SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


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

     For the fiscal year ended June 30, 2000

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

     For the transition period from __________ to __________

                         Commission file number 1-12902


                       FRONTIER ADJUSTERS OF AMERICA, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                ARIZONA                                         86-0477573
    -------------------------------                       ----------------------
    (State of other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                       Identification Number)


         45 East Monterey Way
            Phoenix, Arizona                                      85012
----------------------------------------                        ----------
(Address of principal executive offices)                        (Zip Code)


        Registrant's telephone number, including area code (602) 264-1061


           Securities registered pursuant to Section 12(b) of the Act:

    Title of Each Class                Name of Each Exchange On Which Registered
    -------------------                -----------------------------------------
Common Stock $.01 Par Value                     American Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange 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 [X] No [ ].

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant was $10,587,694 as of September 5, 2000.

The number of shares  outstanding  of the  registrant's  Common Stock,  $.01 par
value, as of September 5, 2000, was 8,957,660.
<PAGE>
                                     PART I

ITEM 1 - BUSINESS

THE COMPANY

Frontier Adjusters of America,  Inc., an Arizona corporation  (together with its
subsidiaries,  the  "Company"),  licenses and franchises  independent  insurance
adjusters (the  independent  insurance  adjusters  licensed or franchised by the
Company are hereinafter referred to collectively as the "Adjusters")  throughout
the United States and in Canada and provides  support services to the Adjusters.
The Adjusters are engaged by insurance  carriers and  self-insured  companies to
adjust claims made against them by claimants and by policyholders.  In addition,
the Company,  and certain of the Adjusters,  offer risk  management  services to
their clients. As of June 30, 2000, the Company had entered into 499 license and
franchise  agreements  ("Agreements")  with 394 entities,  operating 382 offices
with 672 advertised locations in 50 states, the District of Columbia and Canada.
In  addition to  licensing  and  franchising  Adjusters,  the  Company  owns and
operates  independent  insurance  adjusting  and risk  management  businesses in
Arizona and Nevada.

As of June 30,  2000,  the Company  employed  34 people:  32  full-time  and two
part-time.  Nine employees provided adjusting services  full-time,  one employee
provided  adjusting  services  part-time,  two were  full-time  officers  of the
Company,  24 were full- time  administrative  staff,  and one employee  provided
part-time  administrative  support.  Management believes that its relations with
its employees are good.

In March of 2000, the Company's board of directors  agreed in principle to enter
into a transaction (the  "Transaction")  whereby the Company will exchange a net
of  approximately  11.5 million shares of its common stock for all of the issued
and outstanding shares of stock of United Financial  Adjusting Company ("UFAC").
Upon consummation of the proposed Transaction,  the Company will merge with UFAC
and will become the parent of UFAC's two subsidiaries,  JW Software, Inc. ("JW")
and DBG Technologies,  Inc. ("DBG").  In May 2000, JW acquired 100% of the stock
of Vedder Software Group, Inc. ("Vedder").  Vedder will therefore be included in
the Transaction.  The Transaction will be accounted for in a manner similar to a
pooling of interest since the entities are under common  control,  to the extent
of the common  ownership.  The assets and liabilities of these companies will be
recorded at their fair value to the extent of the ownership interest by minority
stockholders and at the historical cost for the ownership  interest under common
control.

UFAC is an insurance claim management  services company, JW develops and markets
claim management software,  DBG develops and markets  internet-based systems and
websites, and Vedder develops property estimating software and tools.

Netrex Holdings,  LLC ("Netrex") currently owns all of the outstanding shares of
stock in UFAC which holds approximately 59% of the Company's  outstanding common
stock.  Consequently,  after the  Transaction  is  consummated,  Netrex will own
approximately   16.4  million  shares  of  the  Company's  stock,   representing
approximately 82% of the Company's outstanding common stock.

The  Transaction is subject to the approval of certain  regulatory  agencies and
the American Stock  Exchange,  the stock exchange on which the Company's  shares
are currently traded, as well as the approval by shareholders of the Company and
UFAC. In connection  with this  Transaction,  the Company is proposing to change
its name to  "Netrex  Business  Services,  Inc.".  The  Company  will,  however,
continue to operate the franchised and licensed claims adjusting  business under
the Frontier name even if the  Transaction  is  consummated  and the name change
effected.

GENERAL

For its fiscal year ended June 30, 2000, the Company's licensing and franchising
activities  accounted for approximately 83% of gross revenue,  and the Company's
adjusting and risk  management  businesses  accounted for  approximately  17% of
gross  revenue.  For the fiscal years ended June 30, 1999 and June 30, 1998, the
Company's licensing and franchising  activities  accounted for approximately 78%
and 79%,  respectively,  of gross revenue,  and the Company's adjusting and risk
management businesses accounted for approximately 22% and 21%, respectively,  of
gross revenue. The revenue derived from the Company's operations, as well as the
gross billings by Adjusters (upon which the Company's revenue from licensing and
franchising activities are based), are set forth in the following table:

                                     Page 2
<PAGE>
GENERAL (CONTINUED)

                                               FISCAL YEAR ENDED JUNE 30,
                                         ---------------------------------------
                                            2000          1999          1998
                                         -----------   -----------   -----------
Gross billings by Adjusters              $45,810,000   $44,730,000   $42,050,000
  (approximate)
Revenue from licensing and
  franchising activities                   5,170,592     4,936,349     4,596,657
Revenue from Company-owned adjusting
  and risk management businesses           1,086,304     1,405,235     1,228,691

For its fiscal year ended June 30, 2000, the Company's licensing and franchising
activities accounted for approximately  $2,372,000 in income from operations and
the  Company's   adjusting  and  risk   management   businesses   accounted  for
approximately $88,000 in income from operations. For the fiscal years ended June
30, 1999 and June 30, 1998, the Company's  licensing and franchising  activities
accounted for approximately  $1,051,000 and $1,152,000  respectively,  in income
from  operations,  and the Company's  adjusting and risk  management  businesses
accounted for approximately $221,000 and $106,000,  respectively, in income from
operations.

CLAIMS ADJUSTING

A claims adjuster conducts the business of providing claims adjustment  services
to insurance companies and to self-insured clients. The major elements of claims
adjusting consist of the following:

     1.   Investigation - the development of information  necessary to determine
          the cause and origin of the loss.

     2.   Evaluation  - the  determination  of the  extent  and  value of damage
          incurred and the coverage,  liability,  and compensability relating to
          the parties involved.

     3.   Disposition  - the  resolution  of  the  claim,  whether  by  payment,
          negotiation and settlement, by denial, or by other resolution.

     4.   Management - the  coordination  of all parties  involved in the claims
          process  and the  supervision  of the claims  process  including  risk
          management related services.

Insurance  companies,  which represent the major source of revenue to adjusters,
customarily  manage their own claims  management  function,  and require defined
services from adjusters,  such as field  investigation and settlement  services.
Self-insured  clients  typically  require  a range of risk  management  services
including claims adjustment, claims management,  statistical reporting, and loss
control, among other services. Insurance companies usually make claims adjusting
assignments on a claim by claim basis.  Self-insured  clients  typically  retain
adjusting  firms  like the  Company  and the  Adjusters  to handle  all of their
claims,  such as  workers  compensation,  general  liability  claims,  and other
claims.  Neither  the  Company  nor  any  of the  Adjusters  engages  in  public
adjusting,  which consists of representing  individual  insureds with respect to
their claims against insurance companies.

Risk management  related  services  consist  primarily of providing  services to
in-house risk managers of self-insureds  whose internal resources do not include
expertise  in claims  adjusting  or other  aspects  of claims  management.  Risk
management services, which are often referred to in the industry as "third party

                                     Page 3
<PAGE>
CLAIMS ADJUSTING (CONTINUED)

administration"  include  administering  claims,  working with  self-insurers to
decide whether  certain  claims need external  investigation,  coordinating  the
efforts of the field  investigation  with  internal  claims  review  activities,
generating  necessary  statistical  reports,  and paying  losses.  The insurance
companies responsible for the excess coverage of self-insured clients often play
a  significant  role  in the  selection  and  retention  of  providers  of  risk
management or third party administration and related services.

LICENSING AND FRANCHISING

The major  part of the  Company's  revenue  is  derived  under its  license  and
franchise  agreements  (the  "Agreements")  with the Adjusters.  Pursuant to the
terms of the  Agreements,  an Adjuster is authorized to use, within a designated
geographic  area, the  Company's service  mark in providing  adjusting  and risk
management-related  services.  In  addition,  an  Adjuster  is  provided  with a
computerized  central collection and rebilling service and national  advertising
and referrals by the Company.  The Company  receives a 10% or 15% royalty fee on
all  of the  Adjusters'  collections  depending  upon  the  Agreement  with  the
Adjuster.  In  fiscal  2000,  the  Company  retained  10.7%  of  the  Adjusters'
collections as royalty fees under the Agreements.

The Company generally does not advertise for or solicit  potential  licensees or
franchisees.  The Company  believes  that through the financial  flexibility  it
offers and the established and dependable services it provides to Adjusters, the
Company is generally capable of attracting qualified licensees and franchisees.

The  philosophy of the Company is to enter into  Agreements  with  licensees and
franchisees  who are highly  qualified  and  capable of  adjusting  all types of
claims.  The Company  estimates that the average length of time during which the
Adjusters have been providing insurance  adjusting  services,  on a Company-wide
basis, is approximately 20 years.

Before entering into an Agreement with a prospective licensee or franchisee, the
Company reviews the prospective  licensees' or franchisee's  background in order
to determine  that he or she is qualified and capable of rendering  professional
insurance adjusting services.  In evaluating a potential licensee or franchisee,
the Company  considers the length of time the  potential  licensee or franchisee
has been  involved in insurance  adjusting  and such other factors as his or her
(i)  experience  and the types of claims that he or she is capable of adjusting;
(ii) ability to act  independently  without  supervision  by the Company;  (iii)
prior and current  associations  in the  insurance  adjusting  business and (iv)
reputation in the insurance  adjusting business and in the community in which he
or she will provide insurance adjusting services.

OPERATION OF INDEPENDENT ADJUSTERS

Each Adjuster is required to maintain an office  within a designated  geographic
area  defined in his or her  Agreement.  The  Agreements  require,  among  other
things,  that  Adjusters  devote at least 80% of their  time  during  any 45 day
period to the conduct of the defined  business.  The  Agreements  are subject to
termination  by the Company upon an  Adjuster's  failure to meet  minimum  gross
billing volumes.  The Adjusters  retain the right to make independent  decisions
regarding the management and operation of their businesses, subject to the terms
of the license or franchise agreements.

The Company has a national  advertising  program in major  trade  journals.  The
advertising is designed to promote the Company's  operations and to generate new
accounts for its licensees and franchisees.  Adjusters  receive claims from both
local  referrals  developed by the Adjusters and from  referrals by the Company.
The  latter  referrals  are  generally  obtained  through  advertising  efforts,
national account marketing  programs and the general  reputation of the Company.
In addition,  Adjusters are  permitted,  but not required,  to advertise  within
their designated geographic areas.

Upon providing  services to a client, the Adjuster prepares a bill to the client
for the  Adjuster's  services.  The form of  invoice,  which is  supplied by the
Company,  indicates  that  remittance  is to be made  directly to the  Company's
address.  Upon receipt of payment  from the client,  the Company  withholds  the
royalty fee together  with any  reimbursements  due to the Company for liability
and errors and omissions  insurance premiums the Company may have paid on behalf
of the Adjuster and repayments for any credits,  loans,  or advances the Company
may have made to the Adjuster.  The Company  rebills  uncollected  invoices on a
45-60 day cycle.  The Company's  arrangements  with Adjusters  located in Canada
differ  from the  foregoing  in that  clients of Canadian  Adjusters  send their
remittances to the Company's  Canadian P. O. Box or to the Company's  franchisee
in  Regina,   Saskatchewan,   Canada.  Remittances  received  by  the  Company's
franchisee  are deposited by the  franchisee  directly  into the Company's  bank
account.

                                     Page 4
<PAGE>
OPERATION OF INDEPENDENT ADJUSTERS - CONTINUED

If a particular geographic area produces claims volume greater than the Adjuster
in that area is capable of  servicing,  the Adjuster  may, at the request of the
Company,  or at the suggestion of the Adjuster,  relinquish to a new prospective
licensee or  franchisee a portion of the  designated  area covered by his or her
Agreement.  As a result of these  arrangements,  the  Company  redirects  to the
relinquishing  Adjuster 5% of collections  derived from services provided by the
new Adjuster.

To assist new Adjusters in meeting their business and personal  expenses  during
their initial period as Adjusters, the Company may advance funds to them against
future  billings.  Typically  such  advances are made  semi-monthly  and average
approximately  $2,500 per month.  The number of Adjusters  to whom  semi-monthly
advances are made typically  varies  between 1 and 5. The Company  believes that
these  arrangements  provide new Adjusters  assistance in making the  transition
from being employees of insurance companies or other adjusting firms to becoming
the owners of their own businesses and, therefore, aid the Company in attracting
qualified individuals as Adjusters.

In addition to advancing funds to new Adjusters,  the Company  frequently  lends
money to Adjusters.  These loans may either be loans that are repaid on a weekly
basis out of their  collections,  or advances against accounts  receivable.  The
Company generally  requires that advances against  receivables be repaid in full
within 45 days.

The Company does not charge interest on any loans or advances made to Adjusters.
During the past four fiscal years, the Company has loaned or advanced an average
aggregate of $331,836 per month and has received  reimbursement of an average of
$322,425 per month. At June 30, 2000, the Company had  approximately  $1,198,000
in outstanding loans or advances. During the past four fiscal years, the Company
has  written  off an average of  $147,554  per year due to bad debts  related to
these arrangements.

LICENSE AND FRANCHISE AGREEMENTS

The current  forms of license and franchise  agreements  used by the Company are
largely  identical  except  that the form of  license  agreement  refers  to the
Adjuster as a licensee,  and the form of the franchise  agreement  refers to the
Adjuster as a franchisee.  The  difference  between the licensee and  franchisee
characterizations  is  primarily  historical,  dating  from the period  when the
Company's arrangements with Adjusters did not constitute a "franchise" under the
United  States  Federal  Trade  Commission's  rules  as  they  now  do.  If  the
arrangement was subject to state franchise laws, the Adjuster was referred to as
a  franchisee;  if not, the Adjuster was referred to as a licensee.  The Company
currently distinguishes between licensees and franchisees in the same manner.

The  franchise  and  other  laws  of  certain   states  limit  or  prohibit  the
enforceability  of covenants not to compete and require or prohibit  other types
of provisions  contained in franchise  agreements.  Accordingly,  certain of the
provisions contained in the Agreement, including, among others, the covenant not
to compete, may not be enforceable under certain circumstances.

The forms of Agreement currently in effect between the Company and the Adjusters
do not necessarily  contain all of the terms in the manner  disclosed below. For
example, the risk management  provisions,  the indemnity provisions,  certain of
the termination provisions,  and the minimum gross billings provisions discussed
below,  may have been  excluded  or  revised  in some of the forms of  Agreement
currently in effect.

Pursuant to the Agreement,  the Adjuster is entitled, and obligated,  to use the
Frontier  service mark in connection  with the conduct of the Adjuster's  claims
adjusting  business and risk  management-related  services.  The current form of
Agreement  provides  that the Adjuster may  participate  in the risk  management
business.  If the  Adjuster  declines  to  participate  in the  risk  management
business, the Adjuster is required to consent to the handling of such matters in
the Adjuster's territory by other Adjusters or by the Company.

The  Agreement  provides  that  each  Adjuster  is  an  independent  contractor.
Accordingly,  each  Adjuster  has  virtually  complete  control over all matters
involving  discretion and judgement in the operation of the Adjuster's business.
However,  before  instituting any legal action against any client,  the Adjuster
must  obtain  the  Company's   consent.   In  addition,   the  Company  has  the
discretionary right to investigate, settle, and satisfy any billing dispute with
any clients of the Adjuster.

The  Agreement  requires  the Adjuster to devote at least 80% of his or her time
during any 45 day period to the  operation  of the business  and  prohibits  the
Adjuster from  accepting any employment for  compensation  from any person.  The
Agreement  sets  forth a  minimum  performance  standard.  The  current  form of

                                     Page 5
<PAGE>
LICENSE AND FRANCHISE AGREEMENTS (CONTINUED)

Agreement  provides  that if at any time  after  the first  three  months of the
Agreement,   the  Adjuster's  gross  billings  are  less  than  $4,000  for  any
three-month  period,  then  either  party will have the right to  terminate  the
Agreement.

Pursuant  to the  Agreement,  the  Adjuster  is required to pay to the Company a
royalty fee equal to 10% or 15% of the Adjuster's  collections.  The Adjuster is
required to prepare initial billings to his or her clients and to send a copy of
each invoice to the Company.  Each invoice states that the payment is to be made
to the Company  with the  exception  of payments by clients of certain  Canadian
franchisees  where  payment  is made  through a Canadian  franchisee.  After the
Company  deducts its royalty fee from the  Adjuster's  collections,  the Company
remits the balance to the Adjuster on a weekly  basis.  In addition to deducting
its royalty  fee,  the Company  also  deducts  from the amounts  remitted to the
Adjuster,  the Adjuster's  general liability and errors and omissions  insurance
premiums, and the periodic repayment of credits, loans, and advances.

If a particular geographic area produces claims volume greater than the Adjuster
in the area is capable of  servicing,  the  Adjuster  may, at the request of the
Company,  or at the suggestion of the Adjuster,  relinquish to a new prospective
licensee or  franchisee a portion of the  designated  area covered by his or her
Agreement.  In  such  case,  the  relinquishing  Adjuster  will  receive  5%  of
collections derived from services provided by the new Adjuster.

The  Adjuster is required to  reimburse  the Company for the  premiums and other
costs and expenses necessary to keep in force an errors and omissions  insurance
policy.  The Agreement  also requires the Adjuster to hold the Company  harmless
from,  and to  indemnify  the  Company  for,  any  acts  of the  Adjuster.  This
indemnification includes paying the errors and omissions deductible or any other
amounts that the Company is obligated  to pay on an errors and  omissions  claim
arising out of a transaction handled by the Adjuster.

The  Agreement  contains a covenant not to compete.  This clause  provides  that
during the term of the Agreement the Adjuster  will not  participate  nor accept
employment with any business that is engaged in services that could be or are in
competition with the Company.  In addition,  the Agreement  provides that upon a
termination of the Agreement,  for any reason,  the Adjuster may not, within the
two year period after termination,  compete with the Company or any of the other
Adjusters  within the  territory  assigned to the  Adjuster or within a 100-mile
radius of that territory.

The  Agreement  provides  that an Adjuster  may not sell or transfer  his or her
interest in the license or franchise  without first receiving the consent of the
Company,  which  consent may not be  unreasonably  withheld.  In  addition,  the
Company has a right of first refusal to purchase the Adjuster's  interest in the
license or franchise in connection with any intended transfer to a third party.

The term of the Agreement is generally ten years, with a ten-year renewal option
exercisable by the Adjuster. The form of the renewal agreement will generally be
the form of the Agreement being used by the Company at the time of renewal.

The Adjuster may terminate the Agreement  upon 30 days' prior written  notice to
the Company.  The Company may terminate the Agreement  upon the  occurrence  of,
among other  things,  any of the  following:  the voluntary  abandonment  of the
business by the Adjuster,  the conviction of the Adjuster for certain  offenses,
the failure of the Adjuster to cure a default  under the  Agreement,  any action
that materially impairs the goodwill associated with the Company's service mark,
and the  failure  to meet  performance  goals.  In  addition,  the  Company  may
terminate the Agreement for good cause, which includes,  among other things, the
bankruptcy or insolvency of the Adjuster,  a lack of response on the  telephone,
and a failure to pick up the mail by the Adjuster for a period of 12 days. Other
actions by the  Adjuster  that  would  entitle  the  Company  to  terminate  the
Agreement  include the Adjuster's  failure to provide the Company with copies of
invoices  for  services  performed  by the  Adjuster,  the failure to instruct a
customer to make payments to the Company, and the failure to keep and maintain a
telephone listing and service.

COMPANY-OWNED INSURANCE ADJUSTING BUSINESS

In addition to its operations as a licensor and franchisor, the Company conducts
independent  insurance  adjusting and risk management  operations in Arizona and
Nevada.

                                     Page 6
<PAGE>
                             SPECIAL CONSIDERATIONS

The following factors,  in addition to those discussed elsewhere in this report,
should be carefully considered in evaluating the Company and its business.

THE INSURANCE ADJUSTING BUSINESS

The  insurance  adjusting  business is dependent  upon the volume of claims that
require  adjusting  services.  Several  factors,  including,  among others,  the
weather and the  incidence  of natural and  manmade  disasters,  will impact the
number of claims that require adjusting  services.  In addition,  the Company is
dependent upon its clients to direct their insurance  adjusting  business to the
Company and the  Adjusters.  If a  significant  number of the  Company's and the
Adjusters'   clients,   which  generally  consist  of  insurance  companies  and
self-insured  companies,  adopt a policy and practice of  establishing  in-house
adjusting  departments,  or increasing  the existing  staffing of their in-house
adjusting  departments,  the Company could be materially adversely affected. See
"Special Considerations - Uncertainty of Future Revenue". Further, the insurance
adjusting  business  is  highly  competitive.   See  "Special  Considerations  -
Competition" and Item 1, "Business - General".

UNCERTAINTY OF FUTURE REVENUE

The  Company's  future  revenue  and  net  income  depends  primarily  upon  the
maintenance or increase in the average revenue realized by the Adjusters and the
maintenance  or increase in the number of Adjusters.  As in any business,  there
can be no assurance  that the Company or the Adjusters will maintain or increase
their  revenue.   Further,  although  the  client  base  of  the  Adjusters  has
historically  continued  to  expand,  there  can be no  assurance  that  it will
continue to do so or that the Adjusters  will retain such  companies as clients.
See  "Special  Consideration  -  The  Insurance  Adjusting  Business",  "Special
Considerations  -  Competition",   "Special  Considerations  -  Dependence  Upon
Significant Clients", and Item 1, "Business - General".

Further,  although  the number of licensees  and  franchisees  has  continued to
increase in recent years,  the Company does not actively  solicit new Adjusters.
The  Company's  plan is to  continue to add  qualified  insurance  Adjusters  as
licensees  and  franchisees.  The  Company's  ability to increase  the number of
Adjusters will depend upon its continued ability to attract and retain qualified
insurance Adjusters as licensees and franchisees.  See "Special Considerations -
Competition".

DEPENDENCE UPON KEY PERSONNEL

In April 1999, the Board of Directors appointed Jeffrey C. Jordan of Netrex, age
44, as Vice  President  of the Company.  In August 1999,  the Board of Directors
appointed Troy M. Huth of Netrex, age 40, as President and, in January 2000, CEO
of the Company.  Mr. Jordan is located in the Company's  home office and manages
the daily  operations  of the  Company,  whereas Mr. Huth is located at the UFAC
corporate office in Cleveland,  Ohio, and oversees the direction of the Company.
Pursuant  to  an  agreement  with  UFAC,  the  Company  also  receives   certain
managerial, marketing, financial,  technological, and other services provided by
UFAC.  Should the Company  lose the  services of Mr.  Jordan  and/or  UFAC,  the
Company would be materially adversely affected.

VOTING CONTROL

The directors and officers of the Company own in excess of 9% of the outstanding
voting stock of the Company. UFAC's ownership constitutes 58.7% of the Company's
outstanding  voting stock.  The Company  anticipates  that UFAC's ownership will
enable UFAC,  and therefore  Netrex,  to control the business and affairs of the
Company.  If the Transaction is consummated,  Netrex will continue to be able to
elect a  majority  of the Board of  Directors,  and  therefore,  will be able to
continue to control the affairs of the Company.

DEPENDENCE UPON SIGNIFICANT CLIENTS

The Company generally considers its client base broad and well-diversified,  and
does not have any clients that generate 10% or more of consolidated  revenue. To
avoid  dependence  on any one  client,  the  Company  continues  to develop  and
implement sales and marketing  efforts to take advantage of its broad geographic
coverage  as  well as the  unique  strengths  of its  individual  licensees  and
franchisees. There is no assurance, however, that the Company will be successful
in procuring  nationwide accounts on terms as favorable as it has in the past or
will be the successful bidder on new or renewing accounts. Failure to procure or
maintain  such  accounts  may have a material  adverse  affect on the  Company's
business. See "Special Considerations - Competition".

                                     Page 7
<PAGE>
SERVICE MARK

The  Company has been  granted a service  mark for the name  Frontier(R)  by the
United  States  Patent  and  Trademark  Office.  If the  Company  is not able to
effectively protect itself against the use of similar trade names, trademarks or
service marks,  or if the Company's use of its service mark is found to infringe
upon the proprietary  rights of third parties,  the Company's  business could be
materially adversely affected.

Recently,  it has come to the  Company's  attention  that another  entity in the
insurance industry has been granted registration by the United States Patent and
Trademark  Office  of a  service  mark  for the  name  "Frontier."  The  Company
continues to monitor and evaluate this matter.  If it is determined  that action
should be taken to protect its service mark,  but the Company fails to take such
action,  or such  action is not  successful,  the  Company's  business  could be
materially adversely affected.

TORT LIABILITY AND INSURANCE

The Company and the Adjusters  may be the subject of litigation  based on errors
and  omissions  of their  respective  Adjusters.  Historically,  clients  of the
Adjusters and others have also sued the Company in  connection  with such claims
against the Adjusters.  Generally,  the Company has  successfully  defended such
claims based upon the fact that the Adjusters are independent contractors of the
Company,  for whose  conduct the Company is not liable.  Further,  although  the
Company and the Adjusters  maintain  insurance (in the amounts of $5,000,000 and
$1,000,000,  respectively) to minimize their exposure to related losses,  it may
become increasingly  difficult or costly to maintain insurance against these and
other  risks.  In such  event,  the  Company's  operations  could  be  adversely
affected.  Costs of insurance may escalate beyond those anticipated,  or certain
types  of  losses  may be  uninsurable  or may  exceed  available  coverage.  In
particular,  claims  against the Company and the  Adjusters may be based upon an
insured's  claim that the insurance  adjusting  operations of the Company and/or
the Adjusters  contributed to a client's "bad faith" in processing a claim.  Any
punitive or multiple  damages arising from any such claim,  and any compensatory
damages  exceeding  the coverage  limitations,  would be excluded  from coverage
under the  insurance  policy  maintained  for the benefit of the Company and the
Adjusters, and, therefore, could adversely affect the financial condition of the
Company.

In June 1999, a client of a former franchisee filed a complaint against multiple
defendants,  including the Company, alleging losses of at least $1,800,000.  See
"Item 3 - Legal Proceedings".

ABILITY TO RELY UPON LICENSE AND FRANCHISE AGREEMENTS

The license and franchise agreements currently in effect between the Company and
the  Adjusters may be terminated by the Adjusters at any time upon a thirty (30)
day prior written  notice to the Company.  Further,  franchise and other laws of
certain  states  limit or  prohibit  the  enforceability  of certain  provisions
contained in the license and franchise agreements, including the covenant not to
compete. See Item 1, "Business - License and Franchise Agreements".

GOVERNMENT REGULATION

FRANCHISING

The Company is subject to various  federal,  state,  provincial,  and local laws
affecting  its  business.  The  Company's  licensing  and  franchising  business
involves  the  sale  of a  franchise  under  the  United  States  Federal  Trade
Commission's  rules and the laws and regulations of certain states.  Many states
have adopted laws  regulating  franchise  operations in a  franchisor-franchisee
relationship,  and similar legislation may be adopted in the remaining states or
provinces.  Existing laws range from filing and disclosure  requirements  in the
offer  and  sale  of  franchises  to  the  application  of  statutory  standards
regulating the franchisor- franchisee  relationship.  The most common provisions
of these laws that regulate  substantive matters in the franchisor  relationship
establish  restrictions  on the ability of franchisors to terminate or to refuse
to renew franchise agreements.  Other laws contain provisions designed to ensure
the fairness of the franchise agreements to franchisees.  A number of these laws
include  prohibitions or  restrictions  pertaining to the  assignability  of the
rights of franchisees,  franchisee  ownership of interests in other  businesses,
and  franchisee  membership  in trade  associations.  In addition,  decisions of
several states limit or prohibit the enforceability of covenants not to compete.
Accordingly,  certain of the provisions  contained in the Company's  license and
franchise  agreements  may  not  be  enforceable  under  certain  circumstances.
Further,  the disclosure  statements and franchise agreements in connection with
future  franchisees  may be  subject to review by state  administrators  who may
require the Company to make  certain  changes and  accommodations  in the way it
does business with its  franchisees  that the Company would not otherwise  make.
There can be no  assurance  that the  Company  will be able to obtain  necessary
regulatory  approvals on a timely basis. Delay in obtaining or failure to obtain
such approvals  could adversely  affect the growth of the Company's  franchising
operations.  Historically,  however, the Company has not experienced significant
delays in obtaining such approvals.

                                     Page 8
<PAGE>
FRANCHISING (CONTINUED)

As the law  applicable to franchise  operations and  relationships  is a rapidly
developing one, the Company is unable to predict the effect on its operations of
additional  requirements or restrictions  which may be enacted or promulgated or
of court decisions which may adversely affect the franchise industry generally.

INSURANCE ADJUSTING

The laws and  regulations of several states require that insurance  adjusters be
licensed  and/or comply with certain  substantive  requirements  with respect to
their  operations.  Additional  requirements  that may be enacted or promulgated
could impact the conduct of the insurance  adjusting business by the Company and
the Adjusters.  Any such additional  requirements  may have  materially  adverse
financial or other consequences and adversely affect the growth of the Company's
franchising and insurance adjusting operations.

COMPETITION

The  insurance  adjusting  business  in  which  the  Company  is  engaged,  both
indirectly as a licensor and franchisor  and directly as an insurance  adjuster,
is highly  competitive.  The Company competes with insurance  companies and with
other  independent  insurance  adjusting  companies for  qualified  adjusters to
become  licensees and  franchisees.  In addition,  through the Adjusters and the
Company-owned  adjusting  businesses,  the  Company  competes  as a provider  of
insurance  adjusting services with other insurance  adjusting companies and with
in-house insurance  adjusting staffs. See "Special  Considerations - Uncertainty
of Future Revenue", "Special Considerations - The Insurance Adjusting Business",
and "Special Considerations - Dependence Upon Significant Clients".

DIVIDENDS

From the third quarter of the Company's 1985 fiscal year through September 1998,
the Company paid  quarterly  dividends  with respect to shares of Common  Stock.
Declaration  and  payment of  dividends  are  subject to the  discretion  of the
Company's  board of directors and may be made only from funds legally  available
therefor.  Payment of quarterly  dividends was  suspended  during the last three
quarters of fiscal 1999,  until the board declared a cash  distribution of $1.60
per share payable to the holders of the rights to the  distribution  on July 12,
1999, to  shareholders of record on June 25, 1999. The Company intends to retain
its  earnings  to finance  development,  expansion  and growth of its  business.
Consequently,  the Board of Directors does not currently  anticipate the payment
of any dividends to the Company's shareholders in the foreseeable future.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain  statements  and  information  contained  in this  Report  under Item 7,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations", and Item 1, "Business" concerning future, proposed, and anticipated
activities  of the  Company,  certain  trends  with  respect  to  the  Company's
operating  results,  capital  resources  and  liquidity,  or with respect to the
insurance adjusting industry in general,  and other statements contained in this
Report  regarding  matters that are not historical  facts,  are  forward-looking
statements,   and  by  their  very  nature,  include  risks  and  uncertainties.
Accordingly, actual results may differ, perhaps materially, from those expressed
in or implied  by such  forward-looking  statements.  Factors  that could  cause
actual results to differ  materially  include the foregoing and those  discussed
elsewhere under this Item 1, "Special Considerations".

ITEM 2 - PROPERTIES

The Company owns the office  building and property  located at 45 East  Monterey
Way,  Phoenix,   Arizona,  where  it  conducts  its  licensing  and  franchising
operations and its Phoenix claims adjusting and risk management-related services
business.  The office building  currently contains  approximately  13,000 square
feet of office space. Adjacent to the main office, the Company also owns a small
building and property at 51 East Monterey Way which  contains two offices.  Both
offices are  currently  being used for  storage.  The combined  offices  contain
approximately 1,500 square feet of office space.

The  Company  also owns a parcel of real  property  across the  street  from the
Company's principal executive office, which is utilized for employee parking.

Additionally,  the Company leases  approximately 800 square feet of office space
in Tucson,  Arizona and 1,000  square  feet in Las Vegas,  Nevada for its claims
adjusting  offices  in that  city.  As the  Company  sold it's  Tucson,  Arizona
adjusting  office in January 2000,  the Company no longer uses the office leased
there and is currently attempting to sublease it.

Management  believes the facilities owned and leased by the Company are adequate
for its current and foreseeable future operations.

                                     Page 9
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS

In June  1999,  Safeway  Inc.  filed a  complaint  against  multiple  defendants
including  the Company in the United  States  District  Court in  Nebraska.  The
complaint arises from the alleged  embezzlement of over $1,800,000 by the former
licensee.  The complaint  alleges claims against the Company in connection  with
claims services provided for the benefit of Safeway,  Inc.,  including breach of
fiduciary duty, negligent failure to monitor or supervise,  vicarious liability,
and breach of  contract. The  complaint  seeks an  accounting  and a recovery of
compensatory  damages  of at  least  $1,800,000.  The  Company  has  denied  the
allegations of liability contained in the complaint.  As the lawsuit is still in
its earliest phase, the Company cannot yet assess the merits of the complaint or
whether  this suit will  have a  material  adverse  affect on the  Company.  The
Company has sought  coverage under various  insurance  policies it holds and has
received  denials of coverage  from the  carriers.  The Company is continuing to
attempt to obtain coverage and defense from these carriers. As of June 30, 2000,
the Company has not accrued any liability with respect to this lawsuit.

From time to time in the normal course of its business,  the Company is named as
a defendant in lawsuits.  With the exception of the complaint  described  above,
the  Company  does  not  believe  that it is  subject  to any such  lawsuits  or
litigation  or  threatened  lawsuits  or  litigation  that will have a  material
adverse effect on the Company or its business.

ITEM 4 - SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS

Matters were submitted to a vote of securities  holders during the third quarter
of this fiscal year.  Such matters were reported on the Company's  Form 10-Q for
the period ended March 31, 2000. No matters were submitted to a vote of security
holders during the fourth quarter of the fiscal year covered by this report.

                                     Page 10
<PAGE>
                                     PART II


ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDERS
         MATTERS

The Company's Common Stock is listed on the American Stock Exchange (AMEX) under
the  symbol  "FAJ".  The  following  table  sets forth the range of high and low
prices,  and the  trading  volume,  during  each  quarterly  period  within  the
Company's two most recent fiscal years.

                                                       PRICE
                                                 ------------------
                                                  HIGH        LOW        VOLUME
                                                 ------      ------      -------
Fiscal Year Ended June 30, 2000
  First Quarter                                  $3.250      $1.500      308,800
  Second Quarter                                  2.125       1.000      370,900
  Third Quarter                                   4.500       1.250      397,600
  Fourth Quarter                                  4.000       2.500      240,500

Fiscal Year Ended June 30, 1999
  First Quarter                                  $3.375      $2.375      260,900
  Second Quarter                                  2.563       2.000      254,200
  Third Quarter                                   2.750       2.375      240,800
  Fourth Quarter                                  4.375       2.375      354,400

The following  shows per share cash  dividends  declared for each quarter during
the Company's two most recent fiscal years.

                                                         CASH DIVIDENDS DECLARED
                                                         -----------------------
Fiscal Year Ended June 30, 2000
  First Quarter.........................................         $ .0000
  Second Quarter........................................           .0000
  Third Quarter.........................................           .0000
  Fourth Quarter........................................           .0000

Fiscal Year Ended June 30, 1999
  First Quarter.........................................         $ .0375
  Second Quarter........................................           .0000
  Third Quarter.........................................           .0000
  Fourth Quarter........................................          1.6000

As of June 30, 2000, there were 220 shareholders of record  (approximately 1,020
including beneficial owners) of the Company's Common Stock.

The Company intends to retain its earnings to finance development, expansion and
growth of its business.  Consequently, the Board of Directors does not currently
anticipate  the payment of any  dividends to the Company's  shareholders  in the
foreseeable future.

                                     Page 11
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                        YEAR ENDED JUNE 30
                                -------------------------------------------------------------------
                                   2000          1999          1998          1997          1996
                                -----------   -----------   -----------   -----------   -----------
<S>                             <C>           <C>           <C>           <C>           <C>
INCOME STATEMENT DATA
  Operating revenue             $ 6,256,896   $ 6,341,584   $ 5,825,348   $ 6,164,603   $ 5,641,984
  Net income                      1,240,369       546,452       612,475       979,198     1,134,519
  Basic earnings per share              .14           .12           .13           .21           .25
  Diluted earnings per share            .14           .12           .13           .21           .25
  Weighted average number of
    shares used in per share
    data: Basic                   8,957,586     4,569,049     4,605,358     4,607,709     4,620,101
          Diluted                 8,957,586     4,570,113     4,612,674     4,631,898     4,627,606
 Cash dividends per share       $        --   $     1.638   $       .15   $       .15   $       .14

BALANCE SHEET DATA
  Working capital               $ 3,533,324   $ 2,073,511   $ 3,214,489   $ 3,261,953   $ 3,196,562
  Total assets                    6,720,093    12,118,984     7,800,700     7,912,139     6,875,752
  Long-term debt                         --            --         4,953        33,462        59,983
  Property and equipment, net     1,622,389     1,608,936     1,724,329     1,736,226     1,554,401
  Stockholders' equity            6,300,340     5,053,633     6,452,241     6,564,193     6,230,799
  Book value per common share           .70           .56          1.40          1.43          1.35
  Retained earnings               4,263,100     3,022,731     4,735,935     4,814,266     4,526,419
  Total shares outstanding        8,957,660     8,957,560     4,605,358     4,605,358     4,619,658
</TABLE>

                                     Page 12
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FINANCIAL CONDITION

In fiscal 2000,  the Company's  continuing  operations  generated  $1,067,000 in
cash,  which  was  sufficient  for the  Company's  cash  requirements.  The most
significant  items affecting cash generated by the Company's  operations are net
income of $1,240,000,  a $437,000 decrease in franchisee and licensee remittance
payable,  a decrease of $266,000 in salaries payable and related  benefits,  and
the bad debt expense of $312,000.  The Company,  pursuant to agreements with its
licensees and  franchisees,  acts as a collection agent for all of its licensees
and  franchisees.  The  Company  remits to its  licensees  and  franchisees  the
collections,  less the  ongoing  license/franchise  fee and any  amounts due the
Company,  such as loan repayments and errors and omissions  insurance  premiums.
The day of the week that the Company's fiscal period ends, therefore, can have a
significant  effect on the  reported  amount  that is due to the  licensees  and
franchisees.  As June 30, 2000 fell one day after the collections  were remitted
to licensees and franchisees,  the Company's remittance payable was $116,000. In
comparison,  the Company's  financial  statements  as of June 30, 1999,  reflect
collections  for four days of  $553,000.  The  decrease in salaries  payable and
related benefits results from the payout of employee benefits and bonuses during
the first quarter of fiscal 2000.  The bad debt expense  relates to the reserves
for aged larger balance loans given to franchisees and licensees.

For the fiscal year ended June 30,  2000,  the  Company's  investing  activities
generated  $85,000 in cash. The most significant  items affecting cash generated
from investing activities are $3,498,000 given as advances or loans to licensees
and  franchisees,  $3,701,000  in  collections  on  advances  or loans  given to
licensees  and  franchisees,  $172,000  in  capital  expenditures,  and  $51,000
received on a called bond held by the Company.

For the fiscal year ended June 30, 2000, the Company's financing activities used
$5,918,000 in cash. The most  significant  item affecting cash used in financing
activities is the $5,918,000 dividend declared in fiscal 1999 but not paid until
the first quarter of fiscal 2000.  This dividend was a one-time  $1.60 per share
dividend in  conjunction  with UFAC's  purchase of  5,258,513  of the  Company's
shares in April of 1999.

Without  giving  effect  to the  operations  added as a result  of the  proposed
Transaction  with UFAC,  the Company  anticipates  that  during  fiscal 2001 its
operations  will generate  sufficient  cash to fund its operations and equipment
acquisitions.  The Company projects that its capital  expenditures for equipment
will be approximately $200,000 to $300,000 in fiscal 2001.

The  Company  continues  to maintain a strong cash  position.  As a result,  the
Company's ratio of current assets to current liabilities is 9.42 to 1 as of June
30, 2000,  compared to 1.29 to 1 as of June 30, 1999.  The increase is primarily
the result of the  decreases  in  payables  for  dividends,  franchisee/licensee
remittances, and salaries and related benefits.

In June 1999, a complaint was filed against  multiple  defendants  including the
Company. The complaint arises from the alleged embezzlement by a former licensee
in connection  with claims  services  provided for the benefit of the plaintiff.
The complaint seeks damages of at least $1,800,000 from the Company. The Company
has denied allegations of liability  contained in the complaint.  As the lawsuit
is still in its earliest phase,  the Company cannot yet assess the merits of the
complaint  or  whether  this  suit will have a  material  adverse  effect on the
Company. For further discussion, see "Item 3 - Legal Proceedings".

                                     Page 13
<PAGE>
RESULTS OF OPERATIONS 2000 COMPARED TO 1999

REVENUE

The Company's  revenue  decreased  $85,000,  or 1.3%,  to $6,257,000  during the
fiscal year ended June 30, 2000 from  $6,342,000 in the prior fiscal year.  This
decrease  consists  primarily  of a $319,000  decrease  in  adjusting  and other
revenue and a $234,000 increase in continuing licensee and franchisee fees.

The  decrease of  $319,000  in  adjusting  and other fees to  $1,086,000  in the
current fiscal year compared to $1,405,000 in the prior fiscal year represents a
22.7% decrease.  The Company experienced decreases of $209,000 in adjusting fees
its Phoenix office, $7,000 in adjusting fees in its Las Vegas/Henderson  office,
and  $99,000  in  adjusting  fees in its Tucson  office.  The  remainder  of the
decrease,  $4,000,  is due to the  discontinuation  of risk management  services
provided by the Company's home office.

The  decline  in the Las  Vegas/Henderson  office is  primarily  the result of a
decrease  in storms  towards  the end of the 2000 fiscal year as compared to the
prior year.  The decrease in the Phoenix  office mainly  relates to a client the
Phoenix  office  acquired in November  1997 and lost in early fiscal  2000.  The
decrease in the Tucson office is the result of the Company's  sale of the Tucson
office to a new  franchisee  on January 1, 2000.  Finally,  the  Company  ceased
providing risk management  services within the home office during fiscal 2000 as
it was not economical to continue  providing such services.  Fees generated from
the risk management services were $2,000 and $5,000 for the years ended June 30,
2000 and 1999,  respectively.  The decision to have  franchisees  and  licensees
provide  risk  management  services  for  clients  continues  to remain with the
individual franchisees and licensees.

The Company's  revenue from  continuing  licensee and franchisee  fees increased
$234,000, or 4.7%, from $4,936,000 in the prior fiscal year to $5,170,000 in the
current  fiscal  year.  This  increase  reflects  the  benefit to the  Company's
licensees and franchisees from an increase in claims  assignments from insurance
companies and self-insureds.

The Company's  revenue is affected by numerous matters  including the work loads
of other companies and claims presented by their clients. Therefore, the Company
is unable to project  its future  revenue.  The Company  has  historically  seen
growth in the licensee and  franchisees  paid,  with  exception to the loss of a
major client in 1997. To further enhance revenue growth,  the Company  continues
to develop and implement sales and marketing  efforts that take advantage of its
geographic diversity as well as the unique strengths of its individual licensees
and franchisees.  In addition to the marketing  resources  provided by UFAC, the
Company hopes to see continued growth in licensee and franchisee fees paid.

COMPENSATION AND EMPLOYEE BENEFITS

Compensation  and  employee  benefits  represent   approximately  45.3%  of  the
Company's  cost and expenses and represent  the largest  single item of expense.
These expenses  decreased  $1,263,000,  or 38.8%,  from  $3,248,000 in the prior
fiscal year to $1,985,000 in the current fiscal year. The decrease is the result
of the  retirement  of William J. Rocke,  former CEO and former  Chairman of the
Board, and Jean E. Ryberg,  former  President,  on June 30, 1999. In addition to
the absence of their  salaries in the current  fiscal year, the Company had paid
severance packages to Mr. Rocke and Mrs. Ryberg in the 1999 fiscal year, thereby
increasing  compensation  expense  compared  to this fiscal  year.  Furthermore,
compensation  decreased as a result of the resignation of Francis J. LaPallo,  a
former  Executive Vice President,  on January 31, 2000.  Certain of the services
provided by Mr. Rocke,  Mrs.  Ryberg,  and Mr.  LaPallo are now provided by UFAC
pursuant to a service agreement between the Company and UFAC.  Charges for these
services are  reflected in a monthly fee paid to UFAC.  For further  discussion,
see "Service Fees" below.

SERVICE FEES

On April 30,  1999,  the  Company  entered  into a service  agreement  with UFAC
whereby the Company pays a $25,000 monthly fee for certain services  provided by
UFAC.  Services  included  under  this  agreement  are  management,   marketing,
technology,  human resource support,  and accounting and reporting support.  For
the fiscal year ended June 30, 2000, the Company  incurred  $300,000 in services
fees under this  agreement  as  compared  to $50,000  for the prior year (as the
agreement was in affect for only two months during fiscal 1999).

The  Company  also  pays UFAC for  services  performed  beyond  the scope of the
service agreement. For the fiscal year ended June 30, 2000, the Company incurred
$51,000 in computer  consulting  fees and $10,000 in  telephone  support for the
Company's  after-hour hotline,  for an aggregate of $61,000 in services provided
by UFAC that were not within the scope of the service agreement.

                                     Page 14
<PAGE>
SERVICE FEES (continued)

The  Company  believes  that the  charges for the  services  provided  under the
service  agreement  are  competitive  with  charges  for  similar  services  and
facilities available from third parties.

EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS AND UFAC SERVICE FEES

The Company's  expenses  other than  compensation  and fringe  benefits and UFAC
service fees decreased $261,000,  or 11.4%, from fiscal 1999 to fiscal 2000. The
principal   items   affecting  these  expenses  are  decreases  of  $175,000  in
advertising  and  promotion,  $110,000 in legal fees,  $53,000 in  depreciation,
$24,000 in office expenses,  and increases of $74,000 in bad debt and $25,000 in
insurance coverage costs.

As a  portion  of the  monthly  service  fee  paid  to UFAC  includes  marketing
resources,  the  Company  has  decreased  similar  services  previously  paid to
external  sources.  Accordingly,   advertising  and  promotional  expenses  have
decreased  this fiscal year as these services were provided by UFAC and recorded
under  service  fees for the fiscal  year 2000.  Furthermore,  a portion of this
reduction is due to the  non-renewal of the Company's share of a luxury suite at
a sporting  facility.  Legal fees decreased  significantly  due to the increased
need for  legal  services  during  the  first  nine  months  of  fiscal  1999 in
preparation of the UFAC transaction that was later consummated in April of 1999.
Furthermore,  the Company has  reduced the legal  services it receives  from the
Company's  outside  counsel,  a current  shareholder  of the  Company and former
officer and director of the  Company,  by $49,000 from $92,000 in fiscal 1999 to
$43,000 in fiscal 2000.  The decrease in  depreciation  expense is a result of a
decline in capital purchases as well as an increase in fully depreciated  assets
as compared to the prior fiscal year.

The Company has  traditionally  advanced funds to  franchisees  and licensees to
assist them in the initial  start-up  and  further  growth of their  businesses.
Throughout  the years,  the Company has loaned  significant  amounts of money to
various  franchisees  and licensees.  The Company  reserves for such loans based
upon  historical  experience  and current  changes in  circumstances.  Loans are
reserved for under the following circumstances:  (1) the Company determines that
the loan is uncollectible and (2) the  collectability of the entire loan balance
is questionable.  Based upon historical  experience,  a loan is determined to be
uncollectible when notice is given by the Company or by a franchisee or licensee
that the relationship with the Company is being terminated.  Collectability of a
loan  becomes   questionable  when  either  the  Company  anticipates  that  the
relationship  between the Company will become  terminated,  or the volume of the
franchisee or licensee is inadequate to repay the loan in a reasonable period.

As of June 30,  2000,  the Company  carried  loans with certain  franchisees  or
licensees  that had sizable loan  balances  which  accumulated  over a number of
years. As the franchisees' or licensees'  volume has diminished,  or their loans
age, the Company has provided  for reserves on these loans as  appropriate.  The
likelihood of collecting  100% of such loans was determined to be  questionable,
based on the  Company's  past  experience,  and  therefore  the Company found it
appropriate  to  reserve  for  these  loans.   The  Company  is  currently  more
conservative in lending funds to franchisees and licensees today; however, older
loans are  affecting  current  reserves for bad debt.  As of June 30, 2000,  the
Company  carried  older,  large  balance loans as compared to the prior year and
therefore increased its reserves for bad debt,  consequently  increasing the bad
debt expense for fiscal 2000.

The  increase  in  insurance  costs  relates to  increased  coverage  as well as
increases in the premiums during fiscal 2000 for the various insurance  policies
the Company carries.

OTHER INCOME

The Company's other income decreased $42,000 or 18.4% from fiscal 1999 to fiscal
2000. The principal items affecting this decrease  include a $49,000 decrease in
realized gain on equity  securities  primarily  due to the  redemption in fiscal
1999 of mutual funds owned by the Company as investments, an increase of $16,000
in the gain on sale of a  license,  an  increase  of  $13,000  in  miscellaneous
revenue,  a decrease of $10,000 in interest income,  and a decrease of $9,000 in
the disposition of fixed assets.

INCOME TAXES

Income taxes were 40.1% and 44.4% of the  Company's  income  before income taxes
for fiscal year 2000 and 1999  respectively.  A difference in these rates is due
to  permanent  differences  and is reflected in the increase of the deferred tax
asset of $122,000  from $235,000 at June 30, 1999, to $357,000 at June 30, 2000.
The Company's income taxes have not been  significantly  affected by any changes
in the federal and state tax laws. However, tax rates can be changed at any time
based upon legislation.

                                     Page 15
<PAGE>
NET INCOME

The Company's net income increased  $694,000 to $1,240,000 in the current fiscal
year from $546,000 in fiscal 1999, an increase of 127.1%.  The most  significant
items  affecting net income were the $85,000  decrease in revenue,  a $1,263,000
decrease in compensation  and fringe  benefits,  a $250,000  increase in service
fees,  a  $261,000  decrease  in  expenses  other than  compensation  and fringe
benefits and service fees,  and a $42,000  decrease in other income.  During the
fourth quarter of fiscal 2000, the Company recorded net income of $369,000.

RESULTS OF OPERATIONS 1999 COMPARED TO 1998

REVENUE

The Company's  revenue  increased to $6,342,000  from $5,825,000 in fiscal 1998,
resulting in a 8.9% increase as compared to fiscal 1998.  The increase  consists
primarily of a $176,000  increase in adjusting  and other revenue and a $339,000
increase in continuing licensee and franchisee fees.

The increase of $176,000 in  adjusting  and other fees to  $1,405,000  in fiscal
1999 compared to $1,229,000 in fiscal 1998 represents an increase of 14.3%.  The
Company  experienced an increase of $198,000 in its Phoenix office and decreases
of $8,000 and $14,000 in adjusting fees from its Las  Vegas/Henderson and Tucson
offices,  respectively.  The increase in fees from the Phoenix office  primarily
reflects fees generated from a client acquired in November of 1997.

The Company's  revenue from  continuing  licensee and franchisee  fees increased
7.4% or $339,000  from  $4,597,000  in fiscal 1998 to $4,936,000 in fiscal 1999.
The increase  reflects the benefit to the Company's  licensees  and  franchisees
from  an  increase  in  claims   assignments   from   insurance   companies  and
self-insureds.

The Company's  revenue is affected by numerous matters  including the work loads
of  other  companies  and  claims  presented  by  their  clients.  The  Company,
therefore, is unable to project its future revenue. The Company has historically
seen growth in licensee and franchisee  fees paid.  However,  during 1998 fiscal
year,  the Company  experienced a decrease in revenue due primarily to the phase
out of a business  relationship  with its then major  client.  The  Company  has
responded to this loss of revenue by continuing  to develop and implement  sales
and marketing  efforts to take advantage of its geographic  diversity as well as
the unique strengths of its individual licensees and franchisees.  Through these
efforts and the addition of UFAC's marketing resources,  the Company anticipates
that over time the lost  business  will be replaced  and hopes to see  continued
growth in licensee  and  franchisee  fees paid from other  sources.  There is no
assurance,  however,  that the Company will be  successful in replacing the lost
business.

COMPENSATION AND EMPLOYEE BENEFITS

Compensation  and  employee  benefits  represent   approximately  58.1%  of  the
Company's costs and expenses and are the Company's  largest expense item.  These
expenses  increased  15.3%  or  $431,000  to  $3,248,000  in  fiscal  1999  from
$2,817,000  in the fiscal 1998.  This  increase is  primarily  the result of the
retirement  packages paid to Mr. Rocke and Mrs. Ryberg of $327,827 and $249,940,
respectively.   Furthermore,   certain  adjusters  in  the  Phoenix  office  are
compensated by commission  based on their adjusting  services.  As the adjusting
fees in the Phoenix  office  increase,  the wages paid to these  adjusters  also
increase.  However,  the Company has reduced the amount of compensation  paid to
its  administrative  staff due to the departure and  non-replacement  of certain
salaried personnel.

EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS

The Company's  expenses other than  compensation  and fringe benefits  increased
$233,000 or 11.1% from fiscal 1998 to fiscal 1999.  Significant changes included
the following  increases:  legal  expenses of $162,000;  auditing and accounting
fees of $81,000;  UFAC  service  fees of $50,000;  computer  consulting  fees of
$27,000; general insurance of $22,000;  miscellaneous expenses of $30,000, and a
decrease in bad debt expense of $115,000.

The  increase in legal fees  reflects  the  Company's  increased  need for legal
services  in  connection  with the  transaction  in fiscal  1999 with UFAC.  The
increase  in audit and  accounting  fees  reflects  the  Company's  decision  to
out-source  certain  income  tax and  financial  reporting  functions  that were
previously performed in-house.  The Company believes this will enable it to more
efficiently  monitor  compliance with the constantly  changing state and federal
tax and reporting laws and  regulations.  Furthermore,  the Company has incurred
additional  accounting  fees in connection  with the  transaction in fiscal 1999
with UFAC.

The balance of the Company's  costs and expenses have not changed  significantly
from the 1998 fiscal year.

                                     Page 16
<PAGE>
OTHER INCOME

The  Company's  other  income  increased  $102,000  or 80.3% from fiscal 1998 to
fiscal 1999.  The principal  items  affecting  this increase  included a $32,000
increase  in interest  income,  a $61,000  increase  in realized  gain on equity
securities  primarily due to the  redemption of the  Company's  mutual funds,  a
decrease in interest  expense of $30,000;  and a decrease in dividend  income of
$10,000.

INCOME TAXES

Income taxes were 44.4% and 40.4% of the  Company's  income  before income taxes
for fiscal year 1999 and 1998  respectively.  A difference in these rates is due
to permanent  differences  and is reflected in the reduction of the deferred tax
asset of $54,000 from  $289,000 at June 30, 1998,  to $235,000 at June 30, 1999.
The Company's income taxes have not been  significantly  affected by any changes
in the federal and state tax laws. However, tax rates can be changed at any time
based upon legislation.

NET INCOME

The  Company's  net income  decreased  $66,000 to  $546,000  in fiscal 1999 from
$612,000  in  fiscal  1998,  a  decrease  of 10.8%  The most  significant  items
affecting net income were the $516,000 increase in revenue,  a $431,000 increase
in compensation and fringe benefits,  a $233,000 increase in expenses other than
compensation  and fringe  benefits,  and a $102,000  increase  in other  income.
During the fourth  quarter of fiscal  1999,  the Company  recorded a net loss of
$97,179.  The most  significant  item  contributing  to this loss was a one time
charge of $577,767 for severance pay to former employees.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss to future earnings,  fair values, or future cash
flows  due to  potential  changes  in the  price of a  financial  instrument.  A
financial  instrument's  value may  change as a result of  changes  in  interest
rates,  exchanges  rates,  commodity  prices,  equity  prices,  and other market
changes.  Market  risk  is  inherent  in all  market  risk  sensitive  financial
instruments.

During the fiscal year 2000, the Company did own an immaterial  number of common
stock shares that it sold in October 1999.  Therefore,  the Company is no longer
exposed to any interest income risk and market value risks  associated with this
investment.

At June 30, 2000, the Company has a book value of $619,000 invested in municipal
bonds that it carries as long term held to maturity investments.  An increase in
interest rates would result in a decline in the market value of the bonds. These
bonds mature between 2005 and 2031. As the Company has the intent and ability to
hold these bonds to  maturity,  the market risk  associated  with these bonds is
insignificant and does not have a material effect on the financial statements.

Although  the Company  wholly owns a Canadian  subsidiary,  the cash held by the
Canadian  subsidiary  is not material to the Company's  operations.  Any foreign
currency  fluctuations  would  not  have a  material  effect  on  the  Company's
financial statements.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the Consolidated  Financial  Statements,  the Notes thereto
and Report of Independent Public  Accountants  thereon commencing at page F-1 of
this Report,  which  Consolidated  Financial  Statements,  Notes and Reports are
incorporated herein by reference.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

Not applicable.

                                     Page 17
<PAGE>
                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
                                                                             SERVED AS DIRECTOR
                                                                              SINCE YEAR LISTED
NAME/TITLE                  BUSINESS EXPERIENCE                        AGE        BELOW (1)
----------                  -------------------                        ---        ---------
<S>                         <C>                                        <C>        <C>
Peter I. Cavallaro          Mr. Cavallaro was appointed Secretary of    38
Secretary                   the   Company   in  January   2000.  Mr.
                            Cavallaro  joined  Netrex  LLC,  a newly
                            organized    financial    services   and
                            technology  company,  in November  1999.
                            From  May  1990  to  March   1999,   Mr.
                            Cavallaro  was  employed by  NationsBanc
                            Auto  Leasing,   Inc.   (formerly  named
                            Oxford Resources  Corp.),  most recently
                            serving  as Senior  Vice  President  and
                            General  Counsel.   From  June  1999  to
                            November  1999,  Mr.   Cavallaro  was  a
                            partner  at the  New  York  Law  Firm of
                            Rivkin,   Radler  & Kremerer  LLP.   Mr.
                            Cavallaro  continues  as Of  Counsel  to
                            that law  firm.  Mr.  Cavallaro  holds a
                            J.D.  degree from St. John's  University
                            School of Law, and a BA from St.  John's
                            University.

John M. Davies              Mr. Davies has been  associated with the    44          1999
Director and Chairman       Company as a director  since  April 1999
of the Board                and Chairman of the Board since  January
                            2000.  Since June 1999,  Mr.  Davies has
                            also served as  President of Netrex LLC,
                            a newly organized financial services and
                            technology company.  From September 1989
                            to June 1999, Mr. Davies was employed by
                            The   Progressive   Corporation,    most
                            recently   as  Division   President   of
                            Progressive's    Diversified    Business
                            Group.  Mr.  Davies  has an MBA from the
                            University of Pittsburgh  and has earned
                            numerous   professional    designations,
                            including   being  a  Certified   Public
                            Accountant,  a  Chartered  Property  and
                            Casualty  Underwriter  and  a  Chartered
                            Life Underwriter.

Jeffrey R. Harcourt         Mr.   Harcourt   has   served  as  Chief    39          1999
Director, Chief Financial   Financial  Officer of the Company  since
Officer and Treasurer       August  1999,   as  a  director  of  the
                            Company   since   April   1999   and  as
                            Treasurer of the Company  since  January
                            2000. From October 1990 through November
                            1999,  Mr.  Harcourt was employed by The
                            Progressive  Corporation,  most recently
                            as the  Controller  of  the  Diversified
                            Business Group.  Mr. Harcourt  currently
                            also  serves  as  the  Chief   Financial
                            Officer of Netrex.  Mr. Harcourt holds a
                            BS degree from Miami  University and has
                            earned numerous designations,  including
                            being a Certified Public  Accountant,  a
                            Chartered    Property    and    Casualty
                            Underwriter,    a   Certified   Internal
                            Auditor  and  a  Certified   Information
                            systems Auditor.
</TABLE>

                                     Page 18
<PAGE>
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)

<TABLE>
<CAPTION>
                                                                             SERVED AS DIRECTOR
                                                                              SINCE YEAR LISTED
NAME/TITLE                  BUSINESS EXPERIENCE                        AGE        BELOW (1)
----------                  -------------------                        ---        ---------
<S>                         <C>                                        <C>        <C>
Troy M. Huth                Mr. Huth has served as  President  and a    40          1999
Director,                   director of the Company since April 1999
CEO and President           and as the  Company's  CEO since January
                            2000.   Mr.  Huth  was  also   appointed
                            President of UFAC in June 1999, Chairman
                            of  the  Board  and  director  of  JW in
                            November 1999 and President and director
                            of DBG in November 1999. From April 1986
                            until   November   1999,  Mr.  Huth  was
                            employed by The Progressive  Corporation
                            in  various  technology  and  management
                            positions.   Mr.  Huth  has  a  BA  from
                            Baldwin Wallace College.

Jeffrey C. Jordan           Mr. Jordan has been Vice President and a    44          1999
Director and                director  of  the  Company  since  April
Vice President              1999.   From   September   1984  through
                            November  1999,  Mr. Jordan was employed
                            by  The   Progressive   Corporation   in
                            numerous  capacities,  most  recently as
                            claims  division  manager.   Mr.  Jordan
                            holds   a   BA   degree   from   Rutgers
                            University and a JD from UCLA.

Louis T. Mastos             Mr.  Mastos  has been the  President  of    79          1978
Director*                   Louis T. Mastos &  Associates,  Inc.,  a
                            managing general agency located in Reno,
                            Nevada, since 1971. He is past President
                            of the American  Association of Managing
                            General  Agents.   Mr.  Mastos  was  the
                            Insurance  Commissioner  of the State of
                            Nevada from 1965 to 1971.

Laurel A. Park              Ms.  Park  has  been   employed  by  the    28
Assistant Secretary         Company  since  June 1995 and  currently
                            serves as  Controller.  In January 2000,
                            Ms. Park was  appointed as the Company's
                            Assistant Secretary. Ms. Park holds a BS
                            degree in accounting  from Arizona State
                            University.

James S. Rocke              Mr.  Rocke  has  been  employed  by  the    32
Vice President              Company  since  1982 and has  served  in
                            various  positions  including  Secretary
                            and   Treasurer   of  the  Company  from
                            January 1993 to January 2000. In January
                            2000  Mr.  Rocke  was  elected  as  Vice
                            President  of the Company and  currently
                            serves  in  that  capacity.   Mr.  Rocke
                            graduated from Arizona State  University
                            in 1991 with a BS degree in Finance. Mr.
                            Rocke is the son of William J. Rocke.
</TABLE>

                                     Page 19
<PAGE>
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)

<TABLE>
<CAPTION>
                                                                             SERVED AS DIRECTOR
                                                                              SINCE YEAR LISTED
NAME/TITLE                  BUSINESS EXPERIENCE                        AGE        BELOW (1)
----------                  -------------------                        ---        ---------
<S>                         <C>                                        <C>        <C>
William J. Rocke            Mr.  Rocke  founded  the Company in 1957    76          1975
Director                    and  served as an  executive  officer of
                            the Company and its predecessor entities
                            from May 1957  through  June  1999.  Mr.
                            Rocke   has   been   in  the   insurance
                            adjusting  business since 1952. He has a
                            law degree from the University of Denver
                            and  is a  member  of the  Colorado  Bar
                            Association.   Mr.   Rocke   retired  as
                            Chairman   of  the   Board   and   Chief
                            Executive Officer of the Company on June
                            30,  1999.  Mr.  Rocke is the  father of
                            James S. Rocke

Jean E. Ryberg              Mrs. Ryberg held several  positions with    68          1975
Director*                   the Company  from  October  1962 through
                            June 1999, most recently as President of
                            the Company  from  January  1993 through
                            June 1999, when she retired.

Kenneth A. Sexton           Mr.  Sexton was  appointed as a director    46          2000
Director*                   of the  Company  in  January  2000,  Mr.
                            Sexton  currently  serves as Senior Vice
                            President of Finance and  Administration
                            and Chief Financial  Officer of Merant a
                            world-wide   technology   and   software
                            company.   Mr.   Sexton  has  served  in
                            various  positions  with  Merant and its
                            related companies since 1991. Mr. Sexton
                            holds a BS degree in business  from Ohio
                            State  University  and  is  a  Certified
                            Public Accountant

William A. White            Mr.  White has served as a  director  of    46          1999
Director and                the  Company  since  April  1999 and was
Vice President              appointed  Vice President of the Company
                            in  January  2000.  Mr.  White  was also
                            appointed as a director of JW and DBG in
                            March  1999.  From May 1985 to  November
                            1999,  Mr.  White  was  employed  by The
                            Progressive  Corporation,  managing  the
                            Diversified  Claims Business Group.  Mr.
                            White  holds a master's  degree from the
                            University  of Southern  California  and
                            undergraduate    degree   in    Business
                            Administration    from   John    Carroll
                            University.
</TABLE>

* Member of the Company's audit committee

(1) Term will continue until next election of directors

                                     Page 20
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION

The following table sets forth certain  information  concerning the compensation
paid by the Company during its year ended June 30, 2000, to the chief  executive
officer and each other executive officer whose aggregate  compensation  exceeded
$100,000.

                         Summary Compensation Table (1)

             a                       b        c             d             e
--------------------------------------------------------------------------------
                                            Annual Compensation       All Other
                                           ----------------------   Compensation
Name and Principal Position        Year    Salary ($)   Bonus ($)        ($)
---------------------------        ----    ----------   ---------   ------------
Troy M. Huth                       2000
Director, CEO and                  1999       (3)          (3)           (3)
President                          1998

(1)  Columns (e), (f), (g) and (h) have been omitted as no such compensation was
     granted.

(2)  No  perquisites  were  received by any person named above  greater than the
     lesser of $50,000 or 10% of salary plus bonus.

(3)  Mr.  Huth's  services and the services of other  executive  officers of the
     Company  are  provided  to the  Company by UFAC under a contract  where the
     Company  pays  $25,000 per month for  services  consisting  of  management,
     marketing, technology, human resource support  and accounting and reporting
     services.

OPTION/SAR EXERCISES AND HOLDINGS

The Company did not grant any stock  options  during  fiscal 2000 nor were there
any options outstanding as of June 30, 2000 for any of the Named Executive.

DIRECTORS COMPENSATION

Each Director,  including  employees of the Company,  but excluding employees of
UFAC or Netrex,  is paid  $1,000 per board  meeting  attended  ($750 per meeting
prior to March 1, 2000).  During  fiscal 2000,  each such  director,  except for
Kenneth A. Sexton,  received $2,750 for attendance at board meetings. Mr. Sexton
received $2,000 for attendance at board meetings.

EMPLOYMENT AGREEMENTS

The Company had an employment  agreement with Mr. LaPallo for a five-year  term.
Mr.  LaPallo's  agreement  was  effective  June 23, 1996 and was  terminated  on
January 3, 2000, due to Mr. LaPallo's resignation.  In addition, the services of
Mr. Jeffrey Jordan are provided to the Company pursuant to the service agreement
with UFAC. See "Item 11 - Executive Compensation - Summary Compensation Table".

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth certain  information  with respect to beneficial
ownership of the Company's  common stock on June 30, 2000, by (1) each director,
(2) each  executive  officer,  (3) all directors  and executive  officers of the
Company as a group, (4) each person,  known by the Company, to be the beneficial
owners of more than 5% of the common stock.  Unless  otherwise  indicated in the
footnotes,  all of such interests are owned directly,  and the indicated  person
has sole voting and investment power. The number of shares represents the number
of shares of the Company's common stock the person holds.  Information presented
in the table and  related  notes has been  obtained  from the  beneficial  owner
and/or from reports filed by the  beneficial  with the  Securities  and Exchange
Commission pursuant to Section 13 of the Exchange Act.

                                     Page 21
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          (CONTINUED)

                                                  AMOUNT OF BENEFICIAL OWNERSHIP
                                                   COMMON STOCK $.01 PAR VALUE
                                                  ------------------------------
                                                     NUMBER OF
NAME AND ADDRESS                                     SHARES (1)    PERCENT (2)
----------------                                     ----------    -----------
OFFICERS AND DIRECTORS

Peter I. Cavallaro (3)                                      --            *

John M. Davies (3) (6)                                     500            *

Jeffrey R. Harcourt (3)                                     --            *

Troy M. Huth (3)                                            --            *

Jeffrey C. Jordan (3)                                       --            *

Louis T. Mastos and Eva B. Mastos, his wife (3) (7)    207,103         2.31%

Laurel A. Park (3)                                          --            *

William J. Rocke and Garnet Rocke, his wife (3) (8)    415,332         4.64%

James S. Rocke and Kelly Rocke, his wife (3) (9)       444,867         4.97%

Jean E. Ryberg (3) (10)                                 97,960         1.09%

Kenneth A. Sexton (3)                                       --            *

William A. White (3)                                        --            *

All officers and directors as a group                  875,762         9.78%
(twelve persons) (11)

FIVE PERCENT SHAREHOLDERS
United Financial Adjusting Company (4) (12)          5,258,513        58.70%

NETREX HOLDINGS, LLC (5) (13)                               --           --

----------
* Less than 1%

(1)  The number of shares shown in the table,  including the notes thereto, have
     been rounded to the nearest whole share. Includes, when applicable,  shares
     owned of record by such  person's  minor  children  and spouse and by other
     related  individuals  and  entities  over whose shares of Common Stock such
     person has custody, voting control or power of disposition.

(2)  The  percentages  shown include the shares of Common Stock which the person
     will  have the  right  to  acquire  within  60 days of June  30,  2000.  In
     calculating  the percentage of ownership,  all shares of Common Stock which
     the identified person will have the right to acquire within 60 days of June
     30,  2000 are deemed to be  outstanding  for the purpose of  computing  the
     percentage of the shares of Common Stock owned by such person,  but are not
     deemed to be  outstanding  for the purpose of computing  the  percentage of
     shares of Common Stock owned by any other stockholders.

(3)  Each of such persons may be reached through the Company at 45 East Monterey
     Way, Phoenix, Arizona 85012.

(4)  May be reached at 31500 Solon Road, Solon, Ohio 44139.

(5)  May be reached at 270 South  Service  Road,  Suite 45,  Melville,  New York
     11747.

(6)  Does  not  include  5,258,513  shares  owned by UFAC to  which  Mr.  Davies
     disclaims any  beneficial  interest for purposes of Section 13(d) or (g) of
     the Securities Exchange Act of 1934, as amended.

                                     Page 22
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          (CONTINUED)

(7)  Includes  183,180 shares which are held in a trust under an agreement dated
     February  10,  1981,  in which Mr. and Mrs.  Mastos  hold equal  beneficial
     interests,  and 23,523  shares  which are held by the Louis T. Mastos in an
     Individual Retirement Account.

(8)  Includes 290,000 shares held by Old Frontier Investment,  Inc., of Arizona,
     of which William J. and Garnet Rocke hold 51% of the outstanding stock.

(9)  Includes 290,000 shares held by Old Frontier Investment, Inc. of Arizona of
     which James S. Rocke holds 49% of the outstanding stock.

(10) Excludes 28,000 held by Mrs. Ryberg's sons and grandchildren,  in which she
     disclaims any beneficial interest.

(11) Excludes all  duplicate  reporting  of holdings  required to be reported by
     more than one officer or director.

(12) Includes  5,258,513  shares  owned by UFAC.  These  shares  were  purchased
     directly  from  Frontier in April 1999.  As a result  there was a change in
     control of Frontier. UFAC is a wholly-owned subsidiary of Netrex. Netrex is
     owned  51.4% by The  Progressive  Corporation  and 48.6% by Netrex  Capital
     Group LLC ("NCG")  which is  wholly-owned  by Netrex LLC.  The  Progressive
     Corporation is a large  publicly-traded  corporation.  According to certain
     insurance  regulatory  filings  dated  March  30,  2000 of The  Progressive
     Corporation,  Peter B. Lewis,  President and Chief Executive Officer of The
     Progressive Corporation, owns approximately 13.1% of the outstanding common
     stock of that  company.  Netrex  LLC is a limited  liability  company,  the
     manager of which is Duck Pond Corp., which is a privately-held  corporation
     having voting control and  investment  power of Netrex LLC. Each of Michael
     C. Pascucci,  Christopher S. Pascucci and Ralph P. Pascucci owns one- third
     of  the  outstanding   stock  of  and  each  is  a  director  of  (together
     constituting  all of the  directors  of) Duck Pond  Corp.  The  Progressive
     Corporation,  NCG,  Netrex LLC,  Netrex,  Duck Pond Corp.,  Peter B. Lewis,
     Michael C.  Pascucci,  Christopher  S.  Pascucci and Ralph P. Pascucci each
     disclaims  that it is the  beneficial  owner of Frontier's  shares owned by
     UFAC for purposes of Section 13(d) or (g) of the Securities Exchange Act of
     1934, as amended.

(13) Does not include  5,258,513  shares owned by UFAC prior to the  Transaction
     and  cancelled  upon  the  Transaction  being  affected.   The  Progressive
     Corporation,  NCG,  Netrex LLC,  Netrex,  Duck Pond Corp.,  Peter B. Lewis,
     Michael C.  Pascucci,  Christopher  S.  Pascucci and Ralph P. Pascucci each
     disclaims  that it is the  beneficial  owner of Frontier's  shares owned by
     Netrex for purposes of Section 13(d) or (g) of the Securities  Exchange Act
     of 1934, as amended.

Based  solely on a review of the copies of such forms  received  by the  Company
during the fiscal year ended June 30, 2000, and written  representations that no
other reports were required,  the Company  believes that each person who, at any
time during such fiscal year,  was a director,  officer or  beneficial  owner of
more than 10% of the  Company's  Common Stock  complies  with all Section  16(a)
filing requirements during such fiscal year.

To the best  knowledge  of the  Company,  no person or groups of  persons, other
than officers, directors and UFAC beneficially own more than five percent of the
Company's common stock (based upon present records of the transfer agent).

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Old Frontier  Investment,  Inc. of Arizona, of which William J. Rocke and Garnet
Rocke,  his wife, are owners of 51% of the issued and outstanding  stock of said
corporation and of which James S. Rocke owns the remaining 49%, has entered into
a license  agreement  with the  Company  pursuant  to which it  operates,  under
standard  terms and  conditions,  an  insurance  adjusting  and risk  management
business  located  in  Scottsdale,  Arizona,  and is paid a 5%  royalty on gross
revenue  derived  from  services  provided by certain  other  licensees in other
Arizona cities and towns. The Company paid Old Frontier Investment, Inc. $14,448
during fiscal year 2000 in connection with such 5% royalty agreement.

George M. Hill, a  shareholder  and a former Vice  President and Director of the
Company,  acts as outside  counsel to the Company.  During the fiscal year ended
June 30,  2000,  the  Company  paid Mr.  Hill's law firm  $42,774  for  services
rendered and  disbursements.  Such fees will  continue to accrue,  pursuant to a
retainer agreement, at the rate of $3,000 per month effective June 1, 1999.

In April 1999,  the Company  entered  into an  agreement  with UFAC  whereby the
Company pays a $25,000  monthly fee for  marketing,  managerial,  technological,
human resource support,  financial and reporting support, the full-time services
of Jeffrey C. Jordan, and other services and resources. As of June 30, 2000, the
Company had incurred $300,000 in service fees related to this agreement, as well
as an additional  $60,741 for services  performed outside the agreement,  for an
aggregate of $360,741.

The Company  believes that the cost to the Company for all of the foregoing were
and are competitive with charges for similar  services and facilities  available
from third parties.

                                     Page 23
<PAGE>
                                     PART IV


ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) Financial Statements

     The following Financial Statements are included at page F-1:

          Report of Independent Auditor

          Consolidated Balance Sheets - June 30, 2000 and 1999

          Consolidated  Statements  of Income for the Years Ended June 30, 2000,
          1999 and 1998

          Condensed  Consolidated  Statements of Comprehensive  Income for years
          ended June 30, 2000, 1999 and 1998

          Consolidated  Statements  of Cash  Flows for the Years  Ended June 30,
          2000, 1999 and 1998

          Consolidated  Statements of  Stockholders'  Equity for the Years Ended
          June 30, 2000, 1999 and 1998

          Notes to Consolidated  Financial  Statements - June 30, 2000, 1999 and
          1998

(a) (2) Financial Statement Schedules

     Schedule
      Number
      ------
        II     Valuation and Qualifying Accounts Years Ended June 30, 2000,
               1999 and 1998

               Schedules  I through  XIV not  listed  above  have  been  omitted
               because they are not  applicable or the required  information  is
               included  in  the  consolidated  financial  statements  or  notes
               thereto.

                                     Page 24
<PAGE>
(a) (3) Exhibits Filed With This Report


EXHIBIT NO.                            DESCRIPTION OF EXHIBIT
-----------                            ----------------------
   3(a)             Articles of Incorporation of Frontier  Adjusters of America,
                    Inc.*

   3(b)             By-Laws of Frontier Adjusters of America, Inc.**

   10(a)            Frontier  Adjusters of America,  Inc. Incentive Stock Option
                    Plan*

   10(b)            Profit Sharing Plan, as amended***

   10(c)            Employment  Agreement,  dated  August 10,  1995  between the
                    Registrant and William J. Rocke***

   10(d)            Employment  Agreement,  dated  August 10,  1995  between the
                    Registrant and Jean E. Ryberg***

   10(e)            Incentive Stock Option Plan, dated October 10, 1987*

   10(f)            Form of  Franchise  Agreement  between  the  Registrant  and
                    franchisees*

   10(g)            Form  of  License   Agreement  between  the  Registrant  and
                    licensees*

   10(h)            Agreement,  dated June 1, 1990,  between the  Registrant and
                    Scottsdale Insurance Company*

   10(i)            Form of Software Purchase Agreement and Order Form*

   10(j)            Frontier  Adjusters  of America,  Inc.,  Stock  Option Plan,
                    dated May 21, 1996****

   10(k)            Employment  Agreement,  dated  April 23,  1996,  between the
                    Registrant and Francis J. LaPallo*****

   10(l)            Stock  Purchase  Agreement  between  Frontier  Adjusters  of
                    America, Inc. and United Financial Adjusting Company,  dated
                    as  of  November   20,   1998,   including   the   following
                    attachments******

                    Terms of Preferred  Shares,  Registration  Rights Agreement,
                    Service Agreement,  William Rocke Agreement, and Jean Ryberg
                    Agreement

   10(m)            2000 Stock Option Plan

   21               List of Subsidiaries of Frontier Adjusters of America, Inc.

   23               Consent of Independent Accountants

   27               Financial Data Schedule

*         Incorporated by reference to the  Registrant's  Form S-2 filed July 9,
          1991

**        Incorporated by reference to the  Registrant's  Form 10-K for the year
          ended June 30, 1993

***       Incorporated by reference to the  Registrant's  Form 10-K for the year
          ended June 30, 1995

****      Incorporated  by  reference  to the  Registrant's  Form  10-Q  for the
          quarter ended September 30, 1996.

*****     Incorporated by reference to the  Registrant's  Form 10-K for the year
          ended June 30, 1996.

******    Incorporated  by reference  to the  Exhibits to Frontier  Adjusters of
          America,  Inc., Notice of Annual Meeting,  and Proxy Statement on Form
          14A as filed with the SEC in definitive form on March 26, 1999.

*******   Incorporated  by reference  to the  Exhibits to Frontier  Adjusters of
          America,  Inc., Notice of Annual Meeting,  and Proxy Statement on Form
          14A as filed with the SEC in preliminary form on September 6, 2000.

(b)  The Company filed no reports on Form 8-K with the  Securities  and Exchange
     Commission during the last quarter of the fiscal year June 30, 2000

                                     Page 25
<PAGE>
                                   SIGNATURES


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


                                        FRONTIER ADJUSTERS OF AMERICA, INC.


                                        /s/ Troy Huth
                                        ----------------------------------------
                                        Troy Huth, President and Chief Executive
                                        Officer


                                        September 6, 2000
                                        ----------------------------------------


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates included:


/s/ John M. Davies                                             September 6, 2000
--------------------------------------------------             -----------------
John M. Davies, Chairman of the Board and Director


/s/ Jeffrey R. Harcourt                                        September 6, 2000
--------------------------------------------------             -----------------
Jeffrey R. Harcourt, Chief Financial Officer,
Treasurer and Director

/s/ Troy Huth                                                  September 6, 2000
--------------------------------------------------             -----------------
Troy Huth, Chief Executive Officer, President and
Director


/s/ Jeffrey C. Jordan                                          September 6, 2000
--------------------------------------------------             -----------------
Jeffrey C. Jordan, Vice President and Director


/s/ Lou Mastos                                                 September 6, 2000
--------------------------------------------------             -----------------
Lou Mastos, Director


/s/ William J. Rocke                                           September 6, 2000
--------------------------------------------------             -----------------
William J. Rocke, Director


/s/ Jean E. Ryberg                                             September 6, 2000
--------------------------------------------------             -----------------
Jean E. Ryberg, Director


/s/ Kenneth A. Sexton                                          September 6, 2000
--------------------------------------------------             -----------------
Kenneth A. Sexton, Director


/s/ William A. White                                           September 6, 2000
--------------------------------------------------             -----------------
William A. White, Director

                                     Page 26
<PAGE>
                       FRONTIER ADJUSTERS OF AMERICA, INC.
                                AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Auditor                                               F-2

Consolidated Balance Sheets - June 30, 2000 and 1999                        F-3

Consolidated Statements of Income for the Years Ended June 30,
2000, 1999 and 1998                                                         F-4

Condensed Consolidated Statements of Comprehensive Income                   F-5
for the Years Ended June 30, 2000, 1999 and 1998.

Consolidated Statements of Cash Flows for the Years Ended
June 30, 2000, 1999 and 1998                                                F-6

Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 2000, 1999 and 1998                                          F-7

Notes to Consolidated Financial Statements - June 30, 2000,
1999 and 1998                                                               F-8

Supplementary Data (unaudited)                                              F-17

Schedule II - Valuation and Qualifying Accounts Years Ended
June 30, 2000, 1999 and 1998                                                F-18

                                       F-1
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Frontier Adjusters of America, Inc.
Phoenix, Arizona

We have  audited  the  accompanying  consolidated  balance  sheets  of  Frontier
Adjusters of America,  Inc. and  subsidiaries  as of June 30, 2000 and 1999, and
the related consolidated statements of income, comprehensive income, cash flows,
and  stockholders'  equity for each of the three years ended June 30, 2000, 1999
and 1998.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Frontier Adjusters
of America,  Inc. and subsidiaries as of June 30, 2000 and 1999, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended June 30, 2000, in conformity  with  generally  accepted  accounting
principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
consolidated   financial   statements   taken  as  a  whole.   The  consolidated
supplemental  schedule  II for the years  ended June 30,  2000,  1999,  and 1998
included on page F-18 of this form 10-K is  presented  for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic
consolidated  financial  statements.  This  schedule  has been  subjected to the
auditing  procedures applied in our audits of the basic  consolidated  financial
statements  and, in our opinion,  is fairly  stated in all material  respects in
relation to the basic consolidated financial statements taken as a whole.

McGLADREY & PULLEN, LLP


/s/ McGladrey & Pullen, LLP

Phoenix, Arizona
August 2, 2000

                                       F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
Frontier Adjusters of America, Inc. and Subsidiaries
<TABLE>
<CAPTION>
June 30,                                                                         2000            1999
--------------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                                 $  2,132,297    $  6,892,851
  Current portion of advances to licensees and franchisees (Notes 4 and 6)       535,472         859,515
  Receivables, net (Note 3)                                                      809,463         744,241
  Income tax refund receivable                                                        --          99,226
  Unbilled adjusting fees                                                         23,130          37,170
  Prepaid expenses                                                               211,108         344,041
  Deferred income taxes, current portion (Note 9)                                241,607         161,818
                                                                            ------------    ------------
         TOTAL CURRENT ASSETS                                                  3,953,077       9,138,862
                                                                            ------------    ------------
PROPERTY AND EQUIPMENT, at cost, less accumulated
  depreciation and amortization (Note 5)                                       1,622,389       1,608,936
                                                                            ------------    ------------
OTHER ASSETS
  Held to maturity investments (Note 7)                                          628,661         685,148
  Advances to licensees and franchisees, net of current portion (Note 4)         200,000         350,000
  Licenses and franchises, net of accumulated amortization of $261,789
   in 2000 and $303,605 in 1999                                                  170,412         226,015
  Deferred income taxes, net of current portion (Note 9)                         115,488          73,563
  Cost of subsidiary in excess of net identifiable assets acquired, net
   of accumulated amortization of $183,752 in 2000 and $181,441 in 1999           30,066          32,377
  Other                                                                               --           4,083
                                                                            ------------    ------------
                                                                               1,144,627       1,371,186
                                                                            ------------    ------------
         TOTAL ASSETS                                                       $  6,720,093    $ 12,118,984
                                                                            ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Accounts payable                                                           $     25,835    $     28,005
 Salaries payable and related benefits                                           138,275         404,325
 Service fees due to UFAC                                                         15,000          50,000
 Distributions payable (Note 14)                                                      --       5,918,475
 Licensees' and franchisees' remittance payable                                  116,287         552,946
 Income Taxes Payable                                                             33,989              --
 Other (Note 13)                                                                  90,367         111,600
                                                                            ------------    ------------
         TOTAL CURRENT LIABILITIES                                               419,753       7,065,351
                                                                            ------------    ------------
COMMITMENTS AND CONTINGENCIES (Note 13)                                               --              --
STOCKHOLDERS' EQUITY
 Preferred stock, authorized 100,000,000 shares, par value $.01,
  none issued or outstanding                                                          --              --
Common stock, authorized 100,000,000 shares, par value $.01, issued
  9,019,059 shares                                                                90,191          90,191
 Additional contributed capital                                                2,104,413       2,104,426
 Retained earnings                                                             4,263,100       3,022,731
                                                                            ------------    ------------
                                                                               6,457,704       5,217,348
 Add (deduct):
  Treasury stock; 61,399 shares in 2000 and 61,499 in 1999                      (184,068)       (184,368)
  Other                                                                           26,704          20,653
                                                                            ------------    ------------
         TOTAL STOCKHOLDERS' EQUITY                                            6,300,340       5,053,633
                                                                            ------------    ------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $  6,720,093    $ 12,118,984
                                                                            ============    ============
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME

Frontier Adjusters of America, Inc. and Subsidiaries

<TABLE>
<CAPTION>
Years Ended June 30,                                     2000             1999             1998
---------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>
REVENUE
 Continuing licensee and franchisee fees (Note 8)     $ 5,170,592      $ 4,936,349      $ 4,596,657
 Adjusting and risk management fees (Note 8)            1,086,304        1,405,235        1,228,691
                                                      -----------      -----------      -----------
                                                        6,256,896        6,341,584        5,825,348
                                                      -----------      -----------      -----------
COST AND EXPENSES
 Compensation and employee benefits (Note 11)           1,984,581        3,248,276        2,817,168
 Office                                                   387,529          411,345          404,554
 Advertising and promotion                                210,441          385,372          395,210
 Depreciation and amortization                            218,615          271,884          253,667
 Bad debt expense                                         311,820          237,601          352,132
 Service fees to UFAC (Note 10)                           360,741           50,000               --
 Legal fees paid to a shareholder (Note 10)                42,774           92,187           92,510
 Other                                                    857,913          891,342          609,111
                                                      -----------      -----------      -----------
                                                        4,374,414        5,588,007        4,924,352
                                                      -----------      -----------      -----------
       INCOME FROM OPERATIONS                           1,882,482          753,577          900,996
                                                      -----------      -----------      -----------
OTHER INCOME (EXPENSE)
 Interest income                                          155,038          165,272          133,067
 Disposition of investments                                 1,000               --            4,042
 Gain (loss) on sale of license (Note 6)                    1,276          (14,500)         (13,000)
 Gain (loss) on disposition of equipment                   (7,066)           1,501            6,352
 Realized gain (loss) (Note 7)                             12,494           60,753              (93)
 Other                                                     24,231           15,539           (3,497)
                                                      -----------      -----------      -----------
       TOTAL OTHER INCOME                                 186,973          228,565          126,871
                                                      -----------      -----------      -----------
       INCOME BEFORE INCOME TAXES                       2,069,455          982,142        1,027,867

       INCOME TAXES (Note 9)                              829,086          435,690          415,392
                                                      -----------      -----------      -----------
       NET INCOME                                     $ 1,240,369      $   546,452      $   612,475
                                                      ===========      ===========      ===========
EARNINGS PER SHARE
 Basic                                                $       .14      $       .12      $       .13
                                                      ===========      ===========      ===========
 Diluted                                              $       .14      $       .12      $       .13
                                                      ===========      ===========      ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
 Basic                                                  8,957,586        4,569,049        4,605,358
                                                      ===========      ===========      ===========
 Diluted                                                8,957,586        4,570,113        4,612,674
                                                      ===========      ===========      ===========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Frontier Adjusters of America, Inc. and Subsidiaries

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,                                          2000           1999           1998
----------------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>             <C>
NET INCOME                                                 $1,240,369     $  546,452      $  612,475

OTHER COMPREHENSIVE INCOME, NET OF TAX
  Foreign currency translation adjustments                      6,051          9,746          (6,037)
  Unrealized gain (loss) on securities, net of
    reclassification adjustment (see below)                        --        (38,693)        (27,584)
                                                           ----------     ----------      ----------
OTHER COMPREHENSIVE INCOME:                                     6,051        (28,947)        (33,621)
                                                           ----------     ----------      ----------
COMPREHENSIVE INCOME                                       $1,246,420     $  517,505      $  578,854
                                                           ==========     ==========      ==========

Reclassifications adjustment
  Unrealized gain (loss) on securities during the year     $   12,494     $   22,060      $  (27,584)
  Less reclassification adjustment for gain (loss)
    included in net income                                     12,494         60,753              --
                                                           ----------     ----------      ----------
  Net unrealized gains on securities                       $       --     $  (38,693)     $  (27,584)
                                                           ==========     ==========      ==========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

Frontier Adjusters of America, Inc. and Subsidiaries

<TABLE>
<CAPTION>
Years Ended June 30,                                         2000            1999            1998
------------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                               $  1,240,369    $    546,452    $    612,475
                                                          ------------    ------------    ------------
 Adjustments to reconcile net income to net
  cash provided by operating activities:
   Depreciation and amortization                               218,615         272,430         255,852
   (Gain) on sale of investments                                (1,000)             --          (4,042)
   (Gain) loss on sale of license                               (1,276)         14,500          13,000
   (Gain) loss on disposition of equipment                       7,066          (1,501)         (6,352)
   Bad debt expense                                            311,820         237,601         352,132
   Deferred income taxes                                      (121,714)         53,891         117,288
   Realized (gain)/loss on equity investments                  (12,494)        (60,753)             93
   Other                                                         6,507           9,576            (355)
 Change in assets and liabilities
   (Increase) decrease in:
     Receivables                                              (100,277)        (91,235)         (1,665)
     Unbilled adjusting fees                                    14,040           3,780         (14,250)
     Prepaid expenses                                          132,933         (26,587)        (49,262)
     Other                                                          --          83,993         (65,220)
   Increase (decrease) in:
     Accounts payable                                           (2,170)        (34,113)         28,325
     Salaries payable and related benefits                    (266,050)       (204,788)        440,081
     Income taxes payable/receivable                           133,215          73,722        (257,937)
     Licensees' & franchisees' remittance payable             (436,659)          7,116         148,839
     Other                                                     (56,233)         63,664        (505,222)
                                                          ------------    ------------    ------------
     Total adjustment                                         (173,677)        401,296         451,305
                                                          ------------    ------------    ------------
    NET CASH PROVIDED BY OPERATING ACTIVITIES                1,066,692         947,748       1,063,780
                                                          ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES
 Proceeds from sale of fixed assets                              1,550          93,512          16,200
 Capital expenditures                                         (171,655)       (324,416)       (167,078)
 Investments purchased                                              --     (11,769,769)     (1,993,019)
 Proceeds from maturity of held-to-maturity investments         51,000      13,124,869       2,040,000
 Proceeds from sale of available-for-sale investments           12,494              --              --
 Proceeds from sale of licenses                                 31,531              --              --
 Payments on license acquisition                               (43,660)        (33,462)        (26,521)
 Advances to licensees' and franchisees'                    (3,497,630)     (4,183,647)     (4,267,700)
 Collections of advances to licensees & franchisees          3,701,261       4,096,545       3,948,312
                                                          ------------    ------------    ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES             84,891       1,003,632        (449,806)
                                                          ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash dividends                                             (5,918,475)       (172,701)       (690,806)
 Proceeds from sales of stock                                      287       6,992,308              --
 Common stock repurchased                                           --      (2,817,246)             --
                                                          ------------    ------------    ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES         (5,918,188)      4,002,361        (690,806)
EFFECT OF EXCHANGE RATE CHANGES ON CASH                          6,051           9,746          (6,037)
                                                          ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        (4,760,554)      5,963,487         (82,869)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD         6,892,851         929,364       1,012,233
                                                          ------------    ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD            $  2,132,297    $  6,892,851    $    929,364
                                                          ============    ============    ============
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-6
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Frontier Adjusters of America, Inc. and Subsidiaries

Years Ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                        Number of
                                         Number of     Par Value of     Additional      Preferred    Par Value of
                                       Common Shares      Common        Contributed      Shares        Preferred
                                          Issued          Stock           Capital        Issued          Stock
                                        -----------     -----------     -----------    -----------    -----------
<S>                                     <C>             <C>             <C>            <C>            <C>
Balance, June 30, 1997                    4,782,010     $    47,820     $ 2,148,470             --             --
 Cash dividends - $.15 per share                 --              --              --             --             --
 Net income                                      --              --              --             --             --
Foreign currency translation                     --              --              --             --             --
Unrealized loss                                  --              --              --             --             --
                                        -----------     -----------     -----------    -----------    -----------
Balance, June 30, 1998                    4,782,010          47,820       2,148,470             --             --
 Cash dividends - $.0375 per share               --              --              --             --             --
Sale of shares to UFAC (Note 14)                 --              --       6,765,982      5,258,513         52,585
Stock options exercised from
 65,153 shares of treasury stock                 --              --         (21,580)            --             --
Retirement of 971,464 common shares
 shares repurchased in tender
  offer (Note 14)                          (971,464)         (9,714)     (2,807,531)            --             --
Distributions declared
  $1.60 per share (Note 14)                      --              --      (3,958,451)            --             --
Retirement of 50,000 treasury shares        (50,000)           (500)        (22,464)            --             --
Conversion of preferred shares
 into common shares (Note 14)             5,258,513          52,585              --     (5,258,513)       (52,585)
Net income                                       --              --              --             --             --
Foreign currency translation                     --              --              --             --             --
Unrealized gain                                  --              --              --             --             --
                                        -----------     -----------     -----------    -----------    -----------
Balance, June 30, 1999                    9,019,059          90,191       2,104,426             --             --
 Stock options exercised from
  100 shares of treasury stock                   --              --             (13)            --             --
 Net income                                      --              --              --             --             --
Foreign currency translation                     --              --              --             --             --
                                        -----------     -----------     -----------    -----------    -----------
Balance, June 30, 2000                    9,019,059     $    90,191     $ 2,104,413             --             --
                                        ===========     ===========     ===========    ===========    ===========


                                                                       Cumulative       Unrealized
                                         Retained       Treasury       Translation    Gain (loss) on
                                         Earnings         Stock        Adjustment       Investments
                                       -----------     -----------     -----------      -----------
Balance, June 30, 1997                 $ 4,814,266     $  (529,584)    $    16,944      $    66,277
 Cash dividends - $.15 per share          (690,806)             --              --               --
 Net income                                612,475              --              --               --
Foreign currency translation                    --              --          (6,037)              --
Unrealized loss                                 --              --              --          (27,584)
                                       -----------     -----------     -----------      -----------
Balance, June 30, 1998                   4,735,935        (529,584)         10,907           38,693
 Cash dividends - $.0375 per share        (172,701)             --              --               --
Sale of shares to UFAC (Note 14)                --              --              --               --
Stock options exercised from
 65,153 shares of treasury stock                --         195,321              --               --
Retirement of 971,464 common shares
 shares repurchased in tender
  offer (Note 14)                               --              --              --               --
Distributions declared
  $1.60 per share (Note 14)             (1,960,024)             --              --               --
Retirement of 50,000 treasury shares      (126,931)        149,895              --               --
Conversion of preferred shares
 into common shares (Note 14)                   --              --              --               --
Net income                                 546,452              --              --               --
Foreign currency translation                    --              --           9,746               --
Unrealized gain                                 --              --              --          (38,693)
                                       -----------     -----------     -----------      -----------
Balance, June 30, 1999                   3,022,731        (184,368)         20,653               --
 Stock options exercised from
  100 shares of treasury stock                  --             300              --               --
 Net income                              1,240,369              --              --               --
Foreign currency translation                    --              --           6,051               --
                                       -----------     -----------     -----------      -----------
Balance, June 30, 2000                 $ 4,263,100     $  (184,068)    $    26,704               --
                                       ===========     ===========     ===========      ===========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION -- These financial  statements  include the accounts
of Frontier Adjusters of America,  Inc.  (Company) and its subsidiaries,  all of
which  are  wholly-owned.  Intercompany  accounts  and  transactions  have  been
eliminated.

BUSINESS -- The Company's operations consist of the licensing and franchising of
independent  adjusters throughout the United States and Canada and the operation
of an  independent  adjusting  business  and a risk  management  division in its
Phoenix, Arizona and Las Vegas, Nevada offices. The Company grants credit to its
licensees and  franchisees,  all of whom operate within the insurance  industry.
Revenue from claims  adjusted by employees of the Company is  recognized  as the
services are performed;  revenue from claims  adjusted by independent  licensees
and  franchisees  is  recognized  when  they  become  due under the terms of the
license and franchise agreements (Note 8).

CONSOLIDATED  STATEMENTS  OF CASH  FLOW -- Short  term  investments  which  have
original maturities of 90 days or less are considered cash equivalents.

CASH  CONCENTRATION  -- The Company  maintains  amounts on deposit in  financial
institutions in excess of federal deposit insurance limits.

DEPRECIATION  AND  AMORTIZATION  -- Property  and  equipment  is stated at cost.
Depreciation  is computed  using  straight-line  and  accelerated  methods  over
estimated useful lives, which range from three to ten years for all property and
equipment except for the two buildings.  The buildings are depreciated using the
straight-line  method  over a period no less than 31 years and six  months.  The
cost of a  subsidiary  in  excess  of net  tangible  assets  acquired  is  being
amortized over 40 years.

LICENSES AND  FRANCHISES  -- Licenses and  franchises  represent  Company  owned
adjusting  operations and are stated at cost less amortization.  Amortization is
computed using the straight-line basis over a period of five years.

IMPAIRMENT OF LONG-LIVED  ASSETS -- The Company  reviews its  long-lived  assets
and  intangibles  related to those assets  periodically  to determine  potential
impairment  by  comparing  the  carrying  value  of the  long-lived  assets  and
identified  goodwill  with the  estimated  future  net  undiscounted  cash flows
expected  to  result  from the use of the  assets,  including  cash  flows  from
disposition.  Should the sum of the expected  future net cash flows be less than
the carrying value, the Company would recognize an impairment loss at that date.
An  impairment  loss  would be  measured  by  comparing  the amount by which the
carrying value exceeds the fair value (estimated  discounted  future cash flows)
of the long-lived assets and identified goodwill.

Goodwill not identified with impaired  assets is evaluated to determine  whether
events or  circumstances  warrant a  write-down  or revised  estimates of useful
lives.  The Company  determines  impairment by comparing  the carrying  value of
goodwill  with the  estimated  future net  undiscounted  cash flows  expected to
result from the use of the assets, including cash flows from disposition. Should
the sum of the expected  future net cash flows be less than the carrying  value,
the Company would recognize an impairment loss at that date.  Impairment  losses
are measured by comparing  the amount by which the  carrying  value  exceeds the
fair value (estimated discounted future cash flows) of the goodwill.

To date,  management has determined that no impairment of long-lived  assets and
goodwill exists.

INCOME  TAXES --  Deferred  taxes are  provided on a  liability  method  whereby
deferred tax assets are  recognized  for deductible  temporary  differences  and
operating loss and tax credit  carry-forwards  and deferred tax  liabilities are
recognized for taxable  temporary  differences.  Temporary  differences  are the
differences  between the reported  amounts and assets and  liabilities and their
tax bases.  Deferred tax assets are reduced by a valuation  allowance when it is
more likely than not that some  portion or all of the  deferred  tax assets will
not be  realized.  Deferred  tax assets and  liabilities  are  adjusted  for the
effects of changes in the tax laws and rates on the date of enactment.

                                       F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES IN THE  PREPARATION OF FINANCIAL  STATEMENTS -- The preparation
of  financial  statements  in  conformity  with  generally  accepted  accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates.

INVESTMENTS    HELD-TO-MATURITY   SECURITIES   --   Securities   classified   as
held-to-maturity  are those debt  securities the Company has both the intent and
ability  to hold  to  maturity  regardless  of  changes  in  market  conditions,
liquidity needs or changes in general economic conditions.  These securities are
carried at cost adjusted for amortization of premiums and accretion of discount,
computed by the interest method over their contractual lives.

The sale of a security  within  three  months of its  maturity  date or after at
least 85 percent of the principal  outstanding  has been collected is considered
held to maturity for purposes of classification and disclosure.

FAIR VALUE OF FINANCIAL  INSTRUMENTS  --  Management  uses its best  judgment in
estimating the fair value of the Company's financial instruments; however, there
are  inherent   weaknesses  in  any   estimation   technique.   Therefore,   for
substantially  all financial  instruments,  the fair value  estimates  presented
herein are not  necessarily  indicative  of the amounts  the Company  could have
realized in a sales  transaction at June 30 of the reporting year. The estimated
fair value amounts have been  measured as of June 30 of the  reporting  year and
have not  been  reevaluated  or  updated  for  purposes  of  these  consolidated
financial statements subsequent to that date. As such, the estimated fair values
of these financial instruments subsequent to the reporting date may be different
than the amounts reported at each year end.

The  information  in Note 7 should not be interpreted as an estimate of the fair
value of the entire Company since a fair value  calculation is only required for
a limited portion of the Company's  assets and  liabilities.  This disclosure of
fair  value  amounts  does not  include  the  fair  values  of any  intangibles,
licensees and  franchisees.  The carrying  amounts of all financial  instruments
approximate fair values.

DERIVATIVE  INSTRUMENTS  AND HEDGING  ACTIVITIES - - In June 1998, the Financial
Accounting  Standards  Board  issued SFAS No.  133,  ACCOUNTING  FOR  DERIVATIVE
INSTRUMENTS  AND  HEDGING  ACTIVITIES,  which is  required  to be adopted in all
fiscal quarters of all fiscal years beginning after June 15, 2000. The Statement
permits  early  adoption as of the  beginning  of any fiscal  quarter  after its
issuance.  The Company will adopt the new Statement  effective July 1, 2000. The
Statement  will require the Company  recognize  all  derivatives  on the balance
sheet at fair  value.  Derivatives  that are not hedges must be adjusted to fair
value through income.  If the derivative is a hedge,  depending on the nature of
the hedge, changes in the fair value of derivative will either be offset against
the change in fair value of the hedges assets,  liabilities  or firm  commitment
through  earnings or recognized in other  comprehensive  income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair  value  will be  immediately  recognized  in  earnings.  Because  of the
Company's  minimal use of  derivatives,  management  does not anticipate that he
adoption of the new Statement  will have a  significant  effect on the Company's
earnings or financial position.

REVENUE  RECOGNITION  -- In  December  1999,  the  staff of the  Securities  and
Exchange Commission issued Staff Accounting Bulletin No. 101 REVENUE RECOGNITION
IN  FINANCIAL   STATEMENTS.   SAB  No.  101  summarizes   some  of  the  staff's
interpretations of the application of generally accepted  accounting  principles
to revenue recognition.  The Company will adopt SAB No. 101 in fiscal year 2001.
Management  believes  the  adoption  of SAB No. 101 will not have a  significant
affect on it's financial statements.

SEGMENT  REPORTING  --  Statement  No.  131,  DISCLOSURES  ABOUT  SEGMENTS OF AN
ENTERPRISE AND RELATED  INFORMATION,  modifies the disclosure  requirements  for
reportable  segments  and  establishes  standards  in the way public  businesses
report information about operating segments in financial  statements and interim
reports issued to shareholders. Statement No. 131 also establishes standards for
related  disclosures  about products and services,  geographic  areas, and major
customers. Management has determined the Company to have one reportable segment.
With the  disposition  of the  Tucson,  Arizona  office,  the  Company no longer
reports  it's  operations  by  geographic  segments  due  to  immateriality  and
accordingly,  the Company has only one segment.  The Company still  provides the
same services to the same markets and clients.

                                       F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EARNINGS  PER COMMON  SHARE -- The  Company  is  required  to present  basic and
diluted earnings per share amounts.  Basic earnings per common share is computed
by dividing net income by the  weighted  average of common  shares  outstanding.
Diluted per share amounts assume the  conversion,  exercise,  or issuance of all
potential  common  stock  instruments  unless  the effect is to reduce a loss or
increase the income per share from continuing operations.  At June 30, 2000, the
Company has no dilutive potential common shares outstanding.

FOREIGN CURRENCY TRANSLATION -- The functional currency of the Company's foreign
operations  is  the  applicable  local  currency.  The  foreign  currencies  are
translated to U.S.  dollars using  applicable  exchange rates at the end of each
period.  The gains or losses  resulting from such  translations  are included in
Stockholders' Equity.

ADVERTISING EXPENSE -- Advertising expenditures are expensed when incurred.

NOTE 2: SUPPLEMENTAL CASH FLOW INFORMATION

                                             2000          1999          1998
                                          ----------    ----------    ----------
Cash paid during the year:
 Interest                                 $    1,405    $    1,369    $   30,898
 Income taxes                                838,099       315,659       607,170
Noncash investing activities:
 Sale of licenses                            242,629            --            --
 Deferred gain on sale of licenses          (231,021)           --            --
 Disposal of license                         (11,608)           --            --
Noncash financing activities:
 Accrued dividends                                --     5,918,475            --

NOTE 3: RECEIVABLES

                                                           2000          1999
                                                        ----------    ----------
Receivables consist of:
 Accounts receivable trade                              $  165,377    $  209,049
 Licensee and franchisee fees receivable                   595,354       601,518
 Errors and omissions insurance premium advanced           160,854        90,992
 Other                                                      30,964         3,469
                                                        ----------    ----------
          Total receivables                                952,549       905,028
 Less allowance for doubtful accounts                      143,086       160,787
                                                        ----------    ----------
                                                        $  809,463    $  744,241
                                                        ==========    ==========

NOTE 4: LONG-TERM RECEIVABLES

Long-term  receivables consist of non-interest bearing advances to licensees and
franchisees  which are  repayable  in the amount  equal to a  percentage  of the
monthly  licensee  and  franchisee  revenue.  Estimated  current  and  long-term
maturities are as follows:

                                                           2000          1999
                                                        ----------    ----------
Advances to licensees and franchisees                   $1,197,533    $1,399,095
Less allowance for doubtful advances                       462,061       189,580
                                                        ----------    ----------
                                                           735,472     1,209,515
Less current portion                                       535,472       859,515
                                                        ----------    ----------
Long term portion                                       $  200,000    $  350,000
                                                        ==========    ==========

                                      F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 5: PROPERTY AND EQUIPMENT

Property and equipment consist of:

                                                           2000          1999
                                                        ----------    ----------
Building and improvements                               $1,390,166    $1,273,023
Computers and software                                     314,716       269,724
Furniture and fixtures                                     348,596       359,235
Automobiles                                                 16,494        51,494
                                                        ----------    ----------
                                                         2,069,972     1,953,476
Less accumulated depreciation and amortization           1,034,326       931,283
                                                        ----------    ----------
                                                         1,035,646     1,022,193
Land                                                       586,743       586,743
                                                        ----------    ----------
                                                        $1,622,389    $1,608,936
                                                        ==========    ==========

NOTE 6: SALE OF LICENSES

On  January  1, 2000,  the  Company  sold its  Tucson,  Arizona  office to a new
franchisee  for $167,629  resulting in a deferred gain of $156,021.  The Company
also sold three  franchises  located in the Chicago,  Illinois area in the third
quarter of fiscal 2000 for $25,000 per  franchise  that resulted in an aggregate
deferred gain of $75,000. The Company is collecting proceeds from these sales by
deducting a specified  percentage of the franchisees'  weekly  remittances to be
applied  against  the  sales  price  until  paid in  full.  The  deferred  gains
associated  with these sales are netted against the current  portion of advances
to licensees and franchisees for balance sheet  presentation and are recorded as
a gain on sale of assets when received. On June 30, 2000, the aggregate deferred
gain  netted  against  receivables  was  $229,745.  As of June 30,  2000,  total
collected  in payment of these  loans was  $6,531  and the gain  recognized  was
$1,276. The Company also sold a license in the Oakland, California area for cash
proceeds of $25,000.

NOTE 7: INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES

The  following is a summary of the Company's  investment in debt and  marketable
equity securities as of June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                               2000
                                         ------------------------------------------------
                                           Gross        Gross        Gross
                                         Amortized    Unrealized   Unrealized
                                           Cost         Gains        Losses    Fair Value
                                           ----         -----        ------    ----------
<S>                                      <C>          <C>          <C>          <C>
Held to maturity securities
 Local government securities & other     $ 628,661    $   1,010    $  18,596    $ 611,075
                                         =========    =========    =========    =========

                                                               1999
                                         ------------------------------------------------
Held to maturity securities
 Local government securities & other     $ 685,148    $  17,886    $   2,992    $ 700,042
                                         =========    =========    =========    =========
</TABLE>

The Company's investment in local government  securities is concentrated in Salt
River Project Agricultural  Improvement and Power District Municipal Bonds which
mature between 2006 and 2031.

The Company  recognized  a gain (loss) of  $12,494,  $60,753,  and ($93) for the
years ended June 30, 2000,  1999,  and 1998,  respectively,  due to the realized
gain or permanent impairment in value of its available for sale securities.

                                      F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 8: LICENSING AND FRANCHISING

As of June 30,  2000,  the Company has  entered  into 499 license and  franchise
agreements  with  394  entities,  operating  382  offices  with  672  advertised
locations,  whereby the Company grants exclusive ten-year licenses or franchises
for the right to use the name "Frontier  Adjusters" in a particular  area. There
is no  initial  license or  franchise  fee except  where the  Company  resells a
previously  acquired  license or  franchise  in which case the Company  seeks to
recover some or all of its acquisition  cost. The Company performs  advertising,
collection and remittance  services,  and provides the licensees and franchisees
with supplies.  As compensation  for the above, the Company receives a fee based
on a percentage of the licensees' or franchisees' gross billings. Gross billings
by licensees and  franchisees  for the years ended June 30, 2000,  1999 and 1998
were approximately $45,810,000, $44,730,000 and $42,050,000, respectively.

The Company's main line of business is providing services,  directly and through
licensees and franchisees,  to the insurance industry and to self-insureds.  The
revenue  and cost  components  along  with  identifiable  assets  and  number of
advertised locations are as follows.

<TABLE>
<CAPTION>
                                    Licensing       Adjusting       Corporate
                                       and             and             and
                                   Franchising    Risk Management     Other       Consolidated
                                   -----------    ---------------     -----       ------------
<S>                                <C>             <C>            <C>             <C>
2000
Revenue                            $  5,170,592    $  1,086,304   $         --    $  6,256,896
Cost and expenses                     2,798,397         998,078        577,939       4,374,414
                                   ------------    ------------   ------------    ------------

Income (loss) from operations      $  2,372,195    $     88,226   $   (577,939)   $  1,882,482
                                   ============    ============   ============    ============

Identifiable assets                $  3,346,286    $    494,756   $  2,879,051    $  6,720,093
                                   ============    ============   ============    ============
Number of advertised locations
 Beginning of year                          659              19             --             678
 Opened                                       5              --             --               5
 Closed                                     (11)             --             --             (11)
 Ownership changes                           (4)              4             --              --
                                   ------------    ------------   ------------    ------------
 End of year                                649              23             --             672
                                   ============    ============   ============    ============
1999
Revenue                            $  4,936,349    $  1,405,235   $         --    $  6,341,584
Costs and expenses                    3,885,586       1,184,289        518,132       5,588,007
                                   ------------    ------------   ------------    ------------

Income (loss) from operations      $  1,050,763    $    220,946   $   (518,132)   $    753,577
                                   ============    ============   ============    ============

Identifiable assets                $  4,231,025    $    637,680   $  7,250,279    $ 12,118,984
                                   ============    ============   ============    ============
Number of advertised locations
 Beginning of year                          652              10             --             662
 Opened                                      23              --             --              23
 Closed                                      (7)             --             --              (7)
 Ownership changes                           (9)              9             --              --
                                   ------------    ------------   ------------    ------------
 End of year                                659              19             --             678
                                   ============    ============   ============    ============
</TABLE>

                                      F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 8: LICENSING AND FRANCHISING (CONTINUED)

<TABLE>
<S>                                <C>            <C>            <C>            <C>
1998
Revenue                            $ 4,596,657    $ 1,228,691    $        --    $ 5,825,348
Costs and expenses                   3,444,402      1,123,172        356,778      4,924,352
                                   -----------    -----------    -----------    -----------

Income (loss) from operations      $ 1,152,255    $   105,519    $  (356,778)   $   900,996
                                   ===========    ===========    ===========    ===========

Identifiable assets                $ 4,520,408    $   540,212    $ 2,740,080    $ 7,800,700
                                   ===========    ===========    ===========    ===========
Number of advertised locations
 Beginning of year                         646             12             --            658
 Opened                                     23             --             --             23
 Closed                                    (19)            --             --            (19)
 Ownership changes                           2             (2)            --             --
                                   -----------    -----------    -----------    -----------
 End of year                               652             10             --            662
                                   ===========    ===========    ===========    ===========
</TABLE>

NOTE 9: INCOME TAXES

The components of the provision for income taxes at June 30 are as follows:

                                            2000          1999          1998
                                          ---------     ---------     ---------
Federal
 Current                                  $ 762,200     $ 309,299     $ 241,232
 Deferred                                   (96,637)       42,788        93,123
State
 Current                                    188,600        72,500        56,872
 Deferred                                   (25,077)       11,103        24,165
                                          ---------     ---------     ---------
   Income taxes                           $ 829,086     $ 435,690     $ 415,392
                                          =========     =========     =========

A  reconciliation  of the  statutory  Federal  income tax rate to the  Company's
effective tax rate follows:

                                            2000          1999          1998
                                          ---------     ---------     ---------

Statutory rate                              35.0%         35.0%         35.0%
Increase (decrease) resulting from:
 State income taxes, net                     5.1           5.5           5.1
 Non-deductible items                        1.1           4.0           3.4
 Non-taxable revenue                         (.6)         (1.4)         (1.4)
 Other                                       (.5)          1.3          (1.7)
                                           -----         -----         -----
Effective rate                              40.1%         44.4%         40.4%
                                           =====         =====         =====

Net deferred tax assets consist of the following components:

                                                          2000          1999
                                                        ---------     ---------
Deferred tax assets
  Current:
  Allowance for doubtful accounts                       $ 224,301     $ 129,858
  Other liabilities                                        17,306        31,960
                                                        ---------     ---------
                                                          241,607       161,818
                                                        ---------     ---------
  Long term:
  Property and equipment                                   84,714        73,563
  Other liabilities                                        30,774            --
                                                        ---------     ---------
                                                          115,488        73,563
                                                        ---------     ---------
                                                        $ 357,095     $ 235,381
                                                        =========     =========

                                      F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 10: RELATED PARTY TRANSACTIONS

Old Frontier  Investment,  Inc. of Arizona, of which William J. Rocke and Garnet
Rocke,  his wife, are owners of 51% of the issued and outstanding  stock of said
corporation  and James S. Rocke  owns the  remaining  49%,  has  entered  into a
license agreement with the Company pursuant to which it operates, under standard
terms and  conditions,  an  insurance  adjusting  and risk  management  business
located  in  Scottsdale,  Arizona,  and is paid a 5%  royalty  on gross  revenue
derived from  services  provided by certain  other  licensees  in other  Arizona
cities and towns. The Company paid that corporation $14,448, $13,382 and $13,142
for the  fiscal  years  ended  June 30,  2000,  1999 and 1998  respectively,  in
connection with such 5% royalty agreement.

George M. Hill, a shareholder,  former Vice President and former Director of the
Company, acts as outside counsel to the Company. The Company paid Mr. Hill's law
firm  approximately  $43,000 in fiscal 2000,  $92,000 in fiscal 1999, $93,000 in
fiscal 1998 for legal  services and  reimbursement  of expenses.  Such fees will
continue to accrue,  pursuant to a retainer  agreement at the rate of $3,000 per
month.

In April 1999, in conjunction  with UFAC's  purchase of 5,258,513  shares of the
Company's  stock,  the Company  entered into an agreement  with UFAC whereby the
Company  pays  $25,000  per  month  for  marketing,  managerial,  technological,
financial,  the full-time  services of Jeffrey  Jordan,  and other  services and
resources.  As of June 30, 2000,  the Company had  incurred  $300,000 in service
fees related to this agreement, and an additional $60,741 for services performed
outside of the  agreement,  for an aggregate of $360,741.  The Company  incurred
$50,000 and $0 in service fees for the fiscal years ended June 30, 1999 and 1998
respectively.

The Company  believes that the cost to the Company for all of the foregoing were
competitive  with charges for similar  services and  facilities  available  from
third parties.

NOTE 11: PROFIT SHARING PLAN AND GAINSHARING PLAN

On June 14, 1984,  the Company  adopted a Profit  Sharing  Plan (Plan)  covering
substantially  all  employees  of the  Company  who have  completed  one year of
service and have  reached age 20. The Plan  provides  for  contributions  at the
discretion of management not to exceed the amount  permitted  under the Internal
Revenue Code as a deductible expense. Participants' benefits vest at the rate of
20% per  year.  Contributions  to the  Plan  are  made  to  trust  accounts  for
investment at the  discretion of the  individual  participants.  Profit  sharing
expense was $17,726,  $235,724,  and $258,272 for the years ended June 30, 2000,
1999, and 1998 respectively.

With the intent to  eventually  terminate the Profit  Sharing Plan,  the Company
implemented a  gainsharing  program for its  employees  during fiscal 2000.  The
program is designed to reward  employees  for  exceptional  growth and return on
revenue. Disbursements are only made if targets set by upper management are met.
Gainsharing expense for the year ended June 30, 2000 was $86,362.

NOTE 12: STOCK OPTIONS

The Company applies APB Option 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and
related   Interpretations   in  accounting  for  its  plans.   Accordingly,   no
compensation  cost has been  recognized  for  grants in which the fair value per
share exceeds the exercise  price per share.  No  compensation  expense has been
charged to expense  for any period  presented.  The  Company  has elected not to
adopt FASB  Statement  No. 123,  ACCOUNTING  FOR  STOCK-BASED  COMPENSATION  for
employee awards.  Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant dates for awards under this plan
consistent  with the method of Statement No. 123,  reported net income for 2000,
1999 and 1998 would have  decreased by $0,  $18,000 and  $20,000,  respectively,
with no effect on earnings per share.

On October 9, 1987,  the  shareholders  approved an Incentive  Stock Option Plan
(1987 Plan) which  provides for the granting of options to acquire up to 300,000
shares of common stock to certain  officers and key  employees of the Company at
no less  than  100% of the fair  market  value  of the  stock on the date of the
grant.  Options  under the 1987 Plan are intended to be Incentive  Stock Options
(ISOs)  pursuant to Section 422A of the Internal  Revenue Code. Such options may
have a maximum  term of ten years and are  exercisable  one year  after they are
granted.  As of June 30,  2000,  the 1987  Plan has no  shares  outstanding  and
134,847 available for granting.

                                      F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 12: STOCK OPTIONS (CONTINUED)

On October 11, 1996, the  shareholders  approved a Stock Option Plan (1996 Plan)
which had been adopted by the Board of  Directors on May 21, 1996 and  effective
July 1,  1996,  which  provides  for the  granting  of  options to acquire up to
300,000  shares of common  stock to certain  officers  and key  employees of the
Company.  Options  under  the 1996 Plan may be  incentive  stock  options  "ISO"
pursuant to Section  422A of the Internal  Revenue  Code.  On July 1, 1996,  the
Company granted ISO's for 100,000 shares of stock at $2.875 per share,  the fair
value at the  grant  date.  As of June 30,  2000,  the 1996  Plan has no  shares
outstanding and 299,900 available for granting.

Outstanding  options become  exercisable in varying  amounts  beginning one year
after grant. Information regarding these option plans are as follows:

<TABLE>
<CAPTION>
                                                Number of Shares
                      ---------------------------------------------------------------------
                             2000                     1999                     1998
                      -------------------      -------------------      -------------------
                      Number of   Weighted     Number of   Weighted     Number of   Weighted
                       Shares      Average      Shares      Average      Shares      Average
                      ---------     -----      ---------     -----      ---------     -----
<S>                   <C>           <C>        <C>           <C>        <C>           <C>
Outstanding July 1      129,629     $2.99        300,000      $3.05       300,000     $3.05
Granted                      --        --             --        --             --        --
Exercised                  (100)    (2.88)       (65,153)    (2.67)            --        --
Expired                (129,529)    (2.99)      (105,218)    (3.37)            --        --
                      ---------     -----      ---------     -----      ---------     -----
Outstanding June 30          --        --        129,629     $2.99        300,000     $3.05
                      =========     =====      =========     =====      =========     =====
</TABLE>

                                            2000          1999            1998
                                            ----          ----            ----
Exercisable at end of year                   --          129,629         234,782

At June 30, 2000, there are no remaining options outstanding under the 1987 Plan
or the 1996 Plan.  The 1987 Plan and 1996 Plan have available for granting up to
134,847 and 299,900 shares, respectively.

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted earnings per share computation for June 30:

<TABLE>
<CAPTION>
                             2000                     1999                     1998
                      -------------------      -------------------      -------------------
                       Shares     Per-share     Shares     Per-share     Shares     Per-share
                    (Denominator)   Amount   (Denominator)   Amount   (Denominator)   Amount
                      ---------     -----      ---------     -----      ---------     -----
<S>                   <C>           <C>        <C>           <C>        <C>           <C>
Basic EPS             8,957,586     $0.14      4,569,049     $0.12      4,605,358     $0.13
                                    =====                    =====                    =====
Effect of Dilutive
  Securities Options         --        --          1,064        --          7,316        --
                      ---------     -----      ---------     -----      ---------     -----
Diluted EPS           8,957,586     $0.14      4,570,113     $0.12      4,612,674     $0.13
                      =========     =====      =========     =====      =========     =====
</TABLE>

NOTE 13: COMMITMENTS AND CONTINGENCIES

The  Company  entered  into  five-year  employment  agreements  with  three  key
executive  officers.  Two of these  agreements were terminated on June 30, 1999,
due to the employees'  early  retirement.  The third agreement was terminated on
January  31,  2000  due to the  resignation  of  Francis  J.  LaPallo,  a former
Executive Vice President.  There are no liabilities relating to these agreements
as of June 30, 2000.

The Company  leases  various  office space and office  equipment  under  various
noncancellable  agreements.  These  leases  expire  between  August 31, 2000 and
August 31, 2003 and require various minimum annual rental payments.  Each office
lease also requires the payment of taxes.

                                      F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Frontier Adjusters of America, Inc. and Subsidiaries
--------------------------------------------------------------------------------

NOTE 13: COMMITMENTS AND CONTINGENCIES (CONTINUED)

The total minimum rental commitment at June 30, 2000 is due as follows:

                  During the year ending June 30:

                  2001                                36,115
                  2002                                36,473
                  2003                                35,291
                                                   ---------
                                                   $ 107,879
                                                   =========

The total rental expense  included in the income  statements for the years ended
June 30, 2000, 1999, and 1998 is $34,426, $35,633, and $34,365, respectively.

During the year, a claim was filed  against  multiple  defendants  including the
Company. The complaint arises from the alleged embezzlement by a former licensee
in  connection  with the  provision  of claims  services.  The  complaint  seeks
compensatory damages of at least $1,800,000.  The Company has denied allegations
of liability  contained in the complaint.  The litigation is in the early phases
of  discovery,  therefore,  the  Company  cannot  yet  assess  the merits of the
complaint or the effects this  litigation  will have on the Company.  As of June
30, 2000, the Company has not accrued any amounts for potential losses.

Included in Other Liabilities is the Company's payable to  franchisees/licensees
and  clients  at June  30,  2000  and  June 30,  1999 of  $37,593  and  $37,065,
respectively.

NOTE 14: STOCK TRANSACTIONS

On  April  29,  1999,  at  the  annual  shareholders'   meeting,  the  Company's
shareholders  approved the November 20, 1998,  agreement between the Company and
United Financial  Adjusting Company  ("UFAC"),  a wholly owned subsidiary of The
Progressive Corporation ("Progressive"). Pursuant to the agreement, on April 30,
1999,  UFAC purchased  5,258,513  shares of the Company's newly issued shares of
Series A  Convertible  Voting  Preferred  Stock at a price of $1.30  per  share.
UFAC's  purchase   represented   approximately   53%  of  the  Company's  voting
securities. Following the purchase by UFAC, the Company issued a tender offer to
purchase up to 1,000,000  common  stock shares at $2.90 per share from  existing
shareholders.  The tender offer  expired on June 12,  1999,  and resulted in the
purchase of 971,464 common stock shares.  Also pursuant of UFAC's purchase,  the
Company  declared a cash  distribution  of $1.60 per share for  shareholders  of
record  on June 25,  1999,  and  payable  to the  holders  of the  rights of the
distribution  on July 12, 1999.  Those shares  tendered in the tender offer were
not eligible for the cash distribution.  UFAC was not eligible to participate in
the tender offer,  nor was UFAC entitled to the cash  distribution.  On June 30,
1999,   UFAC's  preferred  shares  were  converted  into  common  stock  shares,
representing 59% of the Company's voting securities.

In March of 2000, the Company's board of directors  agreed in principle to enter
into a transaction (the  "Transaction")  whereby the Company will exchange a net
of  approximately  11.5 million shares of its common stock for all of the issued
and  outstanding  shares of stock of UFAC.  Upon  consummation  of the  proposed
Transaction,  the  Company  will merge  with UFAC and will  become the parent of
UFAC's two subsidiaries,  JW Software,  Inc. ("JW") and DBG  Technologies,  Inc.
("DBG").  In May 2000, JW acquired 100% of the stock of Vedder  Software  Group,
Inc.  ("Vedder").  Vedder will  therefore  be included in the  Transaction.  The
Transaction  will be accounted for in a manner  similar to a pooling of interest
since the  entities  are  under  common  control,  to the  extent of the  common
ownership.  The assets and  liabilities  of these  companies will be recorded at
their  fair  value  to  the  extent  of  the  ownership   interest  by  minority
stockholders and at the historical cost for the ownership  interest under common
control.

UFAC is an insurance claim management  services company, JW develops and markets
claim management software,  DBG develops and markets  internet-based systems and
websites, and Vedder develops property estimating software and tools.

Netrex Holdings,  LLC ("Netrex") currently owns all of the outstanding shares of
stock in UFAC which holds approximately 59% of the Company's  outstanding common
stock.  Consequently,  after the  Transaction  is  consummated,  Netrex will own
approximately   16.4  million  shares  of  the  Company's  stock,   representing
approximately 82% of the Company's outstanding common stock.

The  Transaction is subject to the approval of certain  regulatory  agencies and
the American Stock  Exchange,  the stock exchange on which the Company's  shares
are currently traded, as well as the approval by shareholders of the Company and
UFAC. In connection  with this  Transaction,  the Company is proposing to change
its name to  "Netrex  Business  Services,  Inc.".  The  Company  will,  however,
continue to operate the franchised and licensed claims adjusting  business under
the Frontier name even if the  Transaction  is  consummated  and the name change
effected.

                                      F-16
<PAGE>
                       FRONTIER ADJUSTERS OF AMERICA, INC.
                                AND SUBSIDIARIES

                               SUPPLEMENTARY DATA

Selected Quarterly Financial Data

(Information for all periods shown below is unaudited)

<TABLE>
<CAPTION>
                                                               2000
                                       -----------------------------------------------------
                                                        Three Months Ended
                                       -----------------------------------------------------
                                        SEPT. 30       DEC. 31       MAR. 31       JUNE 30
                                       -----------   -----------   -----------   -----------
<S>                                    <C>           <C>           <C>           <C>
Revenue                                $ 1,676,064   $ 1,566,992   $ 1,482,098   $ 1,531,742
 Income from operations                    552,906       289,886       467,744       571,946
 Income before income taxes                583,929       345,257       509,423       630,846
 Net income                                367,332       199,068       304,497       369,472
 Net income per share
     Basic                                     .04           .02           .03           .04
     Diluted                                   .04           .02           .03           .04
 Weighted average shares outstanding
     Basic                               8,957,560     8,957,560     8,957,564     8,957,660
     Diluted                             8,957,560     8,957,560     8,957,564     8,957,660

                                                               1999
                                       -----------------------------------------------------
                                                         THREE MONTHS ENDED
                                       -----------------------------------------------------
                                        SEPT. 30       DEC. 31       MAR. 31       JUNE 30
                                       -----------   -----------   -----------   -----------
Revenue                                $ 1,633,369   $ 1,524,113   $ 1,572,172   $ 1,611,930
 Income from operations                    395,320       260,424       312,573      (214,740)
 Income before income taxes                423,263       296,089       347,951       (85,161)
 Net income (loss)                         255,916       179,499       208,216       (97,179)
 Net income (loss) per share
     Basic                                     .06           .04           .05          (.02)
     Diluted                                   .06           .04           .05          (.02)
 Weighted average shares outstanding
     Basic                               4,605,358     4,605,358     4,605,358     4,459,723
     Diluted                             4,609,163     4,605,358     4,605,784     4,459,723

                                                               1998
                                       -----------------------------------------------------
                                                        THREE MONTHS ENDED
                                       -----------------------------------------------------
                                        SEPT. 30       DEC. 31       MAR. 31       JUNE 30
                                       -----------   -----------   -----------   -----------
Revenue                                $ 1,483,708   $ 1,411,242   $ 1,440,432   $ 1,489,966
 Income from operations                    388,084       319,846       233,857       (40,791)
 Income before income taxes                426,229       386,659       274,900       (59,921)
 Net income (loss)                         258,642       234,391       166,817       (47,375)
 Net income (loss) per share
     Basic                                     .06           .05           .04          (.01)
     Diluted                                   .06           .05           .04          (.01)
 Weighted average shares outstanding
     Basic                               4,605,358     4,605,358     4,605,358     4,605,358
     Diluted                             4,605,358     4,628,045     4,611,934     4,605,358
</TABLE>

                                      F-17
<PAGE>
                       FRONTIER ADJUSTERS OF AMERICA, INC.
                                AND SUBSIDIARIES


                        VALUATION AND QUALIFYING ACCOUNTS

                FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                     Additions
                                       Balance at    Charged to    Deductions      Balance
                                        Beginning     Cost and        From         at End
                                        of Period     Expenses      Reserves      of Period
                                       -----------   -----------   -----------   -----------
<S>                                    <C>           <C>           <C>           <C>
Year Ended June 30, 2000:
  Allowance for doubtful accounts      $   350,367   $   311,820   $    57,040   $   605,147

Year Ended June 30, 1999:
  Allowance for doubtful accounts      $   375,220   $   237,601   $   244,435   $   350,367

Year Ended June 30, 1998:
  Allowance for doubtful accounts      $   250,137   $   352,132   $   227,049   $   375,220
</TABLE>

                                      F-18