| **UNITED STATES SECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549 |
|----------------------------------------------------------------------------|
|                                                                       |
| ** **                                                                 |
| **FORM 10-QSB**                                                            |

[**X**]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| For the fiscal quarter ended: |                                                           | Commission file number: |
|---------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| **March 31, 2005**                                |                                                                                                                                                                                                                                                                                                                                                        | **0-11582**             |

****

| **Auto Underwriters of America, Inc.**(Exact name of registrant as specified in its charter) |
|----------------------------------------------------------------------------------------------|

| **California**                                                 | **             ** | **94-2915849**                       |
|----------------------------------------------------------------|------------------------------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |                                                                                    | (I.R.S. Employer Identification No.) |

****

| **2755 Campus Drive, Suite 155, San Mateo, California** |
|---------------------------------------------------------|
| (Address of principal executive offices)                |
|                                                    |
|                                                    |
| **94403**                                               |
| (Zip Code)                                              |
|                                                    |
|                                                    |
| **(650) 377-4381**                                      |
| (Registrant's telephone number, including area code)    |

                Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [  ]  No [X  ]

                Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicabledate.

|                            |                                                                                                                | Outstanding at |
|----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
| Title of Each Class        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | July 11, 2005  |
| Common Stock, no par value |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 6,020,053      |

1

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

|                                |                                                                            | **PAGE**      |
|--------------------------------|----------------------------------------------------------------------------|---------------|
|                           |                                                                            |               |
| **PART I.**                    | **FINANCIAL INFORMATION**                                                  |               |
|       | **     **                                         |               |
| Item 1.                        | Financial Statements                                                       |               |
|       | **     **                                         |               |
|                           | Balance Sheet as of March 31, 2005                                         | 3             |
|       | **     **                                         |               |
|                                | Statements of Operations for the Nine Months Ended March 31, 2005 and 2003 | 4             |
|       | **     **                                         |               |
|                                | Statements of Cash Flows for the Nine Months Ended March 31, 2005 and 2004 | 5             |
|       | **     **                                         |               |
|                                | Notes to Financial Statements                                              | 6 – 10  |
|       | **     **                                         |               |
| Item 2.                        | Management’s Discussion and Analysis of Financial Condition          | 11 – 15 |
|       | **     **                                         |               |
| Item 3.                        | Controls and Procedures                                                    | 16            |
|       | **     **                                         |               |
| **PART II.**                   | **OTHER INFORMATION**                                                      |               |
|       | **     **                                         |               |
| Item 1.                        | Legal Proceedings                                                          | 17            |
|       | **     **                                         |               |
| Item 2.                        | Unregistered Sales of Equity Securities and Use of Proceeds                | 17            |
|       | **     **                                         |               |
| Item 3.                        | Default Upon Senior Securities                                             | 17            |
|       | **     **                                         |               |
| Item 4.                        | Submission of Matters to a Vote of Security Holders                        | 17            |
|       | **     **                                         |               |
| Item 5.                        | Other Information                                                          | 17            |
|       | **     **                                         |               |
| Item 6.                        | Exhibits                                                                   | 17            |

2

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**Part I. Financial Information**

| **Item 1.  Financial Statements** | **                    ** | **Auto Underwriters of America, Inc.** |
|-------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|
| **Balance Sheets**                                    |                                                                                                                              |                                                            |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | March 31, 2005 |                                                                                                                                                        |   | June 30, 2004             |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (Unaudited)         |                                                                                                                                                        |   |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                     |                           |   |       |   |                           |  |
|     Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $                   | 34,952                                                                                                                                                 |   |                                | $ | 101,019 |  |
|     Finance receivables, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                     | 9,324,310                                                                                                                                              |   |                                |   | 9,265,565 |  |
|     Other receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                     | 857,412                                                                                                                                                |   |                                |   | 328,924 |  |
|     Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                     | 1,440,737                                                                                                                                              |   |                                |   | 325,411 |  |
|     Fixed assets, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                     | 106,154                                                                                                                                                |   |                                |   | - |  |
|     Prepaid and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                     | 61,290                                                                                                                                                 |   |                                |   | 39,696 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                             | $                   | 11,824,855                                                                                                                                             |   |                                | $ | 10,060,615 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                     |                                                                                                                                                        |   |                                |   |  |  |
| Liabilities and stockholders’ equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                     |                                                                                                                                                        |   |                                |   |  |  |
|     Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $                   | 1,272,853                                                                                                                                              |   |                                | $ | 825,538 |  |
|     Funding payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                     | 1,117,002                                                                                                                                              |   |                                |   | 1,176,109 |  |
|     Income taxes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                     | 183,706                                                                                                                                                |   |                                |   | 88,706 |  |
|     Senior debts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     | 7,437,207                                                                                                                                              |   |                                |   | 6,485,257 |  |
|     Subordinated debts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                     | 75,877                                                                                                                                                 |   |                                |   | 210,000 |  |
|     Advances from related parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                     | 671,245                                                                                                                                                |   |                                |   | 577,873 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     | 10,757,890                                                                                                                                             |   |                                |   | 9,363,483 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                     |                                                                                                                                                        |   |                                |   |  |  |
|     Commitments and contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                     |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                     |                                                                                                                                                        |   |                                |   |  |  |
|     Stockholders’ equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                     |                                                                                                                                                        |   |                                |   |  |  |
|        Preferred stock: no par value: 10,000,000 authorized                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                     |                                                                                                                                                        |   |                                |   |  |  |
|            None issued or outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                     |                                                                                                                                                        |   |                                |   |  |  |
|        Common stock: no par value: 100,000,000 authorized                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                     |                                                                                                                                                        |   |                                |   |  |  |
|            Issued and outstanding: 2,385,053                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                     | 3,636,378                                                                                                                                              |   |                                |   | 3,451,378 |  |
|        Deferred compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                     | (230,175                                                                                                                                               | ) |                                |   | (230,175 | ) |
|        Retained deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                     | (2,339,238                                                                                                                                             | ) |                                |   | (2,524,071 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |
|            Total stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                     | 1,066,965                                                                                                                                              |   |                                |   | 697,132 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $                   | 11,824,855                                                                                                                                             |   |                                | $ | 10,060,615 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                     |                                                                                                                                                        |   |                                |   |  |  |

See Notes to Financial Statements Unaudited.3

----

| **Statements of Operations** | **                    ** | **Auto Underwriters of America, Inc.** |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|
| **(Unaudited)**              |                                                                                                                              |                                                            |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Three Months ended March 31, |                                                                                                                                                        |        | Nine Months Ended March 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 2005                              |                                                                                                                                                        |        | 2004                             |   |  | 2005 |  |  | 2004 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |
|                                                                          |                                   |                           |   |              |   |                           |   |      |  |                           |   |      |  |                           |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|     Sales                                                                                                                                                                                                                                                                                                                                                                                                                         | $                                 | 4,446,818                                                                                                                                              |        |                                  | $ | 2,144,319 |  |  | $ | 8,787,892 |  |  | $ | 2,166,398 |  |
|     Interest income                                                                                                                                                                                                                                                                                                                                                                                                               |                                   | 409,819                                                                                                                                                |        |                                  |   | 296,704 |  |  |  | 1,280,440 |  |  |  | 454,929 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   | 4,856,637                                                                                                                                              |        |                                  |   | 2,441,023 |  |  |  | 10,068,332 |  |  |  | 2,621,327 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
| Costs and expenses:                                                                                                                                                                                                                                                                                                                                                                                                                              |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|     Cost of sales                                                                                                                                                                                                                                                                                                                                                                                                                 |                                   | 2,704,700                                                                                                                                              |        |                                  |   | 1,243,488 |  |  |  | 5,247,552 |  |  |  | 1,243,488 |  |
|     Selling, general and administrative                                                                                                                                                                                                                                                                                                                                                                                           |                                   | 1,001,910                                                                                                                                              |        |                                  |   | 428,613 |  |  |  | 2,548,362 |  |  |  | 633,484 |  |
|     Provision for credit losses                                                                                                                                                                                                                                                                                                                                                                                                   |                                   | 475,396                                                                                                                                                |        |                                  |   | 399,086 |  |  |  | 1,306,624 |  |  |  | 399,086 |  |
|     Interest expense                                                                                                                                                                                                                                                                                                                                                                                                              |                                   | 196,529                                                                                                                                                |        |                                  |   | 97,498 |  |  |  | 674,381 |  |  |  | 164,925 |  |
|     Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   | 5,806                                                                                                                                                  |        |                                  |   | - |  |  |  | 11,580 |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   | 4,384,341                                                                                                                                              |        |                                  |   | 2,168,685 |  |  |  | 9,788,499 |  |  |  | 2,440,983 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|         Income before taxes                                                                                                                                                                                                                                                                                                                                                                                   |                                   | 472,296                                                                                                                                                |        |                                  |   | 272,338 |  |  |  | 279,833 |  |  |  | 180,844 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
| Provision for income taxes                                                                                                                                                                                                                                                                                                                                                                                                                       |                                   | 160,500                                                                                                                                                |        |                                  |   | - |  |  |  | 95,000 |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|         Net income                                                                                                                                                                                                                                                                                                                                                                                            | $                                 | 311,796                                                                                                                                                |        |                                  | $ | 272,338 |  |  | $ | 184,833 |  |  | $ | 180,844 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
| Basic earnings per share:                                                                                                                                                                                                                                                                                                                                                                                                                        | $                                 | 0.14                                                                                                                                                   |        |                                  | $ | 0.70 |  |  | $ | 0.08 |  |  | $ | 0.54 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
| Basic weighted average shares outstanding:                                                                                                                                                                                                                                                                                                                                                                                                       |                                   | 2,306,942                                                                                                                                              |        |                                  |   | 387,000 |  |  |  | 2,235,162 |  |  |  | 333,306 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |

****

****See Notes to Financial Statements Unaudited.4

----

| **Statements of Cash Flows** | **                    ** | **Auto Underwriters of America, Inc.** |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|
| **(Unaudited)**              |                                                                                                                              |                                                            |

****

****

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Nine Months Ended March 31, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 2005                             |                                                                                                                                                        |  | 2004 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |
| Operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                  |                           |   |       |  |                           |   |
|   Net income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $                                | 184,833                                                                                                                                                |  |  | $ | 180,344 |  |
|                                                                                            |                                  |                                                                                                                                                        |  |  |  |  |  |
|   Adjustments to reconcile income from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                  |                                                                                                                                                        |  |  |  |  |  |
|       to net cash (used in) provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  |                                                                                                                                                        |  |  |  |  |  |
|       Debt issuance costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                  | -                                                                                                                                                      |  |  |  | (32,250 | ) |
|       Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                  | 11,580                                                                                                                                                 |  |  |  | - |  |
|       Discount on sale of finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  | 48,740                                                                                                                                                 |  |  |  | - |  |
|       Changes in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                  |                                                                                                                                                        |  |  |  |  |  |
|            Finance receivable originations                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                  | (8,327,137                                                                                                                                             | ) |  |  | (4,735,296 | ) |
|            Finance receivable collections                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                  | 3,117,501                                                                                                                                              |  |  |  | 1,926,192 |  |
|            Provision for credit losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                  | 1,306,624                                                                                                                                              |  |  |  | 399,086 |  |
|            Inventory acquired in repossession                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  | 2,147,940                                                                                                                                              |  |  |  | 3,819 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                    Subtotal finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  | (1,755,072                                                                                                                                             | ) |  |  | (2,406,199 | ) |
|       Changes in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                  |                                                                                                                                                        |  |  |  |  |  |
|            Other receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                  | (528,488                                                                                                                                               | ) |  |  | (22,493 | ) |
|            Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  | (1,115,327                                                                                                                                             | ) |  |  | - |  |
|            Prepaid and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                  | (21,594                                                                                                                                                | ) |  |  | - |  |
|            Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                  | 239,724                                                                                                                                                |  |  |  | 1,079,376 |  |
|            Income tax payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  | 95,000                                                                                                                                                 |  |  |  | - |  |
|            Funding payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                  | (59,107                                                                                                                                                | ) |  |  | 1,305,262 |  |
|            Deferred sales tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  | 212,016                                                                                                                                                |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                   Net cash (used in) provided by operating activities                                                                                                                                                                                                                                                                                                                                                                                                   |                                  | (2,687,695                                                                                                                                             | ) |  |  | 104,040 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
| Investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                  |                                                                                                                                                        |  |  |  |  |  |
|    Proceeds from sale of finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  | 1,961,140                                                                                                                                              |  |  |  | - |  |
|    Purchase of loan portfolio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                  | -                                                                                                                                                      |  |  |  | (4,469,737 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                   Net cash (used in) provided in investing activities                                                                                                                                                                                                                                                                                                                                                                                                   |                                  | 1,961,140                                                                                                                                              |  |  |  | (4,469,737 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
| Financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                  |                                                                                                                                                        |  |  |  |  |  |
|   Borrowings of other debt, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  | (66,857                                                                                                                                                | ) |  |  | 140,000 |  |
|   Borrowings under senior credit facility, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                  | 638,399                                                                                                                                                |  |  |  | 3,862,603 |  |
|   Advances from related parties, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  | 88,946                                                                                                                                                 |  |  |  | 372,510 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                   Net cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                             |                                  | 660,488                                                                                                                                                |  |  |  | 4,375,113 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
| Increase (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                  | (66,067                                                                                                                                                | ) |  |  | 9,416 |  |
| Cash and cash equivalents at:     Beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  | 101,019                                                                                                                                                |  |  |  | 55,046 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
| Cash and cash equivalents at:                 End of period                                                                                                                                                                                                                                                                                                                                                                                                                  | $                                | 34,952                                                                                                                                                 |  |  | $ | 64,462 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |

See Notes to Financial Statements Unaudited.5

----

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

### **Note 1 – Organization and Business**

   Auto Underwriters of America, Inc. (“AUA” ) began operations in August 1983 under the name Advanced Cellular Technology, Inc. and developed and marketed cellular mobile telephone control units andresold used PBX telecommunications equipment. On December 31, 1990, we suspended operations and remained inactive until December 2002, when we adopted our current name and began our principal operations as a specialty finance company and specialty retailer ofused cars and light trucks.

   We use AutoUnderwriter.com credit decision software tofinance the sale of used cars by our three car sales lots in Houston, Texas and we target a selected customercredit profile.  Such purchasers generally do not meet the credit standards of traditional lenders, such as banks and credit unions, because of the age of the vehicle being financed or the customer’s credit history.  Our borrowers have short orimpaired credit histories.  In making decisions regarding the purchase of a particular contract, we consider the following factors related to the borrower: place and length of residence, current and prior job status, history in making installment payments forautomobiles, current income and credit history.  In addition, we examine the value of the automobile in relation to the purchase price and the term of the contract.

   Our three car lot operations purchase, recondition, sell and finance used vehicles under the name Affordable Cars & Trucks.  Each lot analyzes the credit worthiness and develops proper dealstructure for each customer contract financed. We also take into account the individual’s income, job and residence history, credit score and history. 

   We are still at an early stage in the rollout of our financing programs and retail concept. The primary drivers for future earnings growth will be vehicle unit sales growth from geographic expansion, comparablestore sales increases, and interest income from growth in our finance receivable portfolio.

**Note 2 – Summary of Significant Accounting Policies**

*General*

**

   The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the fiscalyear ending June 30, 2005.  For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-KSB for the year ended June 30, 2004.

**

*Use of Estimates*

**

   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates.

*Concentration of Risk*

   We originate and currently hold the majority of our finance receivable portfolio within the states of Texas and California.  We believe there is a direct correlation between the unemployment rate in Texas,particularly within the Houston area, and the future performance of our portfolio.  A worsening in the state of the local economies or a protracted economic decline could increase the likelihood of losses due to credit and market risks and could create the needfor substantial additions to the provision for loan losses.  We believe the current reserve levels are adequate for the foreseeable future.   

   We maintain our cash and cash equivalents in high quality financial institutions.  The balances, at times, may exceed federally insured limits.  Our cash and cash equivalents represent money marketaccounts at financial institutions.    Our senior debt, line of credit, matured on March 31, 2005.  We are currently negotiating with our senior debt lender to renew or refinance such credit facility but we can give no assurance as to the successof renegotiating our senior line of credit. 

*Finance Receivables and Allowance for Credit Losses*

**

   Finance receivables represent contracts with consumers residing primarily in Texas and California.  Our finance receivable portfolios consist of originations on installment sale contracts from the sale ofused vehicles at our dealerships and from acquisitions of portfolios.  Finance receivables consist of contractually scheduled payments from installment contracts net of an allowance for credit losses.

6

----

   Because of the nature of our customers and their sub-prime credit histories, we consider the establishment of adequate reserves for credit losses to be imperative.  We segregate our contracts into pools forpurposes of establishing reserves for finance receivables.  The determination of provisions for loan losses is based on estimates that are susceptible to significant changes in the economic environment and market conditions.  The allowance for credit lossesis based upon historical and recent credit loss experience, a periodic analysis of the portfolio, economic conditions and trends and collateral values.  The allowance for credit losses is periodically reviewed by management with any changes reflected in currentoperations.  Management believes that the provision for loan losses is adequate based on information currently available.  It is at least reasonably possible that actual credit losses may be materially different from the recorded allowance for creditlosses.

**

*Provisions for Loan Losses*

   Provisions for loan losses are charged to operations in amounts sufficient to maintain the provision for loan losses at a level considered adequate to cover probable credit losses on finance receivables.Provisions for loan losses include nonaccretable acquisition fees, the provision charged to operations, decreased by charge-offs, net of recoveries. Provision for loan losses is maintained at a level that, in management’s judgment, is sufficient to absorb thelosses inherent in the finance receivables. Management periodically evaluates the adequacy of the provision, which is based on our past charge-off experience.  Receivables, including accrued interest, are charged-off to the provision for loan losses when werepossess and dispose of the collateral or the account is otherwise deemed uncollectible. We believe that the provision for loan losses is adequate to cover probable credit losses on finance receivables based on information currently available; however, because theprovision for loan losses is based on estimates, there can be no assurance that the ultimate charge-off amount will not exceed such estimates, which would result in an additional charge to operations.

*Charge Off Policy*

   Our policy is to fully reserve an account in the month in which the account becomes 90 days contractually delinquent if we have not repossessed the related vehicle.  Otherwise, we charge off the account whenthe vehicle securing the delinquent contract is repossessed and liquidated.  The charge-off represents the difference between the actual fair market value of the repossessed vehicle or net realizable wholesale proceeds and the carrying amount of the delinquentcontract, including principal and accrued interest.  Accrual of finance charge income is suspended on accounts that are more than 60 days contractually delinquent.

*Revenue Recognition*

**

   Interest income from installment sales contracts is recognized using the interest method.  Accrual of interest income continues until installment contracts are collected in full, become 60 days delinquent, orare charged off.   Sales are recognized when a customer’s credit has been approved, the customer has taken possession of the vehicle, a contract has been executed, and all down payments have been received or scheduled.  

*Related Party Transactions*

**

   Advances from related parties for the nine months ended March 2005 and 2004 were $88,946 and $372,510  respectively, and represent unsecured, non-interest bearing funds advanced to us by Gateway CreditHoldings, Inc (“Gateway”), a company with a common officer and shareholder, to fund working capital operations, as necessary. 

**

   We have an informal license agreement with Gateway to pay $150 per funded contract for use of Gateway’s computer systems and software in qualifying prospects.  During the nine months ended March 31,2005 and 2004, we paid Gateway approximately $13,800 and $32,100 respectively for the use of software technology used in the credit scoring evaluation process of our underwriting. 

   In March 2005, we purchased $378,252 in finance receivables from EPIC Financial Services, a company with a common officer and shareholder, with a discount of $64,701 using financing from our existing senior lineof credit. 

*Reclassifications*

   Certain prior year amounts in the accompanying financial statements have been reclassified to conform to the fiscal 2005 presentation.

## **Note 3 – Finance Receivables**

   We originate installment sale contracts from the sale of used vehicles at our dealerships, direct loans, and purchases at a discount from third party dealers indirect loans.  These installment sale contractstypically include interest rates ranging from approximately 12% to 27% per annum and currently provide payment periods ranging from 18 to 60 months.  The components of finance receivables as of March 31, 2005 and June 30, 2004 are as follows:

|                                                                                                                                                                                                                                                                                                        | March 31, |                                                                                                                                                        |   | June 30,                       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------|---|
|                                                                                                                                                                                                                                                                                                        | 2005           |                                                                                                                                                        |   | 2004                           |   |
|                                                                                                                                                                                                                                                                                                        |                |                                                                                                                                                        |   |                                |   |
|                                                   |                |                           |   |       |   |                           |  |
| Finance receivables                                                                                                                                                                                                                                                                                    | $              | 11,380,075                                                                                                                                             |   |                                | $ | 11,273,547 |  |
| Allowance for credit losses                                                                                                                                                                                                                                                                            |                | (2,055,765                                                                                                                                             | ) |                                |   | (2,007,982 | ) |
|                                                                                                                                                                                                                                                                                                   |                |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                        |                |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                        | $              | 9,324,310                                                                                                                                              |   |                                | $ | 9,265,565 |  |
|                                                                                                                                                                                                                                                                                                        |                |                                                                                                                                                        |   |                                |   |  |  |

7

----

   Changes in the finance receivables allowance for credit losses for the nine months ended March 31, 2005 and 2004 are as follows:

|                                                                                                                                                                                                                                                                                                                                                                    | Nine Months Ended March 31, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                    | 2005                             |                                                                                                                                                        |  | 2004 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |
|                                                             |                                  |                           |  |       |  |                           |  |
| Balance at beginning of period                                                                                                                                                                                                                                                                                                                                     | $                                | 2,007,982                                                                                                                                              |  |  | $ | 97,851 |  |
| Provision for credit losses                                                                                                                                                                                                                                                                                                                                        |                                  | 1,306,624                                                                                                                                              |  |  |  | 399,086 |  |
| Nonaccretable acquisition fees                                                                                                                                                                                                                                                                                                                                     |                                  | -                                                                                                                                                      |  |  |  | 2,979,799 |  |
| Acquisition of portfolio                                                                                                                                                                                                                                                                                                                                           |                                  | 64,701                                                                                                                                                 |  |  |  | - |  |
| Net charge offs                                                                                                                                                                                                                                                                                                                                                    |                                  | (3,471,482                                                                                                                                             | ) |  |  | (509,903 | ) |
| Net recoveries                                                                                                                                                                                                                                                                                                                                                     |                                  | 2,147,940                                                                                                                                              |  |  |  | 3,819 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                               |                                  |                                                                                                                                                        |  |  |  |  |  |
|   Balance at end of period                                                                                                                                                                                                                                                                                                                                    | $                                | 2,055,765                                                                                                                                              |  |  | $ | 2,970,652 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |

#### **Note 4 – Fixed Assets**

   In November 2004, we acquired certain furniture, fixtures and leasehold improvements related to a lease agreement at one of our lots in Houston, Texas.  Fixed assets are depreciated straight line over a fiveyear period.  The capitalized cost of fixed assets was $117,734 with a related accumulated depreciation of $11,580 as of March 31, 2005 with no comparable fixed assets in the corresponding prior period. 

**Note 5 – Accrued Liabilities**

   A summary of accrued liabilities as of March 31, 2005 and June 30, 2004 is as follows:

|                                                                                                                                                                                                                                                                                                                                                                    | March 31, |                                                                                                                                                        | June 30,                       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                    | 2005      |                                                                                                                                                        | 2004                           |
|                                                                                                                                                                                                                                                                                                                                                                    |           |                                                                                                                                                        |                                |
|                                                             |           |                           |       |  |                           |
| Accounts payable                                                                                                                                                                                                                                                                                                                                                   | $         | 248,283                                                                                                                                                |                                | $ | 247,967 |
| Advances                                                                                                                                                                                                                                                                                                                                                           |           | 134,506                                                                                                                                                |                                |  | 138,932 |
| Deferred sales tax                                                                                                                                                                                                                                                                                                                                                 |           | 587,303                                                                                                                                                |                                |  | 375,287 |
| Payroll and taxes                                                                                                                                                                                                                                                                                                                                                  |           | 182,949                                                                                                                                                |                                |  | 4,090 |
| Dealer inventory tax                                                                                                                                                                                                                                                                                                                                               |           | 27,610                                                                                                                                                 |                                |  | 13,067 |
| Other                                                                                                                                                                                                                                                                                                                                                              |           | 57,250                                                                                                                                                 |                                |  | 46,195 |
|                                                                                                                                                                                                                                                                                                                                                                    |           |                                                                                                                                                        |                                |  |  |
|                                                                                                                                                                                                                                                                                                                                                               |           |                                                                                                                                                        |                                |  |  |
|                                                                                                                                                                                                                                                                                                                                                                    | $         | 1,237,901                                                                                                                                              |                                | $ | 825,538 |
|                                                                                                                                                                                                                                                                                                                                                                    |           |                                                                                                                                                        |                                |  |  |

**Note 6 – Debt**

   We have a $7,000,000 senior debt revolving line of credit (“LOC”) with Oak Rock Financial, LLC, (“Oak Rock”) bearing interest at the greater of prime+7% or 11.25%.  The LOC is securedby all of our assets and a personal validity guarantee by our President.  At March 31, 2005, the LOC balance outstanding was $7,437,207 of which $437,207 was over the facility amount.  We are currently negotiating with Oak Rock for a waiver on our LOCoverdraft position as well as an increase in our LOC. 

   Our senior debt revolving LOC became due March 31, 2005.  During the renewal period prior to the maturity date of March 2005, both AUA and Oak Rock verbally agreed to extend our LOC instruments and our LOC iscurrently on a month-to-month basis.  We are negotiating with Oak Rock to renew the LOC at a higher borrowing base and also searching for new funding sources.  However, we cannot give any assurance that we will be successful in renegotiating the existingLOC with Oak Rock or find other available financing sources. 

   Interest on our LOC debt is payable monthly.  Our LOC facility contains various reporting and performance covenants including maintenance of certain financial ratios and tests, limitations on borrowings fromother sources, restrictions on certain operating activities, and restrictions on the payment of dividends or distributions.

   A summary of our LOC debt as of March 31, 2005 and June 30, 2004 is as follows:

| Revolving Credit Facility |
|---------------------------|
|                           |
|                           |  | Facility |  | Interest |  |  |  | Balance at |
| Lender                    |  | Amount |  | Rate |  | Maturity |  | Mar 31, 2005 |  | June 30, 2004 |
|                           |  |  |  |  |  |  |  |  |  |  |
| Oak Rock Financial LLC    |       | $ 7 million |       | Prime + 7% |       | March 31, 2005 |       | $  7,437,207 |       | $  6,485,257 |

8

----

   In fiscal 2004, we issued $185,000 in unsecured convertible promissory notes pursuant to a private placement.  These notes bear interest at 9.25% per annum from the date of issuance with interest payablesemi-annually on May 1, 2004 and November 1, 2004.  In February 2005, all of the unpaid principal balance was converted into 185,000 shares of our common stock at $1.00 per share.  

   In fiscal 2004, we issued $25,000 in unsecured promissory notes bearing interest at 9.25% per annum.  The $25,000 note payable and the related accrued interest were paid in full in November2004. 

   In November 2004, we issued a $106,000 promissory note for the acquisition of a leased operational facility including furniture, fixtures and equipment located in Houston, Texas.  This note bears interest at6% due in October 2005 with principal and interest payable monthly. 

   A summary of our other debt as of March 31, 2005 and June 30, 2004 is as follows:

| Other Notes Payable |
|---------------------|
|                     |
|                     |  | Origination |  | Interest |  |  |  | Balance at |
| Lender              |  | Amount |  | Rate |  | Maturity |  | Mar 31, 2005 |  | June 30, 2004 |
|                     |  |  |  |  |  |  |  |  |  |  |
| Private placement   |       | $185,000 |       | 9.25% |       | Nov  2004 |       | $              - |       | $  185,000 |
| Seller Finance      |  | $106,000 |  | 6.00% |  | Oct  2005 |  | 75,877 |  | - |
| Individual          |  | $ 25,000 |  | 9.25% |  | Nov  2004 |  | - |  | 25,000 |

**Note 7 – Commitments and Contingencies**

   As a consumer finance company, we are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongfulrepossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against us could take the form of class action complaints by consumers. We believe thatwe have taken prudent steps to address the litigation risks associated with our business activities.

   In the opinion of management, the resolution of these types of current matters will not have a material adverse effect on our financial position or results of operations. However, we cannot provide assurancedamages that result in a material adverse effect on our financial position or results of operations will not be imposed in potential future matters. We account for contingent liabilities when it is probable that future expenditures will be made and such expenditurescan be reasonably estimated.

**Note 8 – Supplemental Cash Flow Information**

Supplemental cash flow disclosures for the nine months ended March 31, 2005 and 2004 are as follows:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Nine Months Ended March 31, |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 2005                        |  | 2004 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                             |  |  |
|                                                                                          |                             |                           |       |  |                           |
| Interest paid                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $                           | 625,641 |  | $ | 164,926 |
| Common stock issued to purchase loan portfolio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                             | - |  |  | 520,000 |
| Note payable converted into common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                             | 185,000 |  |  | 135,000 |
| Note payable issued to purchase loan portfolio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                             | 313,551 |  |  | - |
| Inventory acquired in repossession (Non-cash transactions)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                             | 2,147,940 |  |  | 3,819 |

**Note 9 – Subsequent Events**

****

   In June 2005, we entered into an asset purchase agreement with Gateway Credit Holdings, Inc for the purchase of software and certain other fixed assets and we issued 500,000 shares of common stock in connectionwith this purchase.  Dean Antonis, our president, is also a beneficial owner of Gateway Credit Holdings, Inc. 

   In June 2005, we entered into an asset purchase agreement with Epic Financial Services, LLC for the purchase of certain fixed assets and repayments of loans made by Epic to us and we issued 500,000 shares ofcommon stock in connection with this purchase.  William Kellegher, our vice president, is also a beneficial owner of Epic Financial Service, LLC. 

   In June 2005, we issued an additional 185,000 shares of our common stock for the conversion of debt issued during fiscal 2004 as a result of our board of directors decision to adjust the conversion price to $.50per share.   Previously in February 2005, we had valued the original debt to equity conversation at $1.00 per share.

9

----

   In June 2005, we issued 55,000 shares of common stock to an individual in connection with the purchase of certain fixed assets from Paaco Automotive Group, L.P.   We also issued 240,000 shares of commonstock to an individual to retire certain accounts payable.

   In June 2005, we issued a total of 2,155,000 shares of common stock to several officers and employees for compensation for their efforts in developing our business operations.  We also authorized stockoptions of 50,000 to one of our directors as compensation for their efforts in developing our business operations. 

****

10

----

**Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations**

  The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

**Cautionary Statement Regarding Forward-looking Information**

    This Form 10-QSB for the quarter ended March 31, 2005 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of1934, including statements regarding, among other items, our growth strategies, anticipated trends in our business and our future results of operation, market conditions in the automobile finance industry and the impact of governmental regulation. Theseforward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, many of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of, among otherthings:
|         | •       | The creditworthiness of contract obligors;                                 |
|--------------------------------------------|--------------------------------------------|----------------------------------------------------------------------------|
|         | •       | Economic factors affecting delinquencies;                                  |
|         | •       | Our ability to retain and attract experienced and knowledgeable personnel; |
|         | •       | Our ability to purchase installment contracts; and                         |
|         | •       | Our ability to compete in the consumer finance industry.                   |

   In addition, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” andsimilar expressions, as they relate to us, our business or our management, are intended to identify forward-looking statements.

  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after thedate of this Form 10-QSB. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this Form 10-QSB may not occur and actual results could differ materially from those anticipated or implied in the forward-lookingstatements.

**Business Overview**

  Auto Underwriters of America, Inc. began operations in August 1983 under the name Advanced Cellular Technology, Inc. and developed and marketed cellular mobiletelephone control units and resold used PBX telecommunications equipment. On December 31, 1990, we suspended operations and remained inactive until December 2002, when we adopted our current name and began our principal operations as a specialty finance companyand specialty retailer of used cars and light trucks.

  We use AutoUnderwriter.com credit decision software tofinance the sale of used cars by our three car sales lots inHouston, Texas and we also use the software to provide financing programs to third party automobile dealers via the internet on behalf of purchasers of new and used cars and light trucks who meet our credit standards.  We target a selected customer creditprofile.  Such purchasers generally do not meet the credit standards of traditional lenders, such as banks and credit unions, because of the age of the vehicle being financed or the customer’s credit history.  Our borrowers generally have short orimpaired credit histories.  In making decisions regarding the purchase of a particular contract, we consider the following factors related to the borrower: place and length of residence, current and prior job status, history in making installment payments forautomobiles, current income and credit history.  In addition, we examine the value of the automobile in relation to the purchase price and the term of the contract.

  Our car lot operations purchase, recondition, sell and finance used vehicles under the name Affordable Cars & Trucks.  These car lots also use AutoUnderwriter.com whichaids in the analysis of the credit worthiness and develops proper deal structure for each customer contract financed. The system takes into account the individual’s income, job and residence history, credit score and history.  The car lot operationsfacilitate our use of the software in our financing program.

   We are still at an early stage in the rollout of our financing programs and retail concept. The primary drivers for future earnings growth will be vehicle unit sales growth from geographic expansion, comparablestore sales increases, and interest income from growth in our finance receivable portfolio.  During the next two years, we plan to focus our growth primarily on adding stores to new markets in the state of Texas. In fiscal year 2006 or 2007, we expect to beginoffering our indirect financing programs to automobile dealers in additional states. Over the next three-year period, we plan to open more used car stores.  We also expect used unit comparable store sales increases, reflecting the multi-year ramp up in sales ofnewly opened stores as they mature and continued market share gains at stores that have reached mature sales levels. On a combinedbasis,we expect that new store openings and comparable store used unit increases will drivetotal used unit growth.

11

----

  The principal challenges we face in expanding our store and dealer base and meeting our growth targets include:
|         | •       | Our ability to procure suitable real estate at reasonable costs. Real estate acquisition will be an increasing challenge as we enter large, multi-store markets. |
|--------------------------------------------|--------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •       | Our ability to build our management team to support the store growth.                                                                                            |
|         | •       | Our ability to maintain a competitive indirect finance program for franchise and independent dealers.                                                            |

  We staff each newly opened store with an experienced management team, including the general manager, purchasing manager, and business office manager, as well as anumber of experienced sales managers and account servicing personnel. We must therefore be continually recruiting, training, and developing managers to support future store openings. If at any time we believe that the rate of store growth is causing our performanceto falter, we will slow the growth rate.

**Recent Developments**

  We entered into the following transactions subsequent to the end of our quarter ended March 31, 2005: 
|         | •       | On June 29, 2005, we issued a total of 2,155,000 shares of common stock and 50,000 options to our officers, directors and certain other employees as compensation for their efforts in developing our businessoperations.  Our board of directors valued the shares at $.50 per share.  The options to purchase our common stock were granted pursuant to our 2004 Stock Option Plan and are exercisable for a period of 5 years at an exercise price of $.50 per share. The securities were offered and sold pursuant to an exemption from the registration requirements provided by Section 4(2) of the Securities Act of 1933, as amended.                                                                                                                                                                                                                                           |
|--------------------------------------------|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         | •       | On June 29, 2005, we issued an additional 185,000 shares of common stock to a limited number of accredited investors pursuant to the conversion of $185,000 in unsecured convertible promissory notes that were originallyconverted at $1.00 per share in February 2005.  The additional shares of common stock were issued as a result of the decision of our board of directors to adjust the conversion price to $.50 per share.  As previously reported, the notes were issued and soldpursuant to a private placement memorandum dated February 19, 2004.  The offering and sale was made in reliance upon Section 4(2) of the Securities Act of 1933, as amended, and Regulation D and Rule 506 promulgated thereunder.                                                                                                                                                      |
|                                       |                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         | •       | On June 29, 2005, we issued 55,000 shares of common stock to Larry Lange in connection with the purchase of certain assets from PAACO Automotive Group, L.P.  We also issued 240,000 shares of common stock to LawrenceGunnels to retire an accounts payable of $120,000.  Our board of directors valued the shares at $.50 per share.  The securities were offered and sold pursuant to an exemption from the registration requirements provided by Section 4(2) of the Securities Actof 1933, as amended.                                                                                                                                                                                                                                                                                                                                                                             |
|                                       |                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         | •       | On June 30, 2005, we issued 500,000 shares of common stock to Gateway Credit Holdings, Inc. in connection with the purchase of certain assets from Gateway.  As previously reported, Dean Antonis, our president,treasurer, director and a beneficial owner, is also the president, treasurer, director and a beneficial owner of Gateway.  We also issued 500,000 shares of common stock to Epic Financial Services, LLC in connection with the purchase of certain assets fromEpic.  William Kellagher, our vice president and a beneficial owner, holds a 27% membership interest in Epic.  Our board of directors valued the shares at $.50 per share in connection with both of these transactions.  The securities were offered andsold pursuant to an exemption from the registration requirements provided by Section 4(2) of the Securities Act of 1933, as amended. |

   An appropriate “restricted” legend was placed on the securities issued in each of the transactions described above and we filed a current report on Form 8-K reporting these transactions on July 7,2005. 

12

----

**Results of Operation**

****

   The following table summarizes our results of operations for the nine months ended March 31, 2005 and 2004. 

****

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

|                                                                                                                                                                                                                                                                                                                                            | Three Months Ended March 31, |                                                                                                                                                        |        | Nine Months Ended March 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                            | 2005                              |                                                                                                                                                        |        | 2004                             |   |  | 2005 |  |  | 2004 |  |
|                                                                                                                                                                                                                                                                                                                                            |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |
|                                                         |                                   |                           |   |         |   |                           |   |       |  |                           |   |       |  |                           |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                  |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|     Sales                                                                                                                                                                                                                                                                                                                   | $                                 | 4,446,818                                                                                                                                              |        |                                  | $ | 2,144,319 |  |  | $ | 8,787,892 |  |  | $ | 2,166,398 |  |
|     Interest income                                                                                                                                                                                                                                                                                                         |                                   | 409,819                                                                                                                                                |        |                                  |   | 296,704 |  |  |  | 1,280,440 |  |  |  | 454,929 |  |
|                                                                                                                                                                                                                                                                                                                                       |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                            |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                            |                                   | 4,856,637                                                                                                                                              |        |                                  |   | 2,441,023 |  |  |  | 10,068,332 |  |  |  | 2,621,327 |  |
|                                                                                                                                                                                                                                                                                                                                            |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                       |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
| Costs and expenses:                                                                                                                                                                                                                                                                                                                        |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|     Cost of sales                                                                                                                                                                                                                                                                                                           |                                   | 2,704,700                                                                                                                                              |        |                                  |   | 1,243,488 |  |  |  | 5,247,552 |  |  |  | 1,243,488 |  |
|     Selling, general and administrative                                                                                                                                                                                                                                                                                     |                                   | 1,001,910                                                                                                                                              |        |                                  |   | 428,613 |  |  |  | 2,548,362 |  |  |  | 633,484 |  |
|     Provision for credit losses                                                                                                                                                                                                                                                                                             |                                   | 475,396                                                                                                                                                |        |                                  |   | 399,086 |  |  |  | 1,306,624 |  |  |  | 399,086 |  |
|     Interest expense                                                                                                                                                                                                                                                                                                        |                                   | 196,529                                                                                                                                                |        |                                  |   | 97,498 |  |  |  | 674,381 |  |  |  | 164,925 |  |
|     Depreciation                                                                                                                                                                                                                                                                                                            |                                   | 5,806                                                                                                                                                  |        |                                  |   | - |  |  |  | 11,580 |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                            |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                            |                                   | 4,384,341                                                                                                                                              |        |                                  |   | 2,168,685 |  |  |  | 9,788,499 |  |  |  | 2,440,983 |  |
|                                                                                                                                                                                                                                                                                                                                            |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                       |                                   |                                                                                                                                                        |        |                                  |   |  |  |  |  |  |  |  |  |  |  |
|         Income before taxes                                                                                                                                                                                                                                                                             |                                   | 472,296                                                                                                                                                |        |                                  |   | 272,338 |  |  |  | 279,833 |  |  |  | 180,844 |  |

****

****

**Three months ended March 31, 2005 compared to the three months ended March 31, 2004**

Revenues

   Total revenues increased $2,415,614 for the three month period ending March 31, 2005 compared to the corresponding prior period  principally as a result of the launch of our automotive specialty retailingoperations in January 2004 resulting in revenues generated in the sale of vehicles of $4,304,109, interest income of $409,819 due to an increase in the outstanding loan portfolio and increased other fee income as a result of an increase in the number of loansoriginated of $142,709.  We had three lots operating during the entire three month period ending March 31, 2005 verses the acquisition of these same lots during the three month period ended March 31, 2004 thatwere not fully operational. 

Cost of Sales

   Total cost of sales as a percentage of sales was 62.8% or $2,704,700 for thethree month period ending March 31, 2005 compared to the corresponding prior period of 58.0% or $1,243,488.  The increase was mainlydue to increased number of vehicles sold during the third quarter ended March 31, 2005 which is the most active time for customers to purchase a vehicle.  As a result of this peak season demand, the average unit cost of inventory was slightly higher.  Wehad three lots operating during the entire three month period ending March 31, 2005 verses the acquisition of these same lots during the three month period ended March 31, 2004 that were not fully operational. 

Selling, General and Administrative Expenses

   Selling, general and administrative expenses increased by $573,297 for the three month period ending March 31, 2005 compared to the corresponding prior period.  This increase was primarily attributable toadditional staffing, increased general operating expenses and the opening of automotive retailing facilities. Selling, general and administrative expenses as a percentage of sales was 22.5% for the three month period ending March 31, 2005 compared to20.0% for thesame corresponding prior period.    The increase was due to having fully functional operational lots during the quarter ended March 2005 verses start up operational lots during the corresponding prior period.

Interest Expense

   Interest expense increased to $196,529 for the three month period ending March 31, 2005 as compared to $97,489 for the corresponding prior period.  The indebtedness as of March 31, 2005 increased to$7,513,084 compared to $4,697,404 as of March 31, 2004.  The increase in interest expense was primarily due to the increase in borrowings from a line of credit as we financed our increase in the receivable base through the purchase of two loan portfolios andloan originations from our direct and indirect lending operations and a slight interest rate increase on the LOC between the two periods. 

13

----

Analysis of Credit Losses

   Provision for credit losses was $475,396 for the three month period ending March 31, 2005 as compared to $399,086 for the corresponding prior period.  The provision for credit loss as a percentage of saleswas 11.0% on $4,304,109 on vehicle related sales for the three month period ended March 31, 2005 verses 18.6% on $2,144,319 compared to the corresponding prior period.  The improvement in credit losses was due mainly to an improvement in charge offs andrepossession recoveries. 

  We have a blended finance receivable portfolio of direct and indirect originations.  The majority of indirect originations had a better recovery and less charge offs than direct originations.  During thequarter ended March 31, 2005, we had several portfolio sales to third parties of both direct and indirect loans that left a corresponding allowance for credit loss in the portfolio reserve balances.  As a result of these portfolio sales and the resulting blendedmix of remaining direct and indirect loans, we reevaluated the allowance of doubtful accounts as of March 31, 2005 and determined it had sufficient reserves to cover the existing portfolio. 

**Nine months ended March 31, 2005 compared to the nine months ended March 31, 2004**

Revenues

   Total revenues increased $7,447,005 for the nine month period ending March 31, 2005 compared to the corresponding prior period principally as a result of the launch of our automotive specialty retailing operationsin January 2004 resulting in revenues from the sale of vehicles of $8,491,242, interest income of $1,280,440 due to an increase in the outstanding loan portfolio and increased other fee income as a result of an increase in the number of loans originated of$296,650.  We also had three lots operating during the entire nine month period ending March 31, 2005 verses the acquisition of these same lots during the nine month period ended March 31, 2004 that were not fullyoperational. 

Cost of Sales

   Total cost of sales as a percentage of sales was 61.8% or $5,247,552 for the nine month period ending March 31, 2005 compared to the corresponding prior period of 57.4% or $1,243,488.  The increase in cost ofgoods sold was mainly due to three lots operating during the entire nine month period ending March 31, 2005 verses the acquisition of these same lots during the nine month period ended March 31, 2004 that were not fully operational and also a slightly higher cost ofinventory acquisitions. 

Selling, General and Administrative Expenses

   Selling, general and administrative expenses increased by $1,914,878 for the nine month period ending March 31, 2005 compared to the corresponding prior period.  This increase was primarily attributable toadditional staffing, increased general operating expenses and the opening of automotive retailing facilities. Selling, general and administrative expense as a percentage of sales was 29.0% for the nine month period ending March 31, 2005 compared to 29.2% in thecorresponding prior period.  Selling, general and administrative expenses were a fairly constant percentage between the two periods even though our Houston lots were fully operational during the nine month period ended March 2005 verses start up operational lotsduring the corresponding prior period. 

Interest Expense

   Interest expense increased to $674,381 for the nine month period ending March 31, 2005 as compared to $164,925 for the corresponding prior period.  The indebtedness as of March 31, 2005 increased to$7,513,084 compared to $4,697,404 as of March 31, 2004.  The increase in interest expense was primarily due to the increase in borrowings from a line of credit as we financed our increase in the receivable base through the purchase of two loan portfolios andloan originations from our direct and indirect lending operations and a slight interest rate increase on the LOC between the two periods. 

Analysis of Credit Losses

   Provision for credit losses was $1,306,624 for the nine month period ending March 31, 2005 as compared to $399,086 for the corresponding prior period.  The provision for credit loss as a percentage of saleswas 15.4% on $8,491,242 on vehicle related sales for the nine month period ended March 31, 2005 verses 18.4% on $2,166,398 for the corresponding prior period. 

   The improvement in credit losses was due mainly to an improvement in charge offs and repossession recoveries.  We have a blended finance receivable portfolio of direct and indirect originations.  Themajority of indirect originations had a better recovery and less charge offs than direct originations.  During the quarter ended March 31, 2005, we had several portfolio sales to third parties of both direct and indirect loans that left a corresponding allowancefor credit loss in the portfolio reserve balances.  As a result of these portfolio sales and the resulting blended mix of remaining direct and indirect loans, we reevaluated the allowance of doubtful accounts as of March 31, 2005 and determined it had sufficientreserves to cover the existing portfolio. 

14

----

**Liquidity and Capital Resources**

   The following table summarizes our liquidity and capital resources for the nine months ended March 31, 2005 and 2004.

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Nine Months Ended March 31, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 2005                             |                                                                                                                                                        |  | 2004 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |
| Operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                           |  |       |  |                           |  |
|   Net income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $                                | 184,833                                                                                                                                                |  |  | $ | 180,844 |  |
|                                                                                             |                                  |                                                                                                                                                        |  |  |  |  |  |
|       Changes in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                  | (1,755,072                                                                                                                                             | ) |  |  | (2,406,199 | ) |
|        Changes in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  | (1,117,456                                                                                                                                             | ) |  |  | 2,329,395 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |
|           Cash provided by (used in) operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                  | (2,687,695                                                                                                                                             | ) |  |  | 104,040 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                  |                                                                                                                                                        |  |  |  |  |  |
| Investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  | 1,961,140                                                                                                                                              |  |  |  | (4,469,737 | ) |
| Financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  | 660,488                                                                                                                                                |  |  |  | 4,375,113 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |
| Increase (decrease) in cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                  | (66,067                                                                                                                                                | ) |  |  | 9,416 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |

   Our primary use of working capital was the funding of the origination and purchase of contracts and inventory. The contracts were financed substantially through borrowings on the revolving line of credit. The lineof credit is secured primarily by contracts, and available borrowings are based on a percentage of qualifying contracts. As of March 31, 2005, we were over funded on our line of credit and we are currently seeking other funding sources in addition to renegotiatingour existing line of credit.  We have also funded a portion of our working capital needs through the issuance of subordinated notes.

   We believe we will be able to renegotiate the line of credit with our existing lender.  However, we cannot provide any assurance for the success of acquiring an additional line of credit increase.  Ifnecessary, we could issue additional subordinated debt, or sell our existing finance receivable portfolio at a discount to third party finance companies to meet our short-term funding needs.  However, we cannot provide any assurance for the success of acquiringany additional working capital from these potential funding sources. 

**Critical Accounting Policies**

   The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires us to make estimates and assumptions in determining the reported amountsof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  Actual results could differ from our estimates.  We believethe most significant estimate made in the preparation of the accompanying consolidated financial statements relates to the determination of our allowance for credit losses.  Other accounting policies are disclosed in the footnotes of our consolidated financialstatements which are included in our annual report on Form 10-K for the year ended June 30, 2004.

   We maintain an allowance for credit losses at a level we consider sufficient to cover anticipated losses in the collection of our finance receivables.  The allowance for credit losses is determined based upona review of historical and recent credit losses related to our finance receivable portfolio.  The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations.  It is reasonably possible that actualcredit losses may be materially different from the recorded allowance for credit losses.

**Seasonality**

   Our automobile sales and finance business is seasonal in nature.  The second fiscal quarter (October through December) is historically the slowest period for vehicle sales.  The third fiscal quarter(January through March) is historically the busiest time for vehicle sales as many of our customers use their income tax refunds as a down payment on the purchase of a vehicle.

15

----

**Item 3.  Controls and Procedures**

   We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures included in this report, as well as to safeguardassets from unauthorized use or disposition.  We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15 under supervision and with the participation of our principal executiveofficer and principal financial officer, as of March 31, 2005.  Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting him to materialinformation required to be included in our periodic Securities and Exchange Commission filings.  No significant changes were made to our internal controls or other factors that could significantly affect these controls subsequent to the date of theirevaluation.  The design of any future system of controls and procedures is based in part upon certain assumptions about the likelihood of future events.  There can be no assurance that any design will succeed in achieving its stated goals under allpotential future conditions regardless of how remote.

16

----

**PART II.                OTHER INFORMATION**

| **ITEM 1.    ** | **LEGAL PROCEEDINGS.**                                           |
|------------------------------------------|------------------------------------------------------------------|
|                                     |                                                                  |
|                                          | Not Applicable                                                   |
|                                          |                                         |
| **ITEM 2.    ** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.** |
| ** **                               |                                                                  |

   During the quarter ended March 31, 2005, we issued the following securities in private transactions pursuant to an exemption from the registration requirements provided by Section 4 (2) of the Securities Act of1933, as amended:

****

| Purchaser and Recipient of Securities                                                      |                    | Date                                                                                       |                    | Terms of Exercise if Convestible                                                           |                    | Title Of Security                                                                          |                    | Number Sold or Granted                                                                     |                    | Consideration Received                                                                     |
|--------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------|
|                                                                                            |                    |                                                                                            |                    |                                                                                            |                    |                                                                                            |                    |                                                                                            |                    |                                                                                            |
|                 |     |                 |     |                 |     |                 |     |                 |     |                 |
| Various accredited shareholders                                                            |                    | Feb 8, 2005                                                                      |                    | N/A                                                                                        |                    | Common Stock                                                                               |                    | 185,000                                                                                    |                    | (1)                                                                                        |

****

(1)  As disclosed in Note 6 of our financial statements, in fiscal 2004, we issued $185,000 in unsecured convertible promissory notes pursuant to a private placement.  On February 8, 2005, all of the unpaidprincipal balance was converted into 185,000 shares of our common stock at $1.00 per share.

| **ITEM 3.    ** | **DEFAULT UPON SENIOR SECURITIES.**                                                           |
|------------------------------------------|-----------------------------------------------------------------------------------------------|
| ** **                               |                                                                                               |
|                                          | Not Applicable                                                                                |
| ** **                               |                                                                      |
| **ITEM 4.    ** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**                                      |
|                                     |                                                                      |
|                                          | Not Applicable                                                                                |
|                                          |                                                                      |
| **ITEM 5.    ** | **OTHER INFORMATION.**                                                                        |
|                                          |                                                                      |
|                                          | Not Applicable                                                                                |
| ** **                               |                                                                                               |
| **ITEM 6.    ** | **EXHIBITS**                                                                                  |
|                                     |                                                                                               |
| 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 |

17

----

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| **                                       ** | **Auto Underwriters of America, Inc.**                                                                                                                                                                                                                                                            |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                | By:          \s\ DeanAntonis                                     |
|                                                                                                                                                                                                                                                |                 Dean Antonis                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                |                *President and Treasurer*                                                                                                                                                                               |

Dated: July 15, 2005

18