated deficit                        (8,401,408)  (1,318,786)  (9,720,194)
                                                   -----------  -----------  -----------
            Total shareholders' equity(deficit)        191,391   (1,312,786)  (1,121,395)
                                                   -----------  -----------  -----------
                                                   $   400,042   $3,123,539  $ 3,523,581
                                                   ===========  ===========  ===========

</TABLE>




                                       23

<PAGE>

                    AUTOCORP EQUITIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998

NOTE 14.  UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
         (continued)

                             AUTOCORP EQUITIES, INC.
         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
                      For the 42 Weeks Ended July 21, 1997

                                            AutoCorp                 Combined
                                            Equities    Acquired     Pro Forma
                                              Inc.      Companies     Results
                                          -----------  -----------  -----------

         Net revenues                     $     7,964  $ 2,058,260  $ 2,066,224

         Cost of sales                              -    1,474,532    1,474,532
                                          -----------  -----------  -----------
         Gross profit                           7,964      583,728      591,692

         Selling, administrative and
          other operating expenses            207,922    1,025,371    1,233,293
                                          -----------  -----------  -----------

         Operating loss                      (199,958)    (441,643)    (641,601)

         Other expense:
           Interest                            (4,908)    (182,032)    (186,940)
                                          -----------  -----------  -----------

         Net loss                         $  (204,866) $  (623,675) $  (828,541)
                                          ===========  ===========  ===========













                                       24


<PAGE>



                             AUTOCORP EQUITIES, INC.

                                   FORM 10-KSB

                  FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1998



                                INDEX TO EXHIBITS


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

          2.1  Master  Agreement  dated as of  December  30,  1998 by and  among
               AutoPrime,  Inc.,  AutoCorp Equities,  Inc.,  Consumer Investment
               Corporation,   Lenders  Liquidation  Centers,  Inc.,  William  O.
               Merritt,  Dennis W. Miller, Andrew J. Kacic, Vincent W. Bustillo,
               Wayne McLaws and Efrain Diaz.*

          2.2  Unconditional  Tender of  AutoCorp  Preferred  and Common  Stock,
               effective  December 30, 1998, by and between  AutoCorp  Equities,
               Inc. and AutoPrime, Inc.*

          2.3  Agreement to Issue  Additional  Preferred Stock between  AutoCorp
               Equities, Inc., AutoPrime, Inc., Consumer Investment Corporation,
               and Lenders  Liquidation  Centers,  Inc.  effective  December 30,
               1998.*

          2.4  Pledge  Agreement  dated as of December 30, 1998,  from  Consumer
               Investment  Corporation and Lenders Liquidation Centers,  Inc. to
               AutoPrime, Inc.*

          2.5  Pledge  Agreement  dated as of December 30, 1998, from William O.
               Merritt and Dennis W. Miller to AutoPrime, Inc.*

          2.6  General  Indemnity  Agreement dated as of December 30, 1998, from
               Consumer Investment  Corporation and Lenders Liquidation Centers,
               Inc. to AutoCorp Equities, Inc.*

          2.7  Ratification  of Obligations  dated as of December 30, 1998, from
               Consumer Investment  Corporation and Lenders Liquidation Centers,
               Inc. to AutoPrime, Inc.*

          2.8  Release of Pledge  Agreement  dated as of December 30, 1998, from
               AutoPrime, Inc. to the Merritt Group.*

          3.1  Certificate  of  Designation  of  the  Series  A   Non-Cumulative
               Convertible Preferred Stock of AutoCorp Equities, Inc.*

          9.1  Voting Trust  Agreement I dated as of December 30, 1998,  Charles
               Norman,  Trustee.  (When  this  document  has been  appropriately
               amended,  it  will  contain  a  management  compensatory  plan or
               arrangement.)*

          9.2  Voting Trust Agreement II dated as of December 30, 1998,  Charles
               Norman, Trustee.*

          9.3  Exchange Trust Agreement  dated as of December 30, 1998,  Charles
               Norman, Trustee.*

          10.1 Master Purchase and Sale Agreement dated October 6, 1997, between
               AutoPrime, Inc. and Consumer Investment Corporation.

                  [This  agreement  contains the  following  exhibits  which are
                  omitted  from this  filing but will be made  available  to the
                  Commission upon request:

                Exhibit               Title of Exhibit
                -------               ----------------
                A                              Bill of Sale
                B                              Resolutions/Evidence of Authority



<PAGE>

                C                              Incumbency Certificate
                D                              Owner's Agreement
                E                              Power of Attorney]


          10.2 Guaranty  dated October 6, 1997,  executed by AutoCorp  Equities,
               Inc.  with respect to Master  Purchase and Sale  Agreement  dated
               October 6, 1997.

          10.3 Servicing  Agreement  dated October 6, 1997,  between  AutoPrime,
               Inc. and Consumer Investment Corporation.

          10.4 Master  Purchase  and Sale  Agreement  dated  January  22,  1998,
               between AutoPrime, Inc. and Lenders Auto Resale Centers of Texas,
               Inc.

          [This agreement contains the following exhibits which are omitted from
          this filing but will be made available to the Commission upon request:

               Exhibit                Title of Exhibit
               -------                ----------------
               A                               Bill of Sale
               B                               Resolutions/Evidence of Authority
               C                               Incumbency Certificate
               D                               Owner's Agreement
               E                               Power of Attorney]

          10.5 Servicing  Agreement dated January 22, 1998,  between  AutoPrime,
               Inc. and Lenders Auto Resale Centers of Texas, Inc.

          10.6 Master  Purchase  and Sale  Agreement  dated  January  12,  1999,
               between AutoPrime, Inc. and ACE Motor Company.

          [This agreement contains the following exhibits which are omitted from
          this filing but will be made available to the Commission:

               Exhibit                Title of Exhibit
               -------                ----------------
               A                               Bill of Sale
               B                               Resolutions/Evidence of Authority
               C                               Incumbency Certificate
               D                               Owner's Agreement
               E                               Power of Attorney]


          10.7 Guaranty dated January 12, 1999,  executed by AutoCorp  Equities,
               Inc., ACE Motor Company,  and AutoCorp Financial Services,  Inc.,
               with respect to Master  Purchase and Sale Agreement dated January
               12, 1999.

          10.8 Servicing  Agreement dated January 12, 1999,  between  AutoPrime,
               Inc. and ACE Motor Company.

          10.9 Master  Purchase  and Sale  Agreement  dated  January  12,  1999,
               between AutoPrime, Inc. and AutoCorp Financial Services, Inc.

                  [This  agreement  contains the  following  exhibits  which are
                  omitted  from this  filing but will be made  available  to the
                  Commission upon request:

               Exhibit                Title of Exhibit
               -------                ----------------
               A                               Bill of Sale
               B                               Resolutions/Evidence of Authority
               C                               Incumbency Certificate
               D                               Owner's Agreement


                                       2

<PAGE>

               E                               Power of Attorney]


         10.10 Guaranty dated January 12, 1999, executed by AutoCorp  Equities,
               Inc., ACE Motor Company,  and AutoCorp Financial Services,  Inc.,
               with respect to Master  Purchase and Sale Agreement dated January
               12, 1999.

         10.11 Servicing  Agreement dated January 12, 1999, between  AutoPrime,
               Inc. and AutoCorp Financial Services.

         10.12 Business Loan  Agreement  dated October 26, 1998 between  Suburba
               Acquisition Company, Inc. d/b/a ACE Motor Co. and AutoPrime, Inc.

         10.13 Promissory  Note dated October 26, 1998, in the principal  amount
               of $750,000 executed by Suburba Acquisition  Company,  Inc. d/b/a
               ACE Motor Co. in favor of AutoPrime, Inc.

         10.14 Commercial  Security  Agreement  dated October 26, 1998,  between
               Suburba Acquisition Company, Inc. and AutoPrime, Inc.

         10.15 Promissory Note dated April 26, 1999, in the principal  amount of
               $750,000 executed by Suburba Acquisition Company,  Inc. d/b/a ACE
               Motor Co. in favor of AutoPrime, Inc.

         10.16 Business Loan  Agreement  dated June 17, 1999,  between ACE Motor
               Co. (formerly known as Suburba  Acquisition  Company,  Inc. d/b/a
               ACE Motor Co.) and AutoPrime, Inc.

         10.17 Promissory  Note dated June 17, 1999, in the principal  amount of
               $1,000,000,  executed by ACE Motor Co. (formerly known as Suburba
               Acquisition  Company,  Inc.  d/b/a  ACE  Motor  Co.) in  favor or
               AutoPrime, Inc.

         10.18 Commercial  Security  Agreement dated June 17, 1999,  between ACE
               Motor Co. (formerly known as Suburba  Acquisition  Company,  Inc.
               d/b/a ACE Motor Co.) and AutoPrime, Inc.

         10.19 Asset  Purchase   Agreement   dated  December  30,  1998  between
               AutoCorp  Financial  Services,  Inc.  and ACE Motor  Company,  as
               Buyer, and Lenders Auto Resale Center of Texas,  Inc. and Lenders
               Liquidation Centers, Inc., as Seller.

                  [The  Agreement  contains  the  following  exhibits  which are
                  omitted  from this filing,  but will be made  available to the
                  Commission upon request:

                Exhibits              Title of Exhibit
                A                           Assets (including Retail Installment
                                            Contracts Schedules and inventory of
                                            Personal Property)
                B                           Bill of Sale
                C                           Allonge
                D                           Schedule of Seller's Existing
                                            Obligations (Advanced
                                            Funds)
                E                           Description of Retail Installment
                                            Contracts
                                            Purchased By AutoPrime from Seller]

         21       List of Subsidiaries.

         27       Financial Data Schedule


                                       3

<PAGE>

         99.1     Resume of  Experience  of Charles  Norman  (This  relates to
                  "Item  9.  Directors,   Executive  Officers,  Promoters  and
                  Control  Persons;  Compliance  With  Section  16(a)  of  the
                  Exchange Act" in this Form 10-KSB)*
 ----------------------------------------------------
          *    Incorporated  by  reference to the exhibit with the same name and
               number attached to the Form 8-K filed by AutoCorp Equities,  Inc.
               on March 11, 1999.








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