----

----

| (Mark      one)                                                                                                                                                                          |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| [X]           Quarterly      report under Section 13 or 15(d) of the Securities Exchange Act of      1934                         |
|                                                                                                                                                       |
| For      the quarterly period ended September 30, 2007                                                                                                                                   |
|                                                                                                                                                       |
| [   ]           Transition      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934 |
|                                                                                                                                                       |
| For      the transition period from ___________ to ____________                                                                                                                          |
|                                                                                                                                                       |
| Commission      File Number:  0-11582                                                                                                                                          |
|                                                                                                                                                       |
| AUTO UNDERWRITERS OF      AMERICA, INC.(Exact      Name of Small Business Issuer as Specified in its  Charter)                                                                           |
|                                                                                                                                                       |
| California(State      or Other Jurisdiction ofIncorporation      or Organization)                                                                                                        | 94-2915849(IRS      EmployerIdentification      No.) |
|                                                                                                                                                       |
| 2670      South White RoadSuite      241San Jose, CA      95148(Address      of Principal Executive Offices)                                                                             | (408)      270-3587(Issuer’s      Telephone Number) |
|                                                                                                                                                       |
| (Former      Name, Former Address and Former Fiscal Year, if Changed Since Last      Report)                                                                                             |

----

----

----

| AUTO      UNDERWRITERS OF AMERICA, INC. TABLE      OF CONTENTS |
|---------------------------------------------------------------------|

|                                                                                                                     |                                                                                                          | PAGE   |
|--------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |                                                                                                          |   |
| PART I.                                                                                                                  | FINANCIAL INFORMATION                                                                                         |   |
|                                                                                                 |                                                                                      |   |
| Item 1.                                                                                                                  | Financial Statements                                                                                          |   |
|                                                                                                 |                                                                                      |   |
|                                                                                                                     | Consolidated Balance Sheets as of September 30, 2007 and June      30, 2007 (unaudited)                       | 3      |
|                                                                                                 |                                                                                      |   |
|                      | Consolidated Statements of Operations for the Three Months      Ended September 30, 2007 and 2006 (unaudited) | 4      |
|                                                                                                 |                                                                                      |   |
|                                                                                                                     | Consolidated Statements of Cash Flows for the Three Months      Ended September 30, 2007 and 2006 (unaudited) | 5      |
|                                                                                                 |                                                                                      |   |
|                                                                                                                     | Notes to Consolidated Financial Statements      (unaudited)                                                   | 6-8    |
|                                                                                                 |                                                                                      |   |
| Item 2.                                                                                                                  | Management’s Discussion and Analysis of Financial      Condition                                        | 9      |
|                                                                                                 |                                                                                      |   |
| Item 3.                                                                                                                  | Controls and Procedures                                                                                       | 13     |
|                                                                                                 |                                                                                      |   |
| PART II.                                                                                                                 | OTHER INFORMATION                                                                                             |   |
|                                                                                                 |                                                                                      |   |
| Item 1.                                                                                                                  | Legal Proceedings                                                                                             | 15     |
|                                                                                                 |                                                                                      |   |
| Item 2.                                                                                                                  | Unregistered Sales of Equity Securities and Use of      Proceeds                                              | 16     |
|                                                                                                 |                                                                                      |   |
| Item 3.                                                                                                                  | Default Upon Senior Securities                                                                                | 16     |
|                                                                                                 |                                                                                      |   |
| Item 4.                                                                                                                  | Submission of Matters to a Vote of Security      Holders                                                      | 16     |
|                                                                                                 |                                                                                      |   |
| Item 5.                                                                                                                  | Other Information                                                                                             | 16     |
|                                                                                                 |                                                                                      |   |
| Item 6.                                                                                                                  | Exhibits                                                                                                      | 16     |

----

Part

Item

| Auto Underwriters of America, Inc.        |
|-------------------------------------------|
| Consolidated      Balance Sheets          |
| September      30, 2007 and June 30, 2007 |
| (Unaudited)                               |

|                                                                                                                               |   | September                                                                                                                                              |   |                           |   | June                                                                                                                                                   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                           |   |       |   |                           |   |
|     Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | $      | 811,176                                                                                                                                                |   |                           | $      | 1,671,430                                                                                                                                              |   |
|     Finance      receivables, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |         9,747,751                                                                                              |   |                           |   | 8,932,091                                                                                                                                              |   |
|     Refundreceivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 964,000                                                                                                                                                |   |                           |   | -                                                                                                                                                      |   |
|     Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |         1,471,281                                                                                              |   |                           |   | 1,507,276                                                                                                                                              |   |
|     Prepaid      and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 84,823                                                                                                                                                 |   |                           |   | 63,470                                                                                                                                                 |   |
|     Property      and equipment, net of accumulated depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 98,304                                                                                                                                                 |   |                           |   | 111,408                                                                                                                                                |   |
| Total      assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $      |       13,177,335                                                                                                         |   |                           | $      | 12,285,675                                                                                                                                             |   |
|                                                                                                                               |   |                           |   |       |   |                           |   |
| Liabilities      and stockholders’ deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                   |   |                           |   |                                                                                                                                                   |   |
| Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                   |   |                           |   |                                                                                                                                                   |   |
| Accounts      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | $      | 640,475                                                                                                                                                |   |                           | $      | 193,130                                                                                                                                                |   |
| Accrued      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         1,175,113                                                                                              |   |                           |   | 796,688                                                                                                                                                |   |
| Dividends      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |            288,910                                                                              |   |                           |   | 187,749                                                                                                                                                |   |
| Drafts      payable and floor plan liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 1,176,210                                                                                                                                              |   |                           |   | 1,103,250                                                                                                                                              |   |
| Other      notes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         1,429,328                                                                                              |   |                           |   | 961,198                                                                                                                                                |   |
| Advances      from related parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |            673,846                                                                              |   |                           |   | 673,846                                                                                                                                                |   |
| Deferred      sales tax payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 1,058,878                                                                                                                                              |   |                           |   | 892,763                                                                                                                                                |   |
| Revolving      credit facilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 11,339,464                                                                                                                                             |   |                           |   | 10,086,070                                                                                                                                             |   |
| Total      Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   17,782,224                                                                                                                                 |   |                           |   | 14,894,694                                                                                                                                             |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |   |                           |   |                                                                                                                                                   |   |
| Stockholders’      deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                   |   |                           |   |                                                                                                                                                   |   |
|     Series      A convertible preferred stock: no par value: 10,000,000      authorized,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                   |   |                           |   |                                                                                                                                                   |   |
|        2,023,220      issued and outstanding.  Liquidation preference      of  $5,058,050                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 4,152,576                                                                                                                                              |   |                           |   | 4,253,735                                                                                                                                              |   |
|          Series B convertible preferred stock: no pare value, 4,800,000 authorized,      0 issued and outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -                                                                                                                                                      |   |                           |   | -                                                                                                                                                      |   |
|     Common      stock: no par value: 100,000,000 authorized                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                                                                                                   |   |                           |   |                                                                                                                                                   |   |
|         7,400,575      issued and outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 8,459,430                                                                                                                                              |   |                           |   | 8,450,586                                                                                                                                              |   |
|     Retained      deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (17,216,895                                                                                                                                            | )      |                           |   | (15,313,340                                                                                                                                            | )      |
| Total      stockholders’ deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | (4,604,889                                                                                                                                             | )      |                           |   | (2,609,019                                                                                                                                             | )      |
| Total      liabilities and stockholders’ deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | $      | 13,177,335                                                                                                                                             |   |                           | $      | 12,285,675                                                                                                                                             |   |

----

| Auto Underwriters of America, Inc.                          |
|-------------------------------------------------------------|
| Consolidated      Statements of Operations                  |
| For      the three months ended September 30, 2007 and 2006 |
| (Unaudited)                                                 |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2007                                                                                                                                                   |    |                           |   | 2006                                                                                                                                                   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                       |   |                           |    |            |   |                           |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|     Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $      |         3,871,853                                                                                              |    |                           | $      | 862,990                                                                                                                                                |   |
|     Interest      income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |            417,664                                                                              |    |                           |   | 390,437                                                                                                                                                |   |
|     Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |              31,287                                                                   |    |                           |   | 19,972                                                                                                                                                 |   |
| Total      revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         4,320,804                                                                                              |    |                           |   | 1,273,399                                                                                                                                              |   |
|                                                                                                                                                                               |   |                           |    |       |   |                           |   |
| Costs      and expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|     Cost      of sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |         2,871,292                                                                                              |    |                           |   | 566,397                                                                                                                                                |   |
|     Selling,      general and administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |         1,413,923                                                                                              |    |                           |   | 715,337                                                                                                                                                |   |
|     Provision      for credit losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         1,003,268                                                                                              |    |                           |   | 213,267                                                                                                                                                |   |
|     Depreciation      and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |              13,104                                                                   |    |                           |   | 103,103                                                                                                                                                |   |
|     Interest      expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 922,772                                                                                                                                                |    |                           |   | 948,804                                                                                                                                                |   |
| Total      costs and expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |         6,224,359                                                                                              |    |                           |   | 2,546,908                                                                                                                                              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Loss      before income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |        (1,903,555                                                                                                   | )       |                           |   | (1,273,509                                                                                                                                             | )      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Net      loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |        (1,903,555                                                                                                   | )       |                           |   | (1,273,509                                                                                                                                             | )      |
| Preferred      deemed dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | (101,159                                                                                                                                               | )  |                           |   | (963,074                                                                                                                                               | )      |
| Net      loss available to common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | (2,004,714                                                                                                                                             | )       |                           | $      | (2,236,583                                                                                                                                             | )      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Loss      per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|     Basic      and diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $      | (0.28                                                                                                                                                  | )       |                           | $      | (0.37                                                                                                                                                  | )      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Weighted      average number of shares outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|     Basic      and diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 7,040,575                                                                                                                                              |    |                           |   | 6,060,328                                                                                                                                              |   |

----

| Auto Underwriters of America, Inc.                          |
|-------------------------------------------------------------|
| Statements      of Cash Flows                               |
| For      the three months ended September 30, 2007 and 2006 |
| (Unaudited)                                                 |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2007                                                                                                                                                   |    |                           |   | 2006                                                                                                                                                   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Operating      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                           |    |       |   |                           |   |
|   Net      loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $      | (1,903,575                                                                                                                                             | )       |                           | $      | (1,273,509                                                                                                                                             | )      |
|   Adjustments      to reconcile net loss to net cash used in operating      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|        Depreciation      and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 13,104                                                                                                                                                 |    |                           |   | 103,103                                                                                                                                                |   |
|        Bad      debt expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | -                                                                                                                                                      |    |                           |   | 35,000                                                                                                                                                 |   |
|        Imputed      Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 8,844                                                                                                                                                  |    |                           |   | 10,015                                                                                                                                                 |   |
|        Amortization      of loan discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 468,130                                                                                                                                                |    |                           |   | 561,045                                                                                                                                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|   Change      in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|             Finance receivables originations and purchased, net of      payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | (2,436,927                                                                                                                                             | )       |                           |   | 337,494                                                                                                                                                |   |
|             Provision for credit losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 1,003,269                                                                                                                                              |    |                           |   | 213,267                                                                                                                                                |   |
|             Inventory acquired in repossession                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 618,000                                                                                                                                                |    |                           |   | 474,198                                                                                                                                                |   |
|                    Subtotal      finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (815,658                                                                                                                                               | )       |                           |   | 1,024,959                                                                                                                                              |   |
|   Changes      in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|             Deferred financing cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | -                                                                                                                                                      |    |                           |   | (52,361                                                                                                                                                | )      |
|             Accounts receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (16,537                                                                                                                                                | )       |                           |   | 17,743                                                                                                                                                 |   |
|             Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 35,995                                                                                                                                                 |    |                           |   | (576,655                                                                                                                                               | )      |
|             Prepaid and other expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (4,815                                                                                                                                                 | )       |                           |   | (6,714                                                                                                                                                 | )      |
|             Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 610,769                                                                                                                                                |    |                           |   | (258,008                                                                                                                                               | )      |
|        Drafts      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 72,960                                                                                                                                                 |    |                           |   | 216,505                                                                                                                                                |   |
|             Deferred sales taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 166,115                                                                                                                                                |    |                           |   | (58,165                                                                                                                                                | )      |
|   Net      cash used in operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | (1,364,648                                                                                                                                             | )       |                           |   | (257,044                                                                                                                                               | )      |
|                                                                                                                               |   |                           |    |       |   |                           |   |
| Investing      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|   Purchase      of finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (964,000                                                                                                                                               | )  |                           |   | -                                                                                                                                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Financing      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|   Proceeds      from related party                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | -                                                                                                                                                      |    |                           |   | 2,799                                                                                                                                                  |   |
|   Proceeds      from revolving credit facilities, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 1,253,394                                                                                                                                              |    |                           |   | (485,043                                                                                                                                               | )      |
|   Repayments      on other notes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | -                                                                                                                                                      |    |                           |   | (134,766                                                                                                                                               | )      |
|   Proceeds      from sale of Series A convertible  preferred    stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 215,000                                                                                                                                                |    |                           |   | 909,492                                                                                                                                                |   |
|   Net      cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 1,468,394                                                                                                                                              |    |                           |   | 286,884                                                                                                                                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Increase      (decrease) in cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (860,254)                                                                                                                                              |    |                           |   | 29,840                                                                                                                                                 | )      |
| Cash      at beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 1,671,430                                                                                                                                              |    |                           |   | 4,161                                                                                                                                                  |   |
| Cash      at end of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $      | 811,176                                                                                                                                                |    |                           | $      | 34,001                                                                                                                                                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Cash      paid for:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|   Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $      | 445,799                                                                                                                                                |    |                           | $      | 377,744                                                                                                                                                |   |
|   Income      tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | -                                                                                                                                                      |    |                           |   | -                                                                                                                                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
| Non-cash      supplemental disclosures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                   |    |                           |   |                                                                                                                                                   |   |
|    Preferred      dividend                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 101,159                                                                                                                                                |    |                           |   | 963,074                                                                                                                                                |   |
|    Common      stock issued to repay debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | -                                                                                                                                                      |    |                           |   | 700,000                                                                                                                                                |   |
|    Common      stock issued for convertible preferred stock sale offering      costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 720,000                                                                                                                                                |    |                           |   | -                                                                                                                                                      |   |

----

| Auto Underwriters of America, Inc.              |
|-------------------------------------------------|
| Notes      to Consolidated Financial Statements |
| (Unaudited)                                     |

| Finance      receivables                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 12,644,795 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|
| Allowance      for credit losses                                                                                                                                                                                                                                                                                                                                                                 |   |   | (2,897,044 | )      |
|                                                                  |   |   |       |   |
| Finance      receivables, net                                                                                                                                                                                                                                                                                                                                                                    |   | $      | 9,747,751  |   |

| Balance      at beginning of period                                                                                                                                                                                                                                                                                                                                                              |   | $      | 2,505,938  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|
| Provision      for credit losses                                                                                                                                                                                                                                                                                                                                                                 |   |   | 1,003,269  |   |
| Net      charge offs                                                                                                                                                                                                                                                                                                                                                                             |   |   | (1,230,163 | )      |
| Net      recoveries                                                                                                                                                                                                                                                                                                                                                                              |   |   | 618,000    |   |
|                                                                  |   |   |       |   |
| Balance      at end of period                                                                                                                                                                                                                                                                                                                                                                    |   | $      | 2,897,044  |   |

----

----

----

Item

|   | · | our      ability to continue operating as a going  concern; |
|--------|--------|-------------------------------------------------------------|

|   | · | resolution      and payment of unpaid federal and statetaxes; |
|--------|--------|---------------------------------------------------------------|

|   | · | unfavorable      outcome with respect to pendinglitigation; |
|--------|--------|-------------------------------------------------------------|

|   | · | general      economic and industry conditions; |
|--------|--------|------------------------------------------------|

|   | · | our      capital requirements and dependence on the sale of our equity      securities; |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | the      liquidity of the Company’s common stock will be affected by the lack of or      limited trading market; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | intense      industry competition; |
|--------|--------|------------------------------------|

|   | · | our      ability to purchase installmentcontracts; |
|--------|--------|----------------------------------------------------|

|   | · | the      creditworthiness of contractobligors; |
|--------|--------|------------------------------------------------|

|   | · | shortages      in availability of qualifiedpersonnel; |
|--------|--------|-------------------------------------------------------|

|   | · | legal      and financial implications of unexpected catastrophic    events; |
|--------|--------|-----------------------------------------------------------------------------|

|   | · | regulatory      or legislative changes effecting the automobile finance industry;      and |
|--------|--------|--------------------------------------------------------------------------------------------|

----

|   | · | reliance      on, and the ability to attract, keypersonnel. |
|--------|--------|-------------------------------------------------------------|

|   | · | Our      ability to procure suitable lot locations at reasonable    costs. |
|--------|--------|----------------------------------------------------------------------------|

|   | · | Our      ability to build our management strength to support the store      growth. |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Our      ability to maintain competitive direct retail and direct lending      operations. |
|--------|--------|--------------------------------------------------------------------------------------------|

----

----

| Auto      Underwriters of America, Inc |
|----------------------------------------|
| (unaudited)                            |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Three      Months EndedSeptember      30,                                                                                                              |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2007                                                                                                                                                   |    |   |   | 2006 |   |
| Operating      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                           |    |       |   |                           |   |
|   Net      income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $      | (1,903,555                                                                                                                                             | )       |   | $ | (1,273,509 | ) |
|                                                                                             |   |                                                                                                                                                   |    |   |   |   |   |
|       Depreciation      and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 13,104                                                                                                                                                 |    |   |   | 103,103 |   |
|            Bad debt expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -                                                                                                                                                      |    |   |   | 35,000 |   |
|       Imputed      interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 8,844                                                                                                                                                  |    |   |   | 10,015 |   |
|       Amortization      of loan discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 468,130                                                                                                                                                |    |   |   |   |   |
|       Changes      in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |  (815,658                                                                                                                                         | )       |   |   | 1,024,959 |   |
|       Changes      in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 864,487                                                                                                                                                |    |   |   | (717,657 | ) |
|           Net      cash used in operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (1,364,648                                                                                                                                             | )       |   |   | 257,044 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                                   |    |   |   |   |   |
| Cash      provided by investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (964,000                                                                                                                                               | )  |   |   | - |   |
| Cash      provided by financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 1,468,394                                                                                                                                              |    |   |   | 286,884 |   |
| Increase      (decrease) in cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | $      | (860,254                                                                                                                                               | )       |   | $ | 29,840 |   |

----

Item

----

|   | · | The      current organization of the accounting department does not provide the      Company with the adequate skills to accurately account for and disclose      significant transactions or disclosures within the time periods as      specified by SEC rules and forms. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Substantive      matters are not being addressed appropriately by the Board resulting in      inadequate oversight from theBoard.  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      process that the Company is currently using to monitor the ongoing quality      of internal controls performance, identify deficiencies and trigger timely      corrective action is not workingeffectively. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | There      is no adequate means of accurately capturing and recording certain      significant and complex businesstransactions. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

----

Part

ITEM 1

----

ITEM

ITEM

ITEM

ITEM

ITEM

| 10.1 | Escrow,      Servicing and Consignment Sale Agreement dated July 19, 2007 (incorporated      by reference to Exhibit 10.1 to our Form 8-K filed with the U.S.      Securities and Exchange Commission on July 27, 2007). |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1 | Principal      Executive Officer Certification under Section 302 of the Sarbanes-Oxley      Act of 2002                                                                                                                  |
| 31.2 | Principal      Financial Officer Certification under Section 302 of the Sarbanes-Oxley      Act of 2002                                                                                                                  |
| 32.1 | Principal      Executive Officer Certification under Section 906 of the Sarbanes-Oxley      Act of 2002                                                                                                                  |
| 32.2 | Principal      Financial Officer Certification under Section 906 of the Sarbanes-Oxley      Act of 2002                                                                                                                  |

----

| SIGNATURES |
|------------|

|                                         | Auto      Underwriters of America, Inc.                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                       | By:   /s/ Dean      Antonis                                                                 |
|                                                                                                                                                                                                                                       | DeanAntonis                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                       | President and Treasurer      (Principal Executive,Financial and Accounting      Officer)                                                                                                                                                                                                                                                                                                                                                   |