UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  Form 10-KSB/A

                                 Amendment No. 2

[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

                  For the fiscal year ended December 31, 2000
                                            -----------------

                            AUTOFUND SERVICING, INC.
                            ------------------------
                 (Name of small business issuer in its charter)

             NEVADA                                             88-0465858
           ---------                                            ----------
  (State or other jurisdiction                              (I.R.S. Employer
   of incorporation or organization)                         Identification No.)

   3201 Cherry Ridge Dr., Suite 314, San Antonio, TX              78230
   -------------------------------------------------              -----
      (Address of principal executive offices)                  (Zip Code)

Issuer's telephone number (210) 979-0840
                          --------------

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

     Title of each class              Name of each exchange on which registered


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

                  --------------------------------------------
                                (Title of class)
                  --------------------------------------------
                                (Title of class)

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


Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]


State issuer's revenues for its most recent fiscal year.  $2,274,855.00
                                                          -------------


State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2 of the Exchange Act.)

None.
-----

<PAGE>


     (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)


Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. [ ]Yes [ ] No



                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)


State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date. 20 million  shares  outstanding of
common stock.



Transitional Small Business Disclosure Format (Check one): Yes ____; No (X)
                                                                        ---


                                                                               3
<PAGE>

<TABLE>

<CAPTION>

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

PART I.....................................................................................................5
   ITEM 1.  DESCRIPTION OF BUSINESS........................................................................5
   ITEM 2.  DESCRIPTION OF PROPERTY........................................................................6
   ITEM 3.  LEGAL PROCEEDINGS..............................................................................7
   ITEM 4.  SUBMISSION OF MATERS TO A VOTE OF SECURITY HOLDERS.............................................7
PART II....................................................................................................7
   ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTER........................................7
   ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.............8
   LIQUIDITY AND CAPITAL RESOURCES.........................................................................9
   ITEM 7.  FINANCIAL STATEMENTS..........................................................................10
   ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........10
PART III..................................................................................................10
   ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
            COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.............................................10
   ITEM 10.  EXECUTIVE COMPENSATION TABLE.................................................................12
   ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............................12
   ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................................12
   ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.............................................................12
   INDEPENDENT AUDITORS' REPORT...........................................................................13
   CONSOLIDATED BALANCE SHEET.............................................................................14
   CONSOLIDATED STATEMENTS OF INCOME......................................................................15
   CONSOLIDATED STATEMENTS OF CASH FLOWS..................................................................16
   STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY...........................................................17
   NOTES TO FINANCIAL STATEMENTS..........................................................................18
   SIGNATURE PAGE.........................................................................................21

</TABLE>



                                                                               4

<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS


General


We were  incorporated  in the State of  Nevada  on March 7, 1997  under the name
"Sphinx  Industries,  Inc." On July 7,  2000,  we changed  our name to  AutoFund
Servicing,  Inc. Our President and Chief Executive  Officer is James D. Haggard.
We are located at 3201 Cherry Ridge Drive, Suite 314, San Antonio,  Texas 78230,
phone number 210.979.0840.  We are primarily a collection agency specializing in
the recovery of moneys from  consumers  who have  defaulted on their auto loans.
After default has occurred against the original lender,  we purchase the account
and attempt to collect moneys on the account.


Background


In  September  1998  Mr.  Haggard  formed  AutoFund  Servicing,  Inc.,  a  Texas
corporation ("AutoFund Texas").  AutoFund Texas recognized an opportunity to bid
for the  purchase  of a group of loans  being sold at  auction  by the  Delaware
Bankruptcy   Trustee  on  behalf  of  the   creditors  of  Reliance   Acceptance
Corporation.   While  the  bid  for  this  portfolio  of  loans  was  ultimately
unsuccessful the company was able to forge a business  relationship and recovery
agreement with the post-bankruptcy  surviving  management of Reliance Acceptance
Corporation.   The  agreement  allowed  AutoFund  Texas  the  right  to  perform
collection,   recovery  and  loan  servicing  duties  for  Reliance   Acceptance
Corporation  under a portfolio  servicing  agreement,  that is, an  agreement to
attempt collection on or otherwise manage a group of loans.  During this time it
grew to a work force of 38 full time  employees  and 2 part time  employees  who
managed the recovery efforts on approximately  16,000 individual  accounts.  The
employees of the company are not  represented  by a union or  organized  under a
collective bargaining agreement.

We (AutoFund, the Nevada Corporation formerly known as Sphinx Industries,  Inc.)
purchased  AutoFund  the Texas  Corporation  on July 7,  2000.  Mr.  Haggard  is
currently the major  shareholder of AutoFund with 90% of the outstanding  common
shares issued.  The management and staff of the company are poised to accept the
challenges of future expansion.


Our Current Business


Our only  office is located in San  Antonio,  Texas.  Our  primary  business  is
collection  on defaulted  auto loans.  We provide our existing  clients with all
data on each individual  account.  This data is stored on our Paradata Servicing
Platform and includes customer balance,  daily transactions,  collection history
and collection notations.  Client reports are provided monthly, weekly, or daily
depending upon the client requirements.

We manage loan portfolios that are geographically  diverse and we are subject to
numerous State and Federal laws in each  jurisdiction  including but not limited
to: Federal Truth in Lending Act,  Federal Equal  Opportunity  Act, Federal Fair
Debt  Collection  Practices  Act and the Federal  Trade  Commission  Act.  Other
requirements  mandated by law are licensing,  qualification  and regulation that
govern maximum finance charges,  collection and recovery practices,  selling and
administration  of ancillary  elective and  lender-imposed  insurance  products,
investigation,  skip  tracing  (finding  borrowers)  efforts  and the  location,
recovery and disposal of collateral automobiles through repossession and auction
procedures. We conduct training sessions every 90 days with our collection staff
focusing  on state and federal  laws  pertaining  to  allowable  collection  and
recovery practices. We also monitor collector/customer  conversations on a daily
basis to insure compliance to state and federal requirements.  In the event of a
new hire,  the employee  goes  through the  training  session as part of his/her
first week  orientation  and then is  re-educated  as part of the normal  90-day
cycle.  Modifications  to  state  and  federal  laws are  incorporated  into the
training sessions as received.

We provide third party collection and recovery services to investors,  auto loan
companies, banks, buy-here-pay-here companies and auto finance related companies
who have bad debt accounts. A "bad debt account," often referred to "deficiency"
or  "charged-off"  debts,  are debts which likely are not  collectible by normal
methods. The accounts,  for the most part, have been written off by the owner of
the debt,  and the debt is still owed by a customer whose vehicle may or may not
have been  repossessed.  Because the autos which  secured the loans have usually
been repossessed,  the bulk of the accounts are no longer secured by the auto as
collateral,  and normal recovery efforts are not effective. We also provide data
warehousing services for our clients on a long-term agreement. We also intend to
purchase  portfolios,  at pennies on the  dollar,  from  companies  that wish to
liquidate certain delinquent accounts from their portfolio.

                                                                               5
<PAGE>


We generated 100% of our 1999 revenue from an agreement with Reliance Acceptance
Corporation  and  Bank  of  America  that  initially  called  for us to  recover
delinquent  debt from 16,000  borrowers under an agreement that provided us with
29% of all the money we collected plus expenses.  We renegotiated this agreement
in  February  2000 to  provide  that we  receive  29% of the money we collect on
secured  accounts (those with collateral such as an auto still in the possession
of the borrower) and 45% on accounts with no collateral.

To date we have generated  gross revenues of $8,000,000 for this client over the
preceding 23-month period. This performance is a direct result of the dedication
shown by our seasoned  staff and the  direction,  leadership  and  comprehensive
management techniques and practices we've used.

On January 14,  2000,  we entered into an  agreement  with an investor,  Morwell
Financial  Group of America to  purchase a credit  card  portfolio  from Bank of
Hawaii in the  amount of  $139,135.00.  This  agreement  produced  approximately
$53,777  of the  company's  income  through  second  quarter  2000.  Under  this
agreement,  we  receive  50% of the  moneys we collect  plus  reimbursement  for
related  expenses.  The  investor  on this  purchase  was paid in full  December
28, 2000.

In June 2000 we negotiated an agreement with All American Acceptance Corporation
("All  American")  to collect  debt from a  portfolio  of  approximately  15,500
accounts  representing  $86,000,000 in remaining  unpaid  balances,  provided we
purchase these  accounts.  Under the  agreement,  we retain 50% of the collected
amount on all recoveries. This agreement gives us the option to purchase, at any
time, All-American's portfolio of loans for the sum of $1,395,000 or $0.01622 on
the dollar.  We have  exercised  the option and as of the first  quarter 2001 we
have not received any funds.

As of December  2000 we have been debt free and have,  through  this date,  been
capitalized through cash flow and capital contributions by our president,  James
Haggard.  The capital  contributions by Mr. Haggard are categorized as long-term
debt and as such are to be  repaid  over  time.  We  don't  plan to repay  these
contributions with funds received from this offering.

The vast market  segment  served by AutoFund and other  collection and servicing
companies  is  a  specialized  market  niche  requiring  defined  focus  and  an
aggressive  approach to exact performance.  There are many instances reported in
major  publications  such as the Wall Street Journal that detail the failures of
companies   attempting  to  collect  their  own  bad  debts.  The  inability  or
unwillingness  of  companies  to address  their  seriously  delinquent  accounts
provides  substantial  opportunity  for us and companies in the  collection  and
recovery business.

Many consumer finance companies turn to a third-party  provider such as AutoFund
in an effort to streamline their operations and reduce overhead.  By contracting
with outside  providers  these  companies  utilize  economies of scale and allow
their  infrastructure  to  return  their  focus  to  profit  opportunities.  Our
Servicing  Agreements  contain and  indemnification  clause for future potential
litigation  for any  cause  except  as a  direct  result  of  negligent  actions
initiated by AutoFund Servicing, Inc

ITEM 2.  DESCRIPTION OF PROPERTY

         The  Company's  only  office is located in San  Antonio,  Texas at 3201
Cherry Ridge Drive, Suite 314, San Antonio, Texas 78230. The Company has a lease
agreement in place covering office facilities beginning in September,  2000. The
current year renewal  substantially  doubles rent expense but also doubles floor
space.  This  agreement  expires  September  30, 2005.  However,  the  agreement
contains two renewal options every three years, each with a term of three years.
The following is a schedule of future rent commitments for the next five years:

                  Year Ended December 31,
                         2001                        $  240,597
                         2002                        $  240,597
                         2003                        $  240,597
                         2004                        $  240,597
                         2005                        $  180,448
                                                     ----------
                                                     $1,142,836

                                                                               6

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

AutoFund  Servicing,  Inc. is not a party to any pending  litigation and none is
contemplated or threatened.

ITEM 4.  SUBMISSION OF MATERS TO A VOTE OF SECURITY HOLDERS

None.
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTER


Common Stock


Our  authorized  capital  common stock  consists of 50,000,000  shares of common
stock,  $.001 par  value per  share.  As of the date of this  report,  there are
20,000,000  shares of common  stock  issued and  outstanding,  which are held of
record by approximately 312 holders.

Holders  of our  common  stock are  entitled  to one vote for each  share on all
matters  submitted to a  shareholder  vote.  Holders of common stock do not have
cumulative  voting  rights.  Therefore,  holders of a majority  of the shares of
common  stock  voting  for  the  election  of  directors  can  elect  all of the
directors.  Holders of common stock are entitled to share in all dividends  that
the board of  directors,  in its  discretion,  declares  from legally  available
funds.  In the  event  of our  liquidation,  dissolution  or  winding  up,  each
outstanding  share  entitles its holder to participate in all assets that remain
after payment of  liabilities  and after  providing for each class of stock,  if
any, having preference over the common stock.

Holders of our common stock have no conversion, preemptive or other subscription
rights, and there are no redemption  provisions for the common stock. The rights
of the  holders of common  stock are subject to any rights that may be fixed for
holders of preferred  stock,  when and if any preferred  stock is authorized and
issued.  All outstanding  shares of common stock are, and the shares  underlying
all option and warrants will be, duly authorized, validly issued, fully paid and
non-assessable upon our issuance of these shares.

All shares of common stock now outstanding are fully paid for and non-assessable
and all shares of common  stock  which are the  subject of this  offering,  when
issued, will be fully paid for and non-assessable.  We refer you to our Articles
of Incorporation,  Bylaws and the applicable statutes of the State of Nevada for
a more  complete  description  of the rights and  liabilities  of holders of our
securities.


Non-cumulative Voting


Holders  of shares of our common  stock do not have  cumulative  voting  rights,
which means that the holders of more than 50% of the outstanding shares,  voting
for the election of directors,  can elect all of the directors to be elected, if
they so choose, and, in that event, the holders of the remaining shares will not
be able to elect any of our  directors.  After this offering is  completed,  the
present stockholders will still own approximately 90% of our outstanding shares.
After  preferred  share in this  offering are converted for common shares of the
company,  the present stockholders will own approximately 80% of our outstanding
shares.


Cash Dividends


As of the  date  of  this  report,  we have  not  paid  any  cash  dividends  to
stockholders.  The  declaration  of any  future  cash  dividend  will  be at the
discretion of our board of directors and will depend upon our earnings,  if any,
our  capital   requirements  and  financial   position,   our  general  economic
conditions,  and other pertinent conditions.  It is our present intention not to
pay any cash dividends on our common stock in the foreseeable future, but rather
to reinvest earnings, if any, in our business operations.


Preferred Stock


Our authorized  preferred stock consists of 1,000,000 shares of stock, $.001 par
value per share. As of the date of this report, there are no shares of preferred
stock  outstanding.  Our preferred stock ranks senior to all of our other equity
securities,  including common stock. Dividends,  when, as and if declared by the
board of directors, shall be paid out of funds at the time legally available for
such purpose. The preferred stock will bear simple interest at an annual rate of
10% and  the  interest  will  be paid in  common  stock  at  market  price  upon
conversion.  Exhibit 99.11  creates the  preferred  stock and was filed with the
company's SB-2/A in March 2001.

                                                                               7

<PAGE>

LIQUIDATION PREFERENCE


In the  event of a  liquidation,  dissolution  or  winding  up of our  business,
whether  voluntary or involuntary,  the holders of shares of the preferred stock
shall be entitled to receive out of our assets available for distribution to our
stockholders, an amount equal to $1.00 per share, plus any accrued dividends and
unpaid thereon to the date of  liquidation,  before any payment shall be made or
any assets distributed to the holders of our common stock or any class or series
of our capital stock ranking  junior as to  liquidation  rights to the preferred
stock.


VOTING RIGHTS


The shares of 10% series A  preferred  stock  carry no voting  rights  except as
required  by law.  Nevada law  requires  all shares of a series must have voting
powers, designations, preferences, limitations, restrictions and relative rights
identical with those of other shares of the same series.


CONVERSION RIGHTS

The preferred stock shall, at the option of the holder,  be convertible,  at any
time later than one year after the share is purchased, in whole or in part, into
two fully paid and non-assessable  shares of common stock. If, three years after
the date of purchase,  the holder of the preferred  share has not exercised his,
her, or its right of conversion,  the share shall automatically convert into two
fully paid and non-assessable shares of common stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
         OF OPERATIONS

The  following  discussion  should  be read in  connection  with  the  Company's
financial  statements  and related  notes  thereto  included  elsewhere  in this
report.


OVERVIEW


On July 25, 2000 the sole  shareholder  of  AutoFund  Servicing,  Inc.,  a Texas
Corporation,  (formed  September  1998) entered into an agreement  with AutoFund
Servicing,  Inc., a Nevada  corporation F/K/A Sphinx  Industries,  Inc., (formed
March 1997) to exchange  100% of the issued and  outstanding  shares of AutoFund
Servicing,  Inc.,  the Texas  Corporation,  for 18  million  shares  (90% of the
outstanding shares) of the Nevada corporation.  On October 13, 2000 the emerging
company AutoFund  Servicing,  Inc., a Nevada  corporation filed its registration
statement  8-A12B with the Securities  and Exchange  Commission to become a full
reporting public company.

The  Company  is in  the  business  of  servicing  charged-off  auto  deficiency
portfolios.  Charged-off  deficiencies  are  accounts  that the  consumer  has a
remaining  balance on and has not made a payment for at least 90 - 120 days. The
originator  then  determines the loan is not collectable and takes the remaining
balance as a loss. The Company began servicing its first portfolio, for Reliance
Acceptance Corporation in January 1999. Prior to this portfolio, the Company had
no revenue and its  activities  were to conduct due diligences on this and other
potential portfolios. The Company is presently servicing the original portfolio,
a Bank of Hawaii credit card charged-off  portfolio and another charged-off auto
deficiency portfolio for All American Acceptance Corporation.

Future revenue and profits will depend on various factors,  including  financing
the purchase of additional  portfolios as well as purchasing  portfolios already
in house. The future expansion of the Company's  operation will also be dictated
by the  ability to raise  capital  for  additional  portfolio  purchases  as the
Company  experiences  a  ninety-day  delay  in  revenue  production  on any  new
acquisition.  Additional personnel and equipment are also necessary but will not
be a hindrance to successful expansion.

The Company has adopted a calendar year end for its fiscal accounting period.

                                                                               8

<PAGE>

RESULTS OF OPERATIONS


Total Revenues for 1999,  ending December 31, 1999,  were $976,633,  compared to
the year of 2000, ending December 31, 2000, which were $2,374,582.

Cost and  Expenses--For  the year ended December 31, 1999, the Company had a net
income of $60,451.  For the year ended  December 31, 2000, the Company had a net
income of $178,621.  The income percentage increase for the year ending December
31, 2000 could be  attributed to the increase of the servicing fee with Reliance
Acceptance Corporation.

Under  the  servicing  agreement  with  Reliance  Acceptance   Corporation  AFSI
generated  $3,323,814 in gross  collections from the time of inception,  January
27, 1999 through fiscal year end, December 31, 1999. In comparison,  fiscal year
2000 (January 1, 2000 through  December 31, 2000) resulted in gross  collections
of $4,802,772, which represented an increase of $1,478,958 or 44%.

Of the  gross  collections,  AFSI  earned  revenue  of  $912,077  (based  on the
servicing agreement with Reliance  Acceptance  Corporation) for fiscal 1999. For
fiscal year 2000 AFSI earned  revenue of  $1,658,987  off of gross  collections,
which  represented  an increase of $746,910 or 82%.  This  increase was a direct
result of improved  performance by the collection  staff and the ability of AFSI
to renegotiate the servicing fee with Reliance  Acceptance  Corporation based on
this improved performance.

Management believes that each charged-off  portfolio will peak at a certain time
and that  regardless  of the quality of the efforts the gross  collections  will
experience a downward trend. The ability to increase  revenues,  as demonstrated
by AFSI over the past 24 months,  leads  management  to believe that  additional
incoming  portfolios will experience the same positive trends until reaching its
potential and starting its downward cycle.

The inception of the All American Acceptance  Corporation  portfolio was June 1,
2000. The owners of this portfolio, All American Acceptance Corporation, entered
into a  servicing  contract  with AFSI as of this date.  During the first  seven
months (June 2000 through December 2000) the portfolio has generated $805,642 in
gross collections of which AFSI has received gross revenues of $402,821.

With this portfolio being so new management believes it will follow the progress
of the previously discussed "RAC" portfolio, which it nearly mirrors, and exceed
the  annualized  projection  based on the first seven months gross  collections.
Likewise, gross revenues should follow accordingly.

The "BOH"  (Bank of Hawaii)  portfolio  was a purchase  of a small  credit  card
portfolio.  It is only 5% the size of the "RAC" and "AAAC" portfolios previously
discussed.  Collection efforts were initiated on this portfolio in February 2000
and gross revenues generated through December 31, 2000 were $181,013.

The purchase of Bank of Hawaii was a joint venture with a private investor.  The
loan to purchase, of $139,135 plus interest,  was paid in full in November 2000.
All future  collections  will be directed to the Company with a 50/50 split with
the investor after all Company expenses have been satisfied.

Management   believes  that  the  portfolio  will  continue  to  generate  gross
collections of approximately $120,000 at an expense of approximately $42,000 for
fiscal  year 2001.  With an exit  strategy  to sell the  remainder  of the "BOH"
portfolio at an estimated $.03 on the dollar generating an additional $60,000 in
revenues in December 2001 the portfolio  will conclude as break even. Due to the
company's  increased revenues from "RAC",  "BOH", and "AAAC" the total number of
permanent  employees  increased.  This annual increase resulted in significantly
higher  expenses and costs during the 2000  calendar  year.  In 1999,  the total
expense  for  temporary  staff was  $3,794  and the total in 2000 was  $132,970.
Salaries/wages totaled $491,024 in 1999 and totaled $1,145,067 in the year 2000.
The total direct costs for the year ended  December 31, 1999 was  $584,189.  The
direct  costs for the year ended  December  31,  2000  totaled  $1,403,384.  The
significant  increase can be attributed  to the increase in salaries,  wages and
temporary staff.

LIQUIDITY AND CAPITAL RESOURCES

The Company  has met its  capital  requirements  through  shareholder  (James D.
Haggard) investment of $59,138 at 0% interest. This loan has a remaining balance
of $5,000 as of December 31, 2000 and the balance due on June 30, 2001.

Office  lease  renewal  for the  current  year  doubles  floor  space and rental
expenses,  a  requirement  for future  growth.  Although the  additional  rental
expenditures could affect the liquidity of the company,  management believes the
current  operational  income is sufficient.  Operational  costs and expenses are

                                                                               9
<PAGE>

paid from  operational  profits,  our main source of funds.  The  possibility to
attract outside financial sources exists in a joint venture portfolio  purchase.
Providing  an  attractive  purchase  price can be  negotiated  with a  favorable
investment return.  AutoFund does not believe outside financing is available for
any operational requirements at this time.

As of March 28,  2001,  AutoFund  Servicing,  Inc.  purchased  the All  American
Acceptance Corporation portfolio, a $187,000,000 value with 15,500 accounts, for
a cost of $1,115,000.  AutoFund  Servicing, Inc. borrowed $400,000 from Bank One
N.A. and All American Acceptance  Corporation  financed the balance of $715,000.
All American  Acceptance  Corporation has subordinated  their payment until Bank
One N.A. has been paid.  The  principal of the Note will be paid in  twenty-four
(24) equal monthly installments with the first payment due on the day that is 30
days from the date that the $400,000  Bank One  promissory  note of the Maker is
satisfied. As a result of the aforementioned  portfolio purchase and our ongoing
business,  management  believes it has the sufficient  capital resources to meet
future expected operational costs.

With the  exception  of the  $400,000  loan  provided  by Bank One N.A.  for the
purchase of the All American Acceptance Corporation portfolio and the portfolios
increased income,  there has been no significant  change in AutoFund  Servicing,
Inc.'s cash and use of cash for the fiscal year ending December 31, 2000 and the
first quarter ending March 31, 2001.

It is  managements  belief that the purchasing of a portfolio or portfolios as a
result of the offering  herein,  future purchases and expansion will be financed
through cash flow from  operations  and other forms of  financing.  There are no
assurances  that  such  financing  will be  available  on  terms  acceptable  or
favorable to the Company.

ITEM 7.  FINANCIAL STATEMENTS

         The following  report and financial  statements of the  Corporation are
contained on the pages indicated.

         Independent Auditors' Report                            Page 13
         Balance Sheet                                           Page 14
         Statement of Income and Retained Earnings               Page 15
         Statements of Changes in Stockholders' Equity           Page 16
         Statement of Cash Flows                                 Page 17
         Notes to Financial Statements                           Page 18

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

The Company has not changed  accountants and no  disagreements  on accounting or
financial  disclosure  practices  occurred during the fiscal year ended December
31,2000.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The names,  ages, and positions of the Company's  present officers and directors
are set forth below:

Name               Age  Position(s)

James Haggard      51   President/Chief Executive Officer/Secretary and Director
John Polgar        50   Executive Vice President/Chief Operating Officer
Edward Aleman      29   Vice President/Operations Director
Kathie Bewley      47   Human Resources Director
Daniel Masterson   42   Vice President/Marketing Director
Rick Allen         47   Collections Director
Wendill Blair      60   Corporate Assets Director
James Tankersley   53   Information Systems Manager
Robert Bernholtz   55   Collection Manager
Sharon Canfield    61   Collection Manager

The persons  named above are expected to hold their  offices/positions  at least
until the next annual meeting of our stockholders.

                                                                              10
<PAGE>


Management Biographies

James Haggard has been involved in the automobile  finance related  industry for
over 20 years.  Prior to founding  AutoFund  Mr.  Haggard was employed as Senior
Vice  President by Reliance  Acceptance  Corporation,  a San Antonio  Texas auto
finance company that made indirect auto loans to borrowers, through auto dealers
throughout the United States.  Mr. Haggard was  responsible  for the development
and  profitability of 8 branch offices and over 100 employees.  Prior to joining
Reliance  Acceptance   Corporation  in  1993  he  was  employed  as  a  Business
Development  Manager  with Mercury  Finance  Corporation.  Mr.  Haggard has been
involved in all phases of finance  company  operations  from  marketing  through
collections, training, legal, compliance, recovery and management reporting.

John Polgar  came to  AutoFund  in January  1999.  His  position  with  AutoFund
includes developing strategy,  the development of performance review parameters,
due diligence and management  oversight of all  operations.  Mr. Polgar formerly
held the position of Director of Operations at Reliance  Acceptance  Corporation
where  since mid 1994 he was  responsible  for the  operational  concerns  of 56
regional loan offices and 7 regional collection  centers.  Reporting directly to
the  office  of the  president  and the  board of  directors,  Mr.  Polgar  made
recommendations  regarding strategy, goal setting,  compliance,  performance and
personnel issues. Prior to joining Reliance Acceptance  Corporation,  Mr. Polgar
held positions of management for over 10 years at consumer finance companies.

Edward  Aleman also joined  AutoFund in January  1999.  Mr.  Aleman is currently
responsible for day to day operations of the company as well as the oversight of
the various  department  heads  involved in the daily  collection,  recovery and
customer  interface  functions  of  the  company.  He is  also  involved  in the
sourcing, hiring, training and review of employees directly under his direction.
Prior to joining  AutoFund Mr. Aleman was a branch manager  responsible  for all
phases of business and  reporting at Reliance  Acceptance  Corporation.  He held
this position since 1995 and was involved in sales and customer service prior to
his employment at Reliance Acceptance Corporation.

Daniel  Masterson  was hired in January 2000. As the director of marketing he is
responsible for establishing  contact with potential  clients and to investigate
physical file attributes of portfolios  offered to the company for  collections.
His duties also include the  performance  of due diligence and ensure  licensing
compliance in each state that the company transacts business. Mr. Masterson also
assists  the  information  technology  and  information  systems  department  to
facilitate  uninterrupted  system  service.  Prior to joining  the  company  Mr.
Masterson  was,  for 2  years,  the  director  of  finance  for a  large  import
automobile  dealership in San Antonio. Mr. Masterson was employed,  for 3 years,
as marketing director and regional  operations  manager for Reliance  Acceptance
Corporation.  Immediately  prior  to  this  Mr.  Masterson  was  employed  in  a
management  capacity  in the retail  automobile  dealership  environment  for 15
years.

Kathie Bewley is the director of human  resources who joined the company in July
1999.  Her duties include the  administration  of company  employment  policies,
health,  medical,  dental and other insurance programs,  maintenance of physical
employment  files  performance   reviews  and  employee  handbook  creation  and
distribution.  Ms.  Bewley  also  performs  accounts  payable  functions  and is
responsible  for timesheet  review.  Prior to joining  AutoFund Ms. Bewley was a
student at the  University  of Texas at San Antonio  where she was on the Dean's
List with a GPA of 3.9.

Richard  Allen  joined  AutoFund  7/31/00 in his  current  role as  director  of
deficiency  collections  and is responsible  for a group of employees whose sole
purpose is to effectively  negotiate settlement agreements with borrowers within
their  workbook.  Prior to  joining  AutoFund  Mr.  Allen  spent 6 years  with a
collection company in San Antonio as a collection  manager.  His negotiation and
interpersonal skills qualify him to manage the core functions of his department.
Mr.  Allen has a total of 25 years  experience  in finance  company,  collection
company and bank collection.

Windell Blair brings nearly 30 years of automobile finance related experience to
AutoFund.  Prior to joining AutoFund in 3/1/99 Mr. Blair was the sole proprietor
of a lender services company in San Antonio. His focus on developing  profitable
programs  for  lenders  to assist  in  strategy  and  planning  for  delinquency
resolution is a welcome  addition to the management team. With his knowledge and
personal  experience  Mr. Blair is a natural mentor to employees and an asset to
the organization.

James Tankersley joined the company in February 2000 as the company  information
systems  manager.  His primary  responsibility  is insuring  that the  servicing
platform is up and running at all times so that the collection personnel are not
experiencing  any downtime.  He also  initiates and follows up on changes in the
company  telecommunication  systems  and runs back up for  daily  and  month-end
business  activity.  Previously,  Jim had held the same  position  with Reliance
Acceptance Corporation for 5 years.

                                                                              11
<PAGE>


Robert Bernholtz joined the company in February 2000 as a collection  manager in
the deficiency balance collection department. He is directly responsible for the
daily  work  activity  of 7 to  10  collectors.  This  includes  involvement  in
sourcing,  hiring, and training and evaluating  individual/group results. Robert
brings 20 years of related experience having served collection manager positions
with Reliance Acceptance Corporation and ITT Financial Services.

Sharon  Canfield  joined  the  company  on  January  1999 as an hourly  employee
assigned to the deficiency balance collection department based on her hard work,
dedication  and  positive  monthly  results.  She was  promoted  to her  current
position  as  collection  manager  on  June  2000.  Prior  to  joining  AutoFund
Servicing,  Inc, she was employed as a collector  for 2 1/2 years with  Reliance
Acceptance  Corporation.  She is  currently  responsible  for the  training  and
results of 7 to 10 collectors under her direct supervision

ITEM 10. EXECUTIVE COMPENSATION TABLE

<TABLE>

<S>                                                                             <C> <C>

Name and                                                           Other            All
Principal                                                          Annual           Other
position                             Year     Salary      Bonus    Compensation     Compensation
------------------------------------ -------- ----------- -------- ---------------- ------------
James Haggard                        2000     $200,000    0        $14,544 (1)      0
President and Chief Executive        1999     $90,000
Officer
------------------------------------ -------- ----------- -------- ---------------- ------------
John Polgar                          2000     $200,000    0        $14,544 (1)      0
Executive Vice President and Chief   1999     $78,000
Operating Officer
------------------------------------ -------- ----------- -------- ---------------- ------------
</TABLE>

No other officer, director, or employee received in excess of $100,000 in salary
and benefits in 2000, nor do we expect to pay any officer, director, or employee
in excess of $100,000 in salary and  benefits in 2001.
(1)  $2,544 in insurance benefits and $12,000 in automobile allowance.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of the date of this report,  the total number
of shares  owned  beneficially  by each of AFSI's  directors,  officers  and key
employees,  individually and as a group, and the present owners of 5% or more of
the  Company's  total  outstanding  shares.  The table also  reflects what their
ownership will be assuming completion of the sale of all shares in the offering.
The  stockholder  listed below has direct  ownership of his shares and possesses
sole voting and dispositive power with respect to the shares.

Name                        Number of       Number of        Percentage of
Address                     Shares Before   Shares           Ownership
Beneficial Owner [1]        Offering        After Offering   After Offering

James Haggard               18,000,000      18,000,000       90%
115 Canter Gait
Shavano Park, Texas 78231

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The sole shareholder has advanced $5,000 to the company. This balance is carried
in accounts payable

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits Schedule
The exhibits marked with an "*" have were filed with the company's  SB-2/A filed
on 10/13/2000.

*3.1 Articles of Incorporation
*3.2 Bylaws

(b) Reports on Form 8-K.

None.


                                                                              12

<PAGE>


                            AUTOFUND SERVICING, INC.
                              Financial Statements
                                December 31, 2000

Independent Auditors' Report


To the Board of Directors
Autofund Servicing, Inc.
3201 Cherry Ridge, Suite 314
San Antonio, Texas 78230

We have audited the accompanying balance sheet of Autofund Servicing, Inc. as of
December 31, 2000 and the related  statement  of income and  retained  earnings,
statement of changes in stockholder's equity and statement of cash flows for the
year then  ended.  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 audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Autofund Servicing,  Inc. as of
December 31, 2000,  and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.


/S/  WESLEY F. CROWLEY
----------------------
     WESLEY F. CROWLEY
     CERTIFIED PUBLIC ACCOUNTANT
     11202 DISCO DRIVE, SUITE 118
     SAN ANTONIO, TEXAS
     June 9, 2001



                                                                              13

<PAGE>

<TABLE>

<CAPTION>

                            AUTOFUND SERVICING, INC.
                           Consolidated Balance Sheet
                                December 31, 2000


                                     Assets
                                     ------
<S>                                                                                   <C>            <C>

Current Assets
         Cash                                                                         $    47,797
         Accounts receivable                                                               60,386
                                                                                       ----------

                  Total Current Assets                                                           $   108,183

Property and Equipment
         Building improvements                                                             38,071
         Furniture and fixtures                                                           178,387
         Equipment                                                                        102,918
         Software                                                                          23,722
         Less:  Accumulated depreciation                                                  (87,901)
                                                                                       ----------

                  Net Property and Equipment                                                         255,197

Other Assets
         Deferred offering costs                                                           70,673
                                                                                       ----------

                  Total Other Assets                                                                  70,673
                                                                                                  ----------

                           Total Assets                                                          $   434,053
                                                                                                  ==========


                      Liabilities and Stockholders' Equity
                      ------------------------------------

Current Liabilities
         Accounts payable-trade                                                        $   87,750
         Accounts payable-stockholder                                                       5,000
         Accrued liabilities                                                               41,103
     Income taxes payable                                                                  62,913
                                                                                        ---------

                  Total Current Liabilities                                                      $   196,766

Deferred Credit
         Deferred income taxes                                                             12,404
                                                                                        ---------

                  Total Deferred Credit                                                               12,404

Stockholders' Equity
         Common stock-50 million shares
       authorized, 20 million shares issued
       and outstanding, $.001 par value                                                    20,000
         Retained earnings                                                                204,883
                                                                                        ---------

                  Total Stockholders' Equity                                                         224,883
                                                                                                  ----------

                           Total Liabilities and
                              Stockholders' Equity                                               $   434,053
                                                                                                  ==========
</TABLE>


    The accompanying notes are an integral part of the financial statements.

                                                                              14
<PAGE>

<TABLE>

<CAPTION>

                            AUTOFUND SERVICING, INC.
                        Consolidated Statements of Income
                     Years Ended December 31, 2000 and 1999


                                                                       2000                 1999
                                                                       ----                -----
<S>                                                                  <C>               <C>

Revenues                                                             $ 2,274,855       $   974,633

Costs and expenses

         Direct cost of revenues                                       1,404,158           584,189
         General and administrative                                      579,131           290,593
         Depreciation                                                     56,278            31,623
                                                                      ----------           -------

              Total Costs and Expenses                                 2,039,567           906,405
                                                                      ----------           -------

Income before income taxes                                               235,288            68,228

Income tax expense

         Current                                                          62,913            15,316
         Deferred                                                         12,404               -0-
                                                                      ----------        ----------

                  Total Income Tax Expense                                75,317            15,316
                                                                      ----------        ----------

Net Income                                                           $   159,971       $    52,912
                                                                      ==========        ==========

Earnings per share                                                   $       .01       $        *
                                                                      ==========        ==========

Weighted average shares outstanding                                   20,000,000        20,000,000
                                                                      ==========        ==========
</TABLE>

*  Less than $.01 per share



    The accompanying notes are an integral part of the financial statements.

                                                                              15

<PAGE>

<TABLE>

<CAPTION>

                            AUTOFUND SERVICING, INC.

                      Consolidated Statements of Cash Flows
                         For the Year Ended December 31,


                                                                      2000             1999
                                                                   ----------       ----------
<S>                                                               <C>              <C>

Cash Flows from Operating Activities:
  Net Income                                                      $   159,971      $    52,912
  Adjustments to reconcile net income to net
   cash provided (used) by operating activities
  Deferred income taxes                                                12,404              -0-
  Depreciation                                                         56,278           31,623
  Change in operating assets and liabilities:
         Accounts receivable                                          (58,140)          (2,245)
         Accounts payable                                              46,372          102,209
         Payroll taxes payable                                        (16,351)          16,351
         Federal income taxes payable                                  47,597           15,316
         Accrued liabilities                                           41,103              -0-
                                                                   ----------       ----------

          Net Cash Provided (Used) by
            Operating Activities                                      289,234          216,166

Cash Flows From Investing Activities:
  Equipment purchases                                                (137,474)        (205,624)
  Deferred offering costs                                             (70,673)             -0-
                                                                   ----------       ----------

                  Net Cash Provided (Used) by
            Investing Activities                                     (208,147)        (205,624)

Cash Flows From Financing Activities:
  Stock proceeds-subsidiary                                               -0-           10,000
  Note proceeds-short term                                            139,000            8,820
  Note payments-short term                                           (139,000)          (8,820)
  Payments-stockholders loan                                          (53,832)             -0-
                                                                   ----------       ----------

                  Net Cash Provided (Used) by
            Financing Activities                                      (53,832)          10,000
                                                                   ----------       ----------

Net Increase in Cash                                                   27,255           20,542

Cash - Beginning of Year                                               20,542              -0-
                                                                   ----------       ----------

Cash - End of Year                                                $    47,797      $    20,542
                                                                   ==========       ==========

Supplemental Disclosures of Cash
  Flow Information:

  Federal income taxes paid                                       $    16,096      $       -0-
                                                                   ==========       ==========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                                                              16

<PAGE>


                            AUTOFUND SERVICING, INC.
                  Statement of Changes in Stockholders' Equity
                     Years Ended December 31, 2000 and 1999


                                  Common Stock           Retained
                               Shares       Amount       Earnings       Total
                             ----------   ----------    ----------    ----------

Balance-January 1, 1999      20,000,000   $   20,000    $     --      $   20,000


Net income for 1999                --           --          52,912        52,912
                             ----------   ----------    ----------    ----------

Balance-December 31, 1999    20,000,000       20,000        52,912        64,912


Net income for 2000                --           --         159,971       159,971
                             ----------   ----------    ----------    ----------

Balance-
  December 31, 2000          20,000,000   $   20,000    $  212,883    $  232,883
                             ==========   ==========    ==========    ==========



    The accompanying notes are an integral part of the financial statements.


                                                                              17

<PAGE>

                            AUTOFUND SERVICING, INC.
                          Notes to Financial Statements
                                December 31, 2000

NOTE A - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------

Nature of Business:  The company services  deficient loan portfolios for lenders
nationwide.  These loan  portfolios  are a combination  of written off accounts,
bankruptcy  accounts  and other  accounts  placed for  collection.  The  company
currently  provides  these  services on a fee basis.  The  company  periodically
purchases these loan portfolios at a discount for its own servicing.

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

Revenue  Recognition:  The  company  derives  its  income  from fees paid by its
customers for successful  collection efforts.  The contractual  arrangement pays
the  company a  percentage  of  collections  and  reimburses  it for  collection
expenses  paid on behalf of its  customers.  Currently,  the  company is working
under  contracts on two separate  portfolios.  The first contract pays a 29% fee
for collections and reimburses  expenses for efforts on one loan portfolio.  The
second  contract pays a 50% fee for collection  and  reimburses  expenses on the
second portfolio.

Accounts  Receivable:  The  balance in  accounts  receivable  is  considered  by
management  to be  collectible  in full.  Uncollectible  accounts are charged to
operations when management deems them to be bad debts.

Inventory:  Loan portfolio purchases are recorded at cost.

Property and Equipment:  Property and equipment is stated at cost.  Depreciation
is expensed  using  straight-line  and  accelerated  methods over the  estimated
useful lives of the assets.  The estimated  useful lives are:  building-30 to 40
years;  equipment  and  tools-5  to 7 years;  software-5  years;  furniture  and
fixtures-5 to 7 years.

Federal Income Taxes: These statements have been prepared on the accrual, basis.
For Federal income tax purposes,  the Company reports income on the cash method.
Deferred  income  taxes are  provided  for  differences  in timing in  reporting
certain income and expenses for financial statement and tax purposes.

NOTE B - FEDERAL INCOME TAX
---------------------------

The company  complies with Statement of Financial  Accounting  Standards No. 109
(FAS 109) Accounting for Income Taxes. FAS 109 recognizes  deferred taxes on the
liability  method using  currently  enacted tax rates  scheduled to be in effect
when the temporary differences reverse.

NOTE B - CONTINUED
------------------

Depreciation expense for financial statements is $56,877. For Federal income tax
purposes depreciation expense is $75,877.

For the period ended December 31, 2000,  entertainment expenses in the amount of
$3,636 was not deductible for Federal tax purposes.  This is a permanent  timing
difference and does not require an adjustment for deferred income tax.

The balance sheet  reflects a deferred tax liability of $10,846  resulting  from
timing  differences  occurring  during the current year. There was no prior year
deferral because there were no timing differences during that period.

NOTE C - ACCOUNTS RECEIVABLE

At balance sheet date, accounts receivable consisted of the following:

         Due from customers for collection services       $  59,836
         Due from employees                                     550
                                                          ---------
                                                          $  60,386
                                                          =========

                                                                              18

<PAGE>

One customer  accounts for 78% of current trade  receivables  and 88% of current
year revenues.

NOTE D - INVENTORY
------------------

The company purchases  defaulted loan portfolios from major lenders and utilizes
its collection  expertise to cash out these loans. Any proceeds from collections
are recorded as income.  Management  amortizes  portfolio  costs to expense on a
prorata basis of actual collections to expected collections.

NOTE E - CONCENTRATION OF CREDIT RISK
-------------------------------------

The company complies with statement of Financial Accounting Standards #105. This
statement requires  disclosure of information  regarding  financial  instruments
with off balance  sheet risk and  financial  statements  with  concentration  of
credit risk. Autofund Servicing,  Inc. trade territory covers  substantially the
entire  United  States.   The  corporation  grants  credit  to  customers  whose
businesses  are  located  in that area.  Currently,  the  company  is  servicing
accounts for two major lenders. The current agreement with these lenders is open
ended.  Neither lender has informed company management of their intent to cancel
the current agreement.

NOTE F - FAIR VALUE OF FINANCIAL STATEMENTS
-------------------------------------------

The following  methods and  assumptions  were used to estimate the fair value of
financial instruments:

         Cash - The carrying account reported in the balance sheet  approximates
its fair value.  Accounts Receivable and Accounts Payable - The carrying account
reported in the balance sheet approximates its fair value.

NOTE G - COMMITMENTS
--------------------

The Company has a lease agreement in place covering office facilities  beginning
in September,  2000. The current year renewal substantially doubles rent expense
but also  doubles  floor  space.  This  agreement  expires  September  30, 2005.
However, the agreement contains two renewal options every three years, each with
a term of three years.  The  following is a schedule of future rent  commitments
for the next five years:

                 Year Ended December 31,
                          2001                   $  240,597
                          2002                      240,597
                          2003                      240,597
                          2004                      240,597
                          2005                      180,448
                                                 ----------

                                                 $1,142,836
                                                 ==========

NOTE H - RISKS AND UNCERTAINTIES
--------------------------------

The company's future  operating  results may be affected by a number of factors.
Currently,  the company is servicing  portfolios for two major banking customers
under agreements which are modified from time to time. The most recent amendment
increased  the  company's  fee  structure  from  29%  of  collections  to 50% of
collections.  The  customers  also  reimburse  the  company  for  out of  pocket
expenses.  Company management is continually  seeking additional business either
in the form of a fee based  collection  service or a  circumstance  whereby  the
company will purchase a portfolio at a substantially  discount and will then own
any proceeds collected on those accounts.  At the balance sheet date, management
was in  negotiation  with  several  potential  customers  to provide  service or
structure a direct purchase of accounts.

NOTE I - RELATED PARTY TRANSACTIONS
-----------------------------------

The sole shareholder has advanced $5,000 to the company. This balance is carried
in accounts payable


                                                                              19

<PAGE>


NOTE J - BUSINESS COMBINATION
-----------------------------

On July 25, 2000 the sole  shareholder of the company  entered into an agreement
with Autofund  Servicing,  Inc., a Nevada  corporation,  to exchange 100% of the
issued and outstanding shares of Autofund Servicing,  Inc., a Texas Corporation,
for 18 million shares (90% of the outstanding shares) of the Nevada corporation.
Further, since Autofund Servicing,  Inc. (AFSI Nevada) was a non-operating shell
corporation  with minimum  assets,  the issuance of 18 million common shares for
Autofund  Servicing,  Inc.  (AFSI  Texas) is recorded  as a capital  transaction
rather that a business  combination.  That is, the  transaction is equivalent to
AFSI Texas issuing the stock for the net assets of AFSI Nevada, accompanied by a
recapitalization.

NOTE K - CAPITAL STRUCTURE
--------------------------

Pursuant to an agreement,  discussed in Note J, the shareholder exchanged 10,000
shares  of  common  stock  for 18  million  shares  of  stock  in a  transaction
characterized  as a capital  transaction  rather  than a  business  combination.
Accordingly, at the balance sheet date the capital structure was as follows:

                  Common   shares - 50 million shares authorized, 20 million
                           shares issued, $.001 par value

                  Preferred shares - 1 million shares authorized,
                           no shares issued, $.001 par value

NOTE L - SUBSEQUENT EVENTS
--------------------------

As part of the  company's  continuing  efforts  to expand  business  operations,
management  has entered  into  discussions  with several  investors  and lending
institutions  to provide  capital or lines of credit to purchase  portfolios and
cover operating  expenses during the transition  period from the time portfolios
are acquired for servicing  until such time as operations  have  sufficient cash
flow. This cycle normally requires approximately 90 days to mature.

As of the date of this report,  management has completed a negotiation  with one
of its  customers  to purchase a loan  portfolio  from them.  The  company  will
acquire a loan  portfolio  for  $1,450,000,  closing not later than February 15,
2001. The seller is financing the purchase price for 24 months and has offered a
$200,000  discount if the debt is paid  within 180 days of  closing.  The unpaid
balance on the debt will carry an interest rate as follows:

                   Months                           Rate
                 -----------                     ----------

                    1-6                           Prime + 1%
                    7-12                          Prime + 2%
                   13-18                          Prime + 3%
                   19-24                          Prime + 4%

         (concluded)


                                                                              20

<PAGE>


SIGNATURE PAGE

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

AutoFund Servicing, Inc.
(Registrant)

By: /s/ James D. Haggard
--------------------------------------
James D. Haggard
Chairman, Sole Director, President
and Secretary/Treasurer (Principal
Financial and Accounting Officer)

Date:  July 3, 2001



                                                                              21