| **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: |
|---------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| **September 30, 2004**                            |                                                                                                                                                                                                                                                                                                                                                        | **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

----

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

|                                                                                                                          |                                                                                      | **PAGE**      |
|--------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|---------------|
|                                                                                                                     |                                                                                      |               |
| **PART I.**                                                                                                              | **FINANCIAL INFORMATION**                                                            |               |
|                                                                                                 | **     **                                                   |               |
| Item 1.                                                                                                                  | Financial Statements                                                                 |               |
|                                                                                                 | **     **                                                   |               |
|                                                                                                                     | Balance Sheet as of September 30, 2004                                          | 3             |
|                                                                                                 | **     **                                                   |               |
|                      | Statements of Operations for the Three Months Ended September 30, 2004 and 2003 | 4             |
|                                                                                                 | **     **                                                   |               |
|                                                                                                                          | Statements of Cash Flows for the Three Months Ended September 30, 2004 and 2003 | 5             |
|                                                                                                 | **     **                                                   |               |
|                                                                                                                          | Notes to Financial Statements                                                        | 6 – 9   |
|                                                                                                 | **     **                                                   |               |
| Item 2.                                                                                                                  | Management’s Discussion and Analysis of Financial Condition                    | 10 – 13 |
|                                                                                                 | **     **                                                   |               |
| Item 3.                                                                                                                  | Controls and Procedures                                                              | 14            |
|                                                                                                 | **     **                                                   |               |
| **PART II.**                                                                                                             | **OTHER INFORMATION**                                                                |               |
|                                                                                                 | **     **                                                   |               |
| Item 1.                                                                                                                  | Legal Proceedings                                                                    | 15            |
|                                                                                                 | **     **                                                   |               |
| Item 2.                                                                                                                  | Unregistered Sales of Equity Securities and Use of Proceeds                          | 15            |
|                                                                                                 | **     **                                                   |               |
| Item 3.                                                                                                                  | Default Upon Senior Securities                                                       | 15            |
|                                                                                                 | **     **                                                   |               |
| Item 4.                                                                                                                  | Submission of Matters to a Vote of Security Holders                                  | 15            |
|                                                                                                 | **     **                                                   |               |
| Item 5.                                                                                                                  | Other Information                                                                    | 15            |
|                                                                                                 | **     **                                                   |               |
| Item 6.                                                                                                                  | Exhibits                                                                             | 15            |

2

----

**Part I. Financial Information**

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | September 30, 2004 |                                                                                                                                                        |   | June 30, 2004             |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (unaudited)                  |                                                                                                                                                        |   |                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                              |                           |   |       |   |                           |  |
|     Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $                            | 17,925                                                                                                                                                 |   |                                | $ | 101,019 |  |
|     Finance receivables, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                              | 8,585,788                                                                                                                                              |   |                                |   | 9,265,565 |  |
|     Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                              | 521,937                                                                                                                                                |   |                                |   | 325,411 |  |
|     Prepaid and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                              | 351,148                                                                                                                                                |   |                                |   | 368,620 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                            | $                            | 9,476,798                                                                                                                                              |   |                                | $ | 10,060,615 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                              |                                                                                                                                                        |   |                                |   |  |  |
| Liabilities and stockholders’ equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                              |                                                                                                                                                        |   |                                |   |  |  |
|     Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $                            | 870,600                                                                                                                                                |   |                                | $ | 825,538 |  |
|     Funding payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                              | 675,104                                                                                                                                                |   |                                |   | 1,176,109 |  |
|     Income taxes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                              | 52,706                                                                                                                                                 |   |                                |   | 88,706 |  |
|     Senior debts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              | 6,420,115                                                                                                                                              |   |                                |   | 6,485,257 |  |
|     Subordinated debts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                              | 210,000                                                                                                                                                |   |                                |   | 210,000 |  |
|     Advances from related parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                              | 621,007                                                                                                                                                |   |                                |   | 577,873 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              | 8,849,532                                                                                                                                              |   |                                |   | 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: 2,200,053                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                              | 3,451,378                                                                                                                                              |   |                                |   | 3,451,378 |  |
|        Deferred compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                              | (230,175                                                                                                                                               | ) |                                |   | (230,175 | ) |
|        Retained deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                              | (2,593,937                                                                                                                                             | ) |                                |   | (2,524,071 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |  |  |
|            Total stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                              | 627,266                                                                                                                                                |   |                                |   | 697,132 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $                            | 9,476,798                                                                                                                                              |   |                                | $ | 10,060,615 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                              |                                                                                                                                                        |   |                                |   |  |  |

See Notes to Financial Statements unaudited.3

----

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

****

****

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Three Months Ended September 30, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 2004                             |                                                                                                                                                        |  | 2003 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |
|     Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                  |                           |  |       |  |                           |  |
|         Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $                                | 1,843,263                                                                                                                                              |  |  | $ | - |  |
|         Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                  | 458,622                                                                                                                                                |  |  |  | 60,557 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  | 2,301,885                                                                                                                                              |  |  |  | 60,557 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                            |                                  |                                                                                                                                                        |  |  |  |  |  |
|     Costs and expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  |                                                                                                                                                        |  |  |  |  |  |
|         Cost of sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                  | 1,093,223                                                                                                                                              |  |  |  | - |  |
|         Selling, general and administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                  | 724,125                                                                                                                                                |  |  |  | 77,636 |  |
|         Provision for credit losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  | 370,172                                                                                                                                                |  |  |  | - |  |
|         Interest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                  | 220,231                                                                                                                                                |  |  |  | 22,277 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  | 2,407,751                                                                                                                                              |  |  |  | 99,913 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|             Loss from operations before income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                  | (105,866                                                                                                                                               | ) |  |  | (39,356 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|     Provision for income tax benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                  | 36,000                                                                                                                                                 |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|             Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $                                | (69,866                                                                                                                                                | ) |  | $ | (39,356 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                  |                                                                                                                                                        |  |  |  |  |  |
|         Basic earnings loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $                                | (0.03                                                                                                                                                  | ) |  | $ | 0.00 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |  |
|     Basic weighted average number of shares outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                  | 2,200,053                                                                                                                                              |  |  |  | 30,000,000 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |  |

See Notes to Financial Statements unaudited.4

----

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

****

****

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Three Months Ended September 30, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 2004                                  |                                                                                                                                                        |  | 2003 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |
| Operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                       |                           |  |       |  |                           |  |
|   Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $                                     | (69,866                                                                                                                                                | ) |  | $ | (39,356 | ) |
|                                                                                            |                                       |                                                                                                                                                        |  |  |  |  |  |
|   Adjustments to reconcile income from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                       |                                                                                                                                                        |  |  |  |  |  |
|       to net cash (used in) provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                       |                                                                                                                                                        |  |  |  |  |  |
|       Debt issuance costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                       | -                                                                                                                                                      |  |  |  | (32,250 | ) |
|       Discount on sale of finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                       | 8,556                                                                                                                                                  |  |  |  | - |  |
|       Changes in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                       |                                                                                                                                                        |  |  |  |  |  |
|            Finance receivable originations                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                       | (1,040,043                                                                                                                                             | ) |  |  | (465,647 | ) |
|            Finance receivable collections                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                       | 733,672                                                                                                                                                |  |  |  | 63,316 |  |
|            Provision for credit losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                       | 370,172                                                                                                                                                |  |  |  | - |  |
|            Inventory acquired in repossession                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       | 551,807                                                                                                                                                |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |
|                    Subtotal finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                    |                                       | 615,608                                                                                                                                                |  |  |  | (402,331 | ) |
|       Changes in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                       |                                                                                                                                                        |  |  |  |  |  |
|            Other receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                       | 6,813                                                                                                                                                  |  |  |  | (5,817 | ) |
|            Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                       | (196,526                                                                                                                                               | ) |  |  | - |  |
|            Prepaid and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                       | (10,729                                                                                                                                                | ) |  |  | - |  |
|            Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                       | (26,916                                                                                                                                                | ) |  |  | (12,090 | ) |
|             Income tax payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                       | (36,000                                                                                                                                                | ) |  |  | - |  |
|            Funding payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                       | (653,746                                                                                                                                               | ) |  |  | - |  |
|            Deferred sales tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       | 71,477                                                                                                                                                 |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |
|                   Net cash used in operating activities                                                                                                                                                                                                                                                                                                                                                                                                                 |                                       | (291,329                                                                                                                                               | ) |  |  | (491,844 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                       |                                                                                                                                                        |  |  |  |  |  |
| Investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                       |                                                                                                                                                        |  |  |  |  |  |
|    Proceeds from sale of finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                       | 77,002                                                                                                                                                 |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                       |                                                                                                                                                        |  |  |  |  |  |
| Financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                       |                                                                                                                                                        |  |  |  |  |  |
|   Borrowings of other debt, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                       | 153,241                                                                                                                                                |  |  |  | 51,591 |  |
|   Borrowings under senior credit facility, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                       | (65,142                                                                                                                                                | ) |  |  | 300,854 |  |
|   Advances from related parties, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                       | 43,134                                                                                                                                                 |  |  |  | 86,409 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |
|                   Net cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                             |                                       | 131,233                                                                                                                                                |  |  |  | 438,854 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                       |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                       |                                                                                                                                                        |  |  |  |  |  |
| Increase (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                       | (83,094                                                                                                                                                | ) |  |  | (52,990 | ) |
| Cash and cash equivalents at:     Beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                       | 101,019                                                                                                                                                |  |  |  | 55,046 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |
| Cash and cash equivalents at:                 End of period                                                                                                                                                                                                                                                                                                                                                                                                                  | $                                     | 17,925                                                                                                                                                 |  |  | $ | 2,056 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                       |                                                                                                                                                        |  |  |  |  |  |

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 inHouston, Texas and we target a selected customer credit 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 credithistory.  Our borrowers have short or impaired 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 for automobiles, 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 three month period ended September 30, 2004 are not necessarily indicative of the results that may be expected for thefiscal year 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 inTexas, 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 createthe need for substantial additions to the provision for loan losses.  Management believes that 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, matures in March 2005.  We expect that we will be able to renew or refinance such credit facility on or before the scheduled maturity date. 

*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 saleof used vehicles at its 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 our judgment, is sufficient to absorb the losses inherentin the finance receivables. We periodically evaluate 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 we repossess and dispose of thecollateral 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 the provision for loan losses isbased 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 were  $86,409 and $43,134 for the three months ended September 2003 and 2004 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 first quarter ended September30, 2003 and 2004, we paid Gateway approximately $5,850 and $8,100 respectively for the use of software technology used in the credit scoring evaluation process of our underwriting. 

*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.  These installment sale contracts typically include interest rates ranging from approximately 12% to 27% per annumand provide for payments over periods ranging from 18 to 60 months.  The components of finance receivables as of September 30, 2004 and June 30, 2004 are as follows:

|                                                                                                                                                                                                                                                                                                        | September 30, |                                                                                                                                                        |   | June 30,                       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------|---|
|                                                                                                                                                                                                                                                                                                        | 2004          |                                                                                                                                                        |   | 2004                           |   |
|                                                                                                                                                                                                                                                                                                        |               |                                                                                                                                                        |   |                                |   |
|                                                   |               |                           |   |       |   |                           |  |
| Finance receivables                                                                                                                                                                                                                                                                                    | $             | 10,211,851                                                                                                                                             |   |                                | $ | 11,273,547 |  |
| Allowance for credit losses                                                                                                                                                                                                                                                                            |               | (1,626,063                                                                                                                                             | ) |                                |   | (2,007,982 | ) |
|                                                                                                                                                                                                                                                                                                        |               |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                        |               |                                                                                                                                                        |   |                                |   |  |  |
|                                                                                                                                                                                                                                                                                                        | $             | 8,585,788                                                                                                                                              |   |                                | $ | 9,265,565 |  |
|                                                                                                                                                                                                                                                                                                        |               |                                                                                                                                                        |   |                                |   |  |  |

7

----

   Changes in the finance receivables allowance for credit losses for the three months ended September 30, 2004 and 2003 are as follows:

|                                                                                                                                                                                                                                                                                                                                                                    | Three Months Ended September 30, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                    | 2004                                  |                                                                                                                                                        |  | 2003 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |                                       |                                                                                                                                                        |  |  |  |
|                                                             |                                       |                           |  |       |  |                           |  |
| Balance at beginning of period                                                                                                                                                                                                                                                                                                                                     | $                                     | 2,007,982                                                                                                                                              |  |  | $ | 97,851 |  |
| Provision for credit losses                                                                                                                                                                                                                                                                                                                                        |                                       | 370,172                                                                                                                                                |  |  |  | - |  |
| Nonaccretable acquisition fees                                                                                                                                                                                                                                                                                                                                     |                                       | -                                                                                                                                                      |  |  |  | 27,115 |  |
| Net charge offs                                                                                                                                                                                                                                                                                                                                                    |                                       | (1,303,898                                                                                                                                             | ) |  |  | (3,147 | ) |
| Net recoveries                                                                                                                                                                                                                                                                                                                                                     |                                       | 551,807                                                                                                                                                |  |  |  | - |  |
|                                                                                                                                                                                                                                                                                                                                                                    |                                       |                                                                                                                                                        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                               |                                       |                                                                                                                                                        |  |  |  |  |  |
|   Balance at end of period                                                                                                                                                                                                                                                                                                                                    | $                                     | 1,626,063                                                                                                                                              |  |  | $ | 121,819 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |                                       |                                                                                                                                                        |  |  |  |  |  |

**Note 4 – Accrued Liabilities**

   A summary of accrued liabilities as of September 30, 2004 and June 30, 2004 is as follows:

|                                                                                                                                                                                                                                                                                                                                                                    | September 30, |                                                                                                                                                        | June 30,                       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                    | 2004          |                                                                                                                                                        | 2004                           |
|                                                                                                                                                                                                                                                                                                                                                                    |               |                                                                                                                                                        |                                |
|                                                             |               |                           |       |  |                           |
| Accounts payable                                                                                                                                                                                                                                                                                                                                                   | $             | 142,293                                                                                                                                                |                                | $ | 247,967 |
| Advances                                                                                                                                                                                                                                                                                                                                                           |               | 139,432                                                                                                                                                |                                |  | 138,932 |
| Deferred sales tax                                                                                                                                                                                                                                                                                                                                                 |               | 446,764                                                                                                                                                |                                |  | 375,287 |
| Interest                                                                                                                                                                                                                                                                                                                                                           |               | 14,700                                                                                                                                                 |                                |  | - |
| Payroll and taxes                                                                                                                                                                                                                                                                                                                                                  |               | 42,056                                                                                                                                                 |                                |  | 4,090 |
| Dealer inventory tax                                                                                                                                                                                                                                                                                                                                               |               | 15,244                                                                                                                                                 |                                |  | 13,067 |
| Other                                                                                                                                                                                                                                                                                                                                                              |               | 70,111                                                                                                                                                 |                                |  | 46,195 |
|                                                                                                                                                                                                                                                                                                                                                                    |               |                                                                                                                                                        |                                |  |  |
|                                                                                                                                                                                                                                                                                                                                                               |               |                                                                                                                                                        |                                |  |  |
|                                                                                                                                                                                                                                                                                                                                                                    | $             | 870,600                                                                                                                                                |                                | $ | 825,538 |
|                                                                                                                                                                                                                                                                                                                                                                    |               |                                                                                                                                                        |                                |  |  |

**Note 5 – Debt**

   We have a $7,000,000 revolving line of credit (“LOC”) with Oak Rock Financial, LLC, bearing interest at the greater of prime+7% or 11.25% and matures on March 31, 2005.  The LOC is secured by allof our assets and a personal validity guarantee by our President.  At September 30, 2004, the LOC balance outstanding was $6,420,115 with $579,885 availability for future use. 

   Interest on our LOC debt is payable monthly and the principal balances are due at the maturity of the facilities.  Our LOC facility contains various reporting and performance covenants including maintenanceof certain financial ratios and tests, limitations on borrowings from other sources, restrictions on certain operating activities, and restrictions on the payment of dividends or distributions.

8

----

   A summary of our LOC debt as of September 30, 2004 and June 30, 2004 is as follows:

| Revolving Credit Facility |
|---------------------------|
|                           |
|                           |  | Facility |  | Interest |  |  |  | Balance at |
| Lender                    |  | Amount |  | Rate |  | Maturity |  | Sep 30, 2004 |  | June 30, 2004 |
|                           |  |  |  |  |  |  |  |  |  |  |
| Oak Rock Financial LLC    |       | $ 7 million |       | Prime + 7% |       | March 31, 2005 |       | $  6,420,115 |       | $  6,485,257 |

   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.  All or a portion of the unpaid principal balance is convertible into common stock at $1.00 per share.  Interest due is not convertible into common stock.  In February 2005, these notes were convertedinto 185,000 shares of our common stock. 

   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. 

   A summary of our other debt as of September 30, 2004 and June 30, 2004 is as follows:

| Other Notes Payable |
|---------------------|
|                     |
|                     |  | Facility |  | Interest |  |  |  | Balance at |
| Lender              |  | Amount |  | Rate |  | Maturity |  | Sep 30, 2004 |  | June 30, 2004 |
|                     |  |  |  |  |  |  |  |  |  |  |
| Private placement   |       | N/A |       | 9.25% |       | Nov  2004 |       | $  185,000 |       | $  185,000 |
| Individual          |  | N/A |  | 9.25% |  | Nov  2004 |  | 25,000 |  | 25,000 |

**Note 6 – 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 our opinion, 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 assurance damages that resultin 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 expenditures can be reasonablyestimated.

**Note 7 – Supplemental Cash Flow Information**

   Supplemental cash flow disclosures for the three months ended September 30, 2004 and 2003 are as follows:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Three Months Ended September 30, |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 2004                                  |  | 2003 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                       |  |  |
|                                                                                          |                                       |                           |       |  |                           |
| Interest paid                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $                                     | 205,531 |  | $ | 22,277 |
| Inventory acquired in repossession (Non-cash transactions)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                       | 551,807 |  |  | - |

****

**Note 8 – Subsequent Events**

****

   In March 2005, our senior debt line of credit was extended.  During the renewal process,  prior to the maturity date of March 2005, both AUA and Oak Rock Financial LLC verbally agreed to extend therelated senior debt instruments.  

   In February 2005, we issued 185,000 shares of our common stock issued for the conversion of debt issued during fiscal 2004.  All of the unpaid principal balance was convertible into common stock at $1.00 pershare.  Interest due was not convertible into common stock of the Company.   

   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. 

   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. 

9

----

**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 September 30, 2004 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,” and similar 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 three car lot operations purchase, recondition, sell and finance used vehicles under the name Affordable Cars & Trucks.  These car lots also use AutoUnderwriter.comwhich aids 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 addition, in fiscal 2005 we plan to expand ournetwork of automobile dealers that utilize our financing programs in the states we currently service.  Over the three-year period, we plan to open new used car stores.  We also expect used unit comparable store sales increases, reflecting the multi-yearramp up in sales of newly 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 unitincreases will drive total used unit growth.

10

----

  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 a number of experienced sales managers and accountservicing 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 performance to falter, we will slow the growthrate.

**Recent Developments**

****

**  **We entered into the following transactions subsequent to the end of our quarter ended September 30, 2004: 
|         | •       | 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. 

11

----

**Results of Operations**

   The following table summarizes our results of operations for the three months ended September 30, 2004 and 2003. 

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

|                                                                                                                                                                                                                                                                                                                                                              | Three Months Ended September 30, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                              | 2004                             |                                                                                                                                                        | 2003 |  |
|                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |
| Revenues:                                                                                                                                                                                                                                                                                                                                                    |                                  |                           |       |  |                           |  |
|   Sales                                                                                                                                                                                                                                                                                                                                                 | $                                | $1,843,263                                                                                                                                             |  | $ | - |  |
|   Interest income                                                                                                                                                                                                                                                                                                                                       |                                  | 458,622                                                                                                                                                |  |  | 60,557 |  |
|                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |
|       Total                                                                                                                                                                                                                                                                                                                         |                                  | 2,301,885                                                                                                                                              |  |  | 60,557 |  |
|                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |
|                                                            |                                  |                                                                                                                                                        |  |  |  |  |
| Costs and expenses:                                                                                                                                                                                                                                                                                                                                          |                                  |                                                                                                                                                        |  |  |  |  |
|   Cost of sales                                                                                                                                                                                                                                                                                                                                         |                                  | 1,093,223                                                                                                                                              |  |  | - |  |
|   Selling, general and admin                                                                                                                                                                                                                                                                                                                            |                                  | 724,125                                                                                                                                                |  |  | 77,636 |  |
|   Provision for credit losses                                                                                                                                                                                                                                                                                                                           |                                  | 370,172                                                                                                                                                |  |  | - |  |
|   Interest expense                                                                                                                                                                                                                                                                                                                                      |                                  | 220,231                                                                                                                                                |  |  | 22,277 |  |
|                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |
|        Total                                                                                                                                                                                                                                                                                                                        |                                  | 2,407,751                                                                                                                                              |  |  | 99,913 |  |
|                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                         |                                  |                                                                                                                                                        |  |  |  |  |
|       Pretax income                                                                                                                                                                                                                                                                                                                 | $                                | (105,866                                                                                                                                               | ) | $ | $(39,356 | ) |
|                                                                                                                                                                                                                                                                                                                                                              |                                  |                                                                                                                                                        |  |  |  |  |

**Three months ended September 30, 2004 compared to the three months ended September 30, 2003**

**

Revenues

  Total revenues increased $2,241,328 for the three month period ending September 30, 2004 compared to the corresponding period ended September 30, 2003 principally as aresult of the launch of our automotive specialty retailing operations in January 2004 resulting in revenues generated in the sale of cars and light trucks of $1,778,304, an increase in interest income due to an increase in the outstanding loan portfolio and increaseddocument fee income as a result of an increase in the number of loans originated of $64,959.

Cost of Sales

   Cost of sales as a percentage of automobile and light truck sales was 61.5% or $1,093,223 for the three month period ending September 30, 2004. The corresponding period ended September 30, 2003 had no cost ofsales since our specialty retailing operations did not begin until January 2004.

Selling, General and Administrative Expenses

   Selling, general and administrative expenses increased by $646,489 for the three month period ending September 30, 2004 compared to the corresponding period ended September 30, 2003. This increase was primarilyattributable to additional staffing, increased general operating expenses and the opening of automotive retailing facilities. Selling, general and administrative expenses as a percentage of sales was 31.5% for the three month period ending September 30, 2004. Theselling, general and administrative expense for the three month period ending September 30, 2003 was not comparable.  The comparison between the two reporting periods is not meaningful due to the automotive operations generally began during January 2004 withno related expenses during the quarter ended September 2003. 

Interest Expense

    Interest expense increased to $220,231for the three month period ending September 30, 2004 as compared to $22,277 for the corresponding period ended September 30, 2003. The indebtedness as of September 30,2004 increased to $7,251,122 compared to $1,270,655 as of September 30, 2003.  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 twoloan portfolios and loan originations from our direct and indirect lending operations.

12

----

Analysis of Credit Losses

   Provision for credit losses was $370,172 with no comparable expense in the corresponding period ended September 30, 2003 due to no comparable operations.  The provision for credit losses as a percentage ofsales was 20.8% on $1,778,304 vehicle related sales. 

**Liquidity and Capital Resources**

   The following table summarizes our liquidity and capital resources for the three months ended September 30, 2004 and 2003. 

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Three Months Ended September 30, |                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 2004                             |                                                                                                                                                        |  | 2003 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |
| Operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                  |                           |  |       |  |                           |  |
|   Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $                                | (69,866                                                                                                                                                | ) |  | $ | (39,356 | ) |
|                                                                                             |                                  |                                                                                                                                                        |  |  |  |  |  |
|       Changes in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                  | 615,608                                                                                                                                                |  |  |  | (402,331 | ) |
|       Changes in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                  | (837,071                                                                                                                                               | ) |  |  | 50,157 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |
|           Net cash used in operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                  | (291,329                                                                                                                                               | ) |  |  | (491,844 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                  |                                                                                                                                                        |  |  |  |  |  |
| Cash provided by investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                  | 77,002                                                                                                                                                 |  |  |  | - |  |
| Cash provided by financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                  | 131,233                                                                                                                                                |  |  |  | 438,854 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |
| Decrease in cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                  | (83,094                                                                                                                                                | ) |  |  | (52,990 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                  |                                                                                                                                                        |  |  |  |  |  |

   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 September 30, 2004, we had approximately $579,885 available under the line of credit. We have also funded a portion of its working capitalneeds through the issuance of subordinated notes.

   We believe that borrowings available under the line of credit as well as cash flow from operations and, if necessary, the issuance of additional subordinated debt, or the sale of additional securities, will besufficient to meet its short-term funding needs.

**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.  Below is a discussion of our accounting policy concerning such allowance.  Otheraccounting policies are disclosed in the footnotes of our consolidated financial statements 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, recent credit losses, and the finance receivable portfolio.  The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations.  It is at least 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.  In such business, the second fiscal quarter (October through December) is historically the slowest period for vehicle sales.  The thirdfiscal quarter (January through March) is historically the busiest time for vehicle sales as many of our customers use income tax refunds as a down payment on the purchase of a vehicle. 

13

----

**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 September 30, 2004.  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 tomaterial information 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.

14

----

**PART II.                OTHER INFORMATION**

| **ITEM 1.    ** | **LEGAL PROCEEDINGS.**                                                                        |
|------------------------------------------|-----------------------------------------------------------------------------------------------|
|                                     |                                                                                               |
|                                          | Not Applicable                                                                                |
|                                          |                                                                      |
| **ITEM 2.    ** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**                              |
| ** **                               |                                                                                               |
|                                          | We did not sell any equity securities during the period covered by this report.          |
| ** **                               |                                                                                               |
| **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 |

15

----

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 14, 2005

16