----

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| California(State      or Other Jurisdiction ofIncorporation      or Organization) |        | 94-2915849(I.R.S.      Employer Identification Number) |
|-----------------------------------------------------------------------------------|--------------------------------------|--------------------------------------------------------|

| Documents      Incorporated By Reference:None |
|-----------------------------------------------|

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

| PART I                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Page No. |
|--------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      1.                                                                                                 | Description of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 4             |
|                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      2.                                                                                                 | Description of Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 16            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      3.                                                                                                 | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 17            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      4.                                                                                                 | Submission of Matters to a Vote of Security      Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 18            |
|                    |                                                                                                                                        |          |
| PART II                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |          |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      5.                                                                                                 | Market for Common Equity, Related Stockholder Matters and      Small Business Issuer Purchases of Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 19            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      6.                                                                                                 | Management’s Discussion and Analysis of Financial Condition      And Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 20            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      7.                                                                                                 | Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 23            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      8.                                                                                                 | Change In and Disagreements with Accountants on Accounting      and Financial Disclosure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 23            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      8A.                                                                                                | Controls and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 24            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      8B.                                                                                                | Other Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 25            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| PART III                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |          |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      9.                                                                                                 | Directors, Executive Officers, Promoters, Control Persons And      Corporate Governance; Compliance With Section 16(a) of The Exchange      Act                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 26            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      10.                                                                                                | Executive Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 27            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      11.                                                                                                | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 29            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      12.                                                                                                | Certain Relationships and Related Transactions, and Director      Independence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 30            |
|                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |
| Item      13.                                                                                                | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 30            |
|                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |          |
| Item      14.                                                                                                | Principal Accountant Fees and Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 31            |
|                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |          |
|                                                                                                         | Signatures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 32            |

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Part I

Item 1

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|   | · | A      tangible net worth of $100,000 (exclusive of goodwill or other intangible      assets), or a parent or affiliate which meets the net worth criteria and      guarantees the performance of the obligation of the automobile dealer      under the purchase agreements, replacement guarantees or other forms of      dealer recourse. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Possess      acceptable accounts payablehistory. |
|--------|--------|--------------------------------------------------|

|   | · | Possess      acceptable personal credithistory. |
|--------|--------|-------------------------------------------------|

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|   | · | Verifiable      banking references. |
|--------|--------|-------------------------------------|

|   | · | Possess      acceptable mortgage or landlordreferences. |
|--------|--------|---------------------------------------------------------|

|   | · | Possess      a current Department of Motor Vehicle automobile dealer      license. |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | The      purchase discount from the face amount of the loan will generally range      between 5% and 12% depending on the creditworthiness of each individual      borrower; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Contracts      must have an original term of 60 months or  less; |
|--------|--------|------------------------------------------------------------------|

|   | · | The      age of the financed vehicle may not exceed eight  years; |
|--------|--------|-------------------------------------------------------------------|

|   | · | The      borrowers on the contracts are required to make a down payment in cash      plus a net trade-in allowance of a minimum 10% of the purchase price of      the financed vehicles; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      interest rate on the contract will not violate any applicable usury      laws; |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | No      contract may be in arrears at the time of purchase;  and |
|--------|--------|------------------------------------------------------------------|

|   | · | We      maintain first payment recourse on all non-franchise      dealers. |
|--------|--------|----------------------------------------------------------------------------|

|   | · | A      dealer path allows automobile dealers to enter consumer credit      applications online and obtain instant credit decisions and deal      structures for our purchase of contracts.  This path also enables      dealers to enter existing deal structures and obtain instant pricing for      our purchase of existing contracts.  As described above,      participating dealers must first register to use the website and enter      into a dealer agreement before we will receive any applications from the      dealer. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A      consumer path allows a consumer to complete an online credit application      and receive an instant credit decision, print loan documentation and a      list of automobile dealers in the area that we have pre-approved.       The printed loan documentation is intended to be used as evidence of a      pre-approved lending arrangement between the consumer and us, thereby      making it easier for the consumer to purchase and finance a vehicle.       When the consumer presents the certificate to a participating dealer, the      dealer must enter the certificate number into the specified field through      the dealer path on the website, as well as enter the required information      concerning the vehicle to be purchased and the contract structure.       We then verify that the vehicle information and contract structure are      acceptable and gives final approval to the  transaction. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Instant Credit      Decisions.   The website provides dealers and      consumers with online credit decisions within thirty seconds after an      online application is submitted.  Upon receipt of a loan package from      a pre-approved dealer, we verify the loan documentation sent by the dealer      to ensure the loan and the borrower satisfy our internal criteria for      financing.  Our verification process normally is completed within      three days of the receipt of the loan documentation.  We believe the      speed at which dealers and consumers can receive a credit decision for the      financing will encourage dealers and consumers to use our      website. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Automatic Deal      Structures.   Dealers have the option of (i)      entering financing deals they have already structured and we will give the      dealer a decision on whether we will finance the deal, or (ii) we will      process the application and provide the dealer a conditional approval with      the maximum contract limits that will enable us to purchase the      contract. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Decisions 24 hours a day/7days      a week/365 days a year.   The website allows for      applications to be submitted 24 hours a day, 7 days a week.  Many      automobile sales take place in the evenings and on the weekends when      financial institutions are closed.  Many finance companies are only      open Monday through Friday from 9am to 5pm.  The website provides      instant decisions during these peak evening and weekend      hours.  This instant decision process helps increase dealer      sales and helps reduce dealer “roll-backs” which occur when a dealer      finances a vehicle and is later forced to reclaim the vehicle because the      dealer is unable to sell the financing  structure. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | “A”      credit consumer is a prime consumer who has a long credit history with no      defaults, has been employed in the same job for a period of at least 18      months, and can easily finance a new car purchase through a bank, a      captive finance subsidiary of an automobile manufacturer or an independent      finance company that focuses on prime consumer  credit. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | “B”      credit consumer is a non-prime consumer who may have had some slight      credit problems in his or her past or may not have been employed at his or      her current job for 18 months.  To finance a new or late-model used      car, the “B” credit borrower may not qualify for a loan from a captive      finance subsidiary, but may have success borrowing from a bank and can      access credit through an independent finance  company. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | “C”      credit consumer is a non-prime consumer who may have had an inconsistent      employment record or a non-recurring event that has caused problems with      credit in the past.  To finance a late-model or older used car      purchase, this borrower will generally not be able to obtain a loan from a      captive finance subsidiary or a bank, and will have to access an      independent finance company that lends into this market      category. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | “D”      credit consumer is a non-prime consumer who has an unfavorable employment      history and serious credit problems, such as a personal      bankruptcy.  This borrower’s only choice is to finance his or her      used car purchase through an independent finance company that is active in      this market segment. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | State Licensing      Requirements. We maintain a Sales Finance Company License as well      as consumer loan licenses in states that require  them. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fair Debt Collection      Act. The Fair Debt Collection Act and applicable state law      counterparts prohibits us from contacting customers during certain times      and at certain places, from using certain threatening practices and from      making false implications when attempting to collect a      debt. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Truth in Lending Act.      The Truth in Lending Act requires us and the dealers we do business with      to make certain disclosures to customers, including the terms of      repayment, the total finance charge and the annual percentage rate charged      on each contract or directloan. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Equal Credit Opportunity      Act. The Equal Credit Opportunity Act prohibits creditors from      discriminating against loan applicants on the basis of race, color, sex,      age or marital status. Pursuant to Regulation B promulgated under the      Equal Credit Opportunity Act, creditors are required to make certain      disclosures regarding consumer rights and advise consumers whose credit      applications are not approved of the reason for the      rejection. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Fair Credit Reporting      Act. The Fair Credit Reporting Act requires us to provide certain      information to consumers whose credit applications are not approved on the      basis of a report obtained from a consumer-reporting      agency; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Gramm-Leach-Bliley Act.      The Gramm-Leach-Bliley Act requires us to maintain privacy with respect to      certain consumer data in our possession and to periodically communicate      with consumers on privacymatters. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Soldiers’ and Sailors’ Civil      Relief Act. The Soldiers’ and Sailors’ Civil Relief Act requires us      to reduce the interest rate charged on each loan to customers who have      subsequently joined, enlisted, been inducted or called to active military      duty. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Electronic Funds Transfer      Act. The Electronic Funds Transfer Act prohibits us from requiring      our customers to repay a loan or other credit by electronic funds transfer      (“EFT”).  We are also required to provide certain documentation      to our customers when an EFT is initiated and to provide certain      notifications to our customers with regard to preauthorized      payments. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Telephone Consumer Protection      Act. The Telephone Consumer Protection Act prohibits telephone      solicitation calls to a customer’s home before 8 a.m. or after 9 p.m. In      addition, if we make a telephone solicitation call to a customer’s home,      the representative making the call must provide his or her name, our name,      and telephone number or address at which our representative may be      contacted. The Telephone Consumer Protection Act also requires that we      maintain a record of any requests by customers not to receive future      telephone solicitations, which must be maintained for five      years. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Bankruptcy. Federal      bankruptcy and related state laws may interfere with or affect our ability      to recover collateral or enforce a deficiency  judgment. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | · | require      us to dedicate a substantial portion of our cash flow from operations to      payments on our indebtedness, thereby reducing the availability of our      cash flow to fund working capital, capital expenditures, research and      development efforts and other general corporate purposes, including debt      reduction or dividend payments; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | increase      our vulnerability to general adverse economic and industry      conditions; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | limit      our flexibility in planning for, or reacting to, changes in our businesses      and the industry in which weoperate; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | restrict      our ability to introduce new technologies or exploit business      opportunities; |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | make      it more difficult for us to satisfy our payment obligations with respect      to our outstanding indebtedness;and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | increase      the difficulty and/or cost to us of refinancing our      indebtedness. |
|--------|--------|--------------------------------------------------------------------------------------|

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Item 2

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|   | · | 5715      N Freeway, Houston, Texas 77076, lease expires October 31, 2009,      payments $9,293 |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | 9175      Gulf Freeway, Houston, Texas 77017, lease expires September 30, 2008,      payments $5,500 |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | 8555      Beechnut, Houston, Texas 77036, lease expires June 30, 2010, payments      $6,000 |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | 3451      Ella Boulevard, Houston, Texas 77018, lease expires January 31st,      2009, payments $2,600 |
|--------|--------|--------------------------------------------------------------------------------------------------------|

Item 3

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Item 4

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Part II

Item 5

|                |   | High   |    |   | Low    |   |
|---------------------|--------|--------|---------|--------|--------|--------|
| Fiscal      2007    |   |   |    |   |   |   |
| Fourth      Quarter |   | $      | 3.75    |   |   | $      | 1.25 |   |
| Third      Quarter  |   | $      | 3.25    |   |   | $      | 0.65 |   |
| Second      Quarter |   | $      | 4.00    |   |   | $      | 2.00 |   |
| First      Quarter  |   | $      | 5.01    |   |   | $      | 1.85 |   |
|                |   |   |    |   |   |   |   |   |
| Fiscal      2006    |   |   |    |   |   |   |   |   |
| Fourth      Quarter |   | $      | 3.50    |   |   | $      | 1.80 |   |
| Third      Quarter  |   | $      | — |   |   | $      | — |   |
| Second      Quarter |   | $      | — |   |   | $      | — |   |
| First      Quarter  |   | $      | — |   |   | $      | — |   |

----

Item 6

|   | · | The      creditworthiness of contractobligors; |
|--------|--------|------------------------------------------------|

|   | · | Economic      factors affectingdelinquencies; |
|--------|--------|-----------------------------------------------|

|   | · | Our      ability to retain and attract experienced and knowledgeable      personnel; |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | Our      ability to purchase contracts;and |
|--------|--------|--------------------------------------------|

|   | · | Our      ability to compete in the consumer finance  industry. |
|--------|--------|----------------------------------------------------------------|

----

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

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

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

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| 2007      vs 2006           |
|-----------------------------|
| (amounts      in thousands) |

----

| Auto      Underwriters of America, Inc.               |
|-------------------------------------------------------|
|                                                  | June 30, |   |
|                                                  | 2007 |   |   | 2006 |   |
| Operating      activities:                            |   |                      |   |       |   |                      |   |
| Net loss                                              | $ | (4,649,672 | ) |   |   | (6,574,353 | ) |
| Non-cash      adjustments                             |   | 1,011,422 |   |   |   | 439,782 |   |
| Changes in finance      receivables, net              |   | (501,987 | ) |   |   | 825,688 |   |
| Changes in operating assets      and liabilities      |   | (40,097 | ) |   |   | 1,554,651 |   |
| Cash used in operating      activities                |   | (4,180,334 | ) |   |   | (3,754,232 | ) |
|                                                  |   |   |   |   |   |   |   |
| Investing      activities                             |   | (18,753 | ) |   |   | 1,142,610 |   |
| Financing      activities                             |   | 5,866,356 |   |   |   | 2,547,671 |   |
|                                                  |   |   |   |   |   |   |   |
| Increase      (decrease) in cash and cash equivalents |   | 1,667,269 |   |   |   | (63,951 | ) |

Item 7.

Item 8

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Item 8A

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

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

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

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

----

Item 8B

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PART III

 Item 9 

| Name                                                                                                                                                                                                                                                                                                               |       |  Age  |       | Position      with the Company                                                                                                                                                                                                                                                                                                                                                             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|-----------------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                     |                           |            |                           |                                                                 |
| Dean      Antonis                                                                                                                                                                                                                                                                                                  |                           | 45              |                           | President,      Treasurer and Director                                                                                                                                                                                                                                                                                                                                                     |
| William      J. Kellagher                                                                                                                                                                                                                                                                                          |                           | 49              |                           | Executive      Vice President and Director                                                                                                                                                                                                                                                                                                                                                 |
| Michele      H. Clark                                                                                                                                                                                                                                                                                              |                           | 46              |                           | Secretary      and Director                                                                                                                                                                                                                                                                                                                                                                |

----

Item 10

| SUMMARY      COMPENSATION TABLE                                                         |
|-----------------------------------------------------------------------------------------|
|                                                                                    |
| (a)                                                                                     | (b) | (c) | (d0 | (e) | (f) | (g) | (h) | (i) | (j) |
| Name  And  Principal  Position                                                          | Year  June 30, | Salary  ($) | Bonus  ($) | Stock  Awards  ($)(1) | Options  Awards  ($)(1) | Non-Equity  Incentive      Plan  Compensation  ($) | Nonqualified  Deferred  Compensation  Earnings  ($) | All  Other  Compen-  sation  ($)(2) | Total  ($) |
|                                                                |       |       |       |       |       |       |       |   |       |
| Dean      Antonis   President,      Treasurer   and      Director             | 2007 | $66,800 | - | - | - | - | - | - | $66,800 |
|                                                                |       |       |       |       |       |       |       |       |
| William      J. Kellagher   Executive      Vice   President      and Director | 2007 | $159,452 | - | - | - | - | - | - | $159,452 |
|                                                                |       |       |       |       |       |       |       |       |
| Michele      H. Clark   Secretary      and   Director                         | 2007 | $75,000 | - | -- | 11,694 | - | - | - | $86,694 |
|                                                                                    |   |   |   |   |   |   |   |   |

| (1)      |  Reflects      dollar amount expensed by us during applicable fiscal year for financial      statement reporting purposes pursuant to FAS 123R.  FAS 123R requires      us to measure the cost of employee services received in exchange for an      award of equity instruments (options) based on the grant date fair value      of the award, and to recognize that cost over the service period over      which the options become exercisable (vest).  As a general rule, for      time-in-service-based options, we will immediately expense any option or      portion thereof which is vested upon grant, while expensing the balance on      a pro rata basis over the remaining vesting term of the      option.   For a description of FAS 123R and the assumptions      used in determining the value of the options, see the notes to the      consolidated financial statements included with this      report. |
|-----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2)      | Includes      all other compensation not reported in the preceding columns, including      (i) perquisites and other personal benefits, or property, unless the      aggregate amount of such compensation is less than $10,000; (ii) any      “gross-ups” or other amounts reimbursed during the fiscal year for the      payment of taxes; (iii) discounts from market price with respect to      securities purchased from the company except to the extent available      generally to all security holders or to all salaried employees; (iv) any      amounts paid or accrued in connection with any termination (including      without limitation through retirement, resignation, severance or      constructive termination, including change of responsibilities) or change      in control; (v) contributions to vested and unvested defined contribution      plans; (vi) any insurance premiums paid by, or on behalf of, the company      relating to life insurance for the benefit of the named executive officer;      and (vii) any dividends or other earnings paid on stock or option awards      that are not factored into the grant date fair value required to be      reported in a preceding column. |
|-----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Option      Awards                                |   |   | Stock      Awards                                                            |   |
|---------------------------------------------------|--------|--------|------------------------------------------------------------------------------|--------|
| Name                                              |   |   | Number of  Securities  Underlying  Unexercised  Options(#)  Exercisable |   |   | Number of  Securities  Underlying  Unexercised  Options(#)  Unexercisable |   |   | Equity  Incentive Plan  Awards:  Number of  Securities  Underlying  Unexercised  Unearned  Options (#) |   |   | Option  Exercise  Price ($) |   | Option  Expiration  Date |   |   | Number of  Shares or  Units of  Stock That  Have Not  Vested (#) |   |   | Market  Value of  Shares or  Units of  Stock That  Have Not  Vested |   |   | Equity  Incentive  Plan  Awards:  Number  of  Unearned  Shares,  Units or  Other  Rights  That Have  Not  Vested |   |   | Equity  Incentive Plan  Awards:  Market or  Payout Value of  Unearned  Shares, Units or  Other Rights  That Have Not  Vested |   |
| Dean      Antonis                                 |   |   | —                                                                      |   |   | — |   |   | — |   | $ | — |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                              |   |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| William      J. Kellagher     |   |   | —                                                                      |   |   | — |   |   | — |   | $ | — |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
|                                              |   |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Michele      H. Clark                             |   |   | 100,000                                                                      |   |   | — |   |   | — |   | $ | 2.50 |   | 4/4/17 |   |   | — |   |   | — |   |   | — |   |   | — |   |

----

 Item 11 

| Title      of Class |       | Name      and Address of Beneficial Owner                                                              |       | Amount      and  Nature      of Beneficial  Ownership(1) |       | Percentage      of Common  Stock      Outstanding(1) |
|---------------------|--------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------|----------------------------------------------------------|--------------------------------|------------------------------------------------------|
| Common      Stock   |                           | Lawrence      E. Gunnels                                                                               |                           | 650,000                                                  |                           | 8.8%                                                 |
| Common      Stock   |                           | Timothy      Hassell    2361      Campus Drive, Suite 210    Irvine,      CA 92612 |                           | 663,480                                                  |                           | 9.0%                                                 |
| Common      Stock   |                           | David      Hulin                                                                                       |                           | 530,000(2)                                               |                           | 6.7%                                                 |

| Title      of Class |       | Name      and Address of Beneficial Owner                          |       | Amount      and  Nature      of Beneficial  Ownership(1) |       | Percentage      of Common  Stock      Outstanding(1) |
|---------------------|--------------------------------|--------------------------------------------------------------------|--------------------------------|----------------------------------------------------------|--------------------------------|------------------------------------------------------|
| Common      Stock   |                           | Dean      Antonis                                                  |                           | 837,936                                                  |                           | 11.3%                                                |
| Common      Stock   |                           | William      J. Kellagher                                          |                           | 750,000                                                  |                           | 10.1%                                                |
| Common      Stock   |                           | Michele      H. Clark                                              |                           | 128,125(3)                                               |                           | 1.7%                                                 |
| Common      Stock   |                           | All      officers and directors as a group   (3)      persons |                           | 1,716,061                                                |                           | 23.1%                                                |

| *                     | Indicates      less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | Calculated      pursuant to Rule 13d-3(d) of the Securities Exchange Act of      1934.  Unless otherwise stated below, each such person has sole      voting and investment power with respect to all such shares. Under Rule      13d-3(d), shares not outstanding that are subject to options, warrants,      rights or conversion privileges exercisable within 60 days are deemed      outstanding for the purpose of calculating the number and percentage owned      by such person, but are not deemed outstanding for the purpose of      calculating the number and percentage owned by each other person      listed. |
| (2)                   | Includes      530,000 shares of Series A Convertible Preferred Stock that is currently      convertible into shares of our common stock on a one-for-one basis within      60 days of April 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (3)                   | Includes      100,000 options granted to Ms. Clark pursuant to the 2004 Stock Option      Plan.  The options are immediately exercisable at $2.50 per      share and expire April, 2017.                                                                                                                                                                                                                                                                                                                                                                                                                                        |

----

|                                                                                     |   | Number of securities  to      be issued upon  exercise      of options,  warrants and rights |   | Weighted-average  exercise      price  of options, warrants,  and rights |   | Number of securities  remaining      for future issuance |
|------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|
| Equity      compensation plans   approved      by security holders                  |   | 150,000                                                                                                          |   | $1.83                                                                                   |   | 300,000                                                            |
| Equity      compensation plans not      approved by      security holders |   | --                                                                                                               |   | --                                                                                      |   | --                                                                 |
| Totals                                                                                   |   | 150,000                                                                                                          |   | $1.83                                                                                   |   | 300,000                                                            |

 Item 12 

Item 13

| (a)                                                     | Exhibits:                                      |                                                                                                    |
|--------------------------------------------------------------------------------------------|------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|
|                 |                                           |                                                                                                                             |
|                 | 3.1                                            | Amended      and Restated Articles of Incorporation.(1)                                                                          |
|                                                                                       | 3.2                                            | Certificate      of Determination of Preferences of Series A Convertible Preferred      Stock.(2)                                |
|                                                                                       | 3.3                                            | Bylaws.(3)                                                                                                                       |
|                 | 10.1                                           | Asset      Purchase Agreement with Advantage Autoplex, Inc. and TAB Enterprises, Inc.      dated March 10, 2004.(1)         |
|                 | 10.2                                           | Asset      Purchase Agreement with Advantage Autoplex, Inc. and TAB Enterprises, Inc.      dated March 12, 2004.(1)         |
|                 | 10.3                                           | Loan,      Security and Service Agreement with Oak Rock Financial, LLC dated      March 31, 2003 and amendments thereto.(4) |
|                 | 10.4                                           | Standard      Industrial Lease of Caldwell LaHaye Real Estate Associates dated      November 1, 2004.(4)                    |
|                 | 10.5                                           | The      Commercial Lease with Transworld Corporation dated July 1, 2005.(4)                                                |
|                 | 10.6                                           | Asset      Purchase Agreement with Gateway Credit Holdings, Inc. dated June 30,      2005.(4)                               |
|                 | 10.7                                           | Asset      Purchase Agreement with EPIC Financial Services, Inc. dated June 30,      2005.(4)                               |
|                                                                                       | 10.8                                           | Floor      Plan Agreement dated April 19, 2007. (5)                                                                         |
|                                                                                       | 10.9                                           | Escrow,      Servicing and Consignment sale Agreement dated July 19, 2007. (6)                                              |
|                 | 14.1                                           | Code      of Ethics.(7)                                                                                                          |
|                 | 16.1                                           | Letter      from Malone & Bailey, P.C.(8)                                                                                    |
|                                                                                       | 21.1                                           | List      of Subsidiaries*                                                                                                       |
|                 | 31.1        | Principal      Executive Officer Certification under Section 302 of the Sarbanes-Oxley      Act of 2002.*                        |
|                 | 31.2        | Principal      Financial Officer Certification under Section 302 of the Sarbanes-Oxley      Act of 2002.*                        |
|                 | 32.1        | Principal      Executive Officer Certification under Section 906 of the Sarbanes-Oxley      Act of 2002.*                        |
|                 | 32.2        | Principal      Financial Officer Certification under Section 906 of the Sarbanes-Oxley      Act of 2002.*                        |

----

| (1)    | Document      previously filed with the U.S Securities and Exchange Commission on      August 13, 2004 as an exhibit to our Form 10-QSB and incorporated      herein by reference. |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)                   | Document      previously filed with the U.S. Securities and Exchange Commission on      September 7, 2006 as Exhibit 3.2 to our Form 8-K and incorporate      herein by reference. |
| (3)                   | Document      previously filed with the U.S. Securities and Exchange      Commission.                                                                                                   |
| (4)                   | Document      previously filed with the U.S. Securities and Exchange Commission on      October 12, 2005 as an exhibit to our Form 10-KSB and incorporated herein      by reference.    |
| (5)                   | Document      previously filed with the U.S. Securities and Exchange Commission on      April 23, 2007 as Exhibit 99.1 to our Form 8-K and incorporate herein      by reference.   |
| (6)                   | Document      previously filed with the U.S. Securities and Exchange Commission on      July 27, 2007 as Exhibit 10.1 to our Form 8-K and incorporate herein      by reference.    |
| (7)                   | Document      previously filed with the U.S. Securities and Exchange Commission on      May 12, 2005 as Exhibit 14 to our Form 10-KSB and incorporated herein      by reference.   |
| (8)         | Document      previously filed with the U.S Securities and Exchange Commission on      April 23, 2007 as Exhibit 16 to our Form 8-K and incorporated herein      by reference.     |

Item 14

|                                                                                                                                                  |   | Fiscal      2007(1) |   |   | Fiscal      2006(1) |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|
| Audit      fees                                                                                                                                       |   | $                   | 40,737 |   |                | $      | 84,520 |   |
| Audit-related      fees                      |   |                | 0      |   |                |   | 0 |   |
| Tax      fees                                                                                                                                         |   |                | 0      |   |                |   | 0 |   |
| All      other fees                                                                                                                                   |   |                | 0      |   |                |   | 0 |   |
| Total      Fees                                                                                                                                       |   | $                   | 40,737 |   |                | $      | 84,520 |   |

| (1)    | As      previously disclosed, on April 19, 2007, Clancy and Co., P.L.L.C.      replaced Malone & Bailey, PC as our independent registered public      accounting firm.  Fees for Fiscal 2007 reflect those of Clancy      and fees for Fiscal 2006 reflect those of  Malone. |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|                                                                                                                                                                   | AUTO      UNDERWRITERS OF AMERICA, INC.                                                         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                                                                                                                                                    |                                                                             |
| Date:  April 8,      2008                      | By: /s/ DEAN      ANTONIS                                                                  |
|                                                                                                                                                                   |      Dean      Antonis                                                 |
|                                                                                                                                                                   |       President,      Treasurer and Director                      |
|                                                                                                                                                                   |       (Principal      Executive, Financial and AccountingOfficer) |

| Signature                                                                                                                                                                                                                                                                                                                                                          | Title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Date                                 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                 |
| /s/ DEAN      ANTONIS                                                                                                                                                                                                                                                                                                                                              | President,      Treasurer and Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | April 8,      2008              |
| Dean      Antonis                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                 |
|                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |
| /s/ WILLIAM      KELLAGHER                                                                                                                                                                                                                                                                                                                                         | Executive      Vice President and Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | April 8,      2008              |
| William      Kellagher                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |
|                                                             |                                                                                    |        |
| /s/ MICHELE H.      CLARK                                                                                                                                                                                                                                                                                                                                          | Secretary      and Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | April 8,      2008              |
| Michele      H. Clark                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |
|                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                 |

----

| Auto      Underwriters of America, Inc.Index      to Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                   | Page   |
| Report      of Independent Registered Public Accounting Firm – Clancy and Co.,      P.L.L.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | F-1    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| Report      of Independent Registered Public Accounting Firm – Malone & Bailey,      PC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | F-2    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| Balance      Sheets as of June 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | F-3    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| Statements      of Operations for the years ended June 30, 2007 and    2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | F-4    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| Statements      of Stockholders’ Equity (Deficit) for the years ended      June 30,  2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | F-5    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| Statements      of Cash Flows for the years ended June 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | F-6    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| Notes      to the Financial Statements for the year ended June 30,    2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | F-7    |

----

| Report      of Independent Registered Public AccountingFirm |
|-------------------------------------------------------------|

| To      the Board of Directors and Stockholders of |
|----------------------------------------------------|
| Auto      Underwriters of America, Inc.            |
| San      Jose, California                          |

----

| Report      of Independent Registered Public AccountingFirm |
|-------------------------------------------------------------|

| To      the Board of Directors and Stockholders of |
|----------------------------------------------------|
| Auto      Underwriters of America, Inc.            |
| San      Jose, California                          |

----

| Auto      Underwriters of America, Inc. |
|-----------------------------------------|
| Balance      Sheets                     |
| June      30                            |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 2007   |                                                                                                                                       |   | 2006                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                                                                     |   |                         |   |       |   |                         |   |
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                       |   |                           |   |   |   |
| Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $      | 1,671,430                                                                                                                                  |   |                           | $      | 4,161 |   |
| Finance receivables,      net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 8,932,091                                                                                                                                  |   |                           |   | 8,430,105 |   |
| Accounts receivable,      other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 35,572                                                                                                                                     |   |                           |   | 47,022 |   |
| Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 1,507,276                                                                                                                                  |   |                           |   | 285,135 |   |
|                      Deferred financing cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | -                                                                                                                                          |   |                           |   | 261,595 |   |
| Prepaid and other      assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 27,898                                                                                                                                     |   |                           |   | 63,502 |   |
| Property and equipment,      net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 111,408                                                                                                                                    |   |                           |   | 138,152 |   |
| Total      assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $      | 12,285,675                                                                                                                                 |   |                           | $      | 9,229,672 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                       |   |                           |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                       |   |                           |   |   |   |
| Liabilities      and stockholders’ deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                       |   |                           |   |   |   |
| Accounts payable and accrued      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $      | 989,818                                                                                                                                    |   |                           | $      | 1,048,670 |   |
| Drafts payable and floor plan      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 1,103,250                                                                                                                                  |   |                           |   | - |   |
|                      Dividends Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 187,749                                                                                                                                    |   |                           |   | - |   |
| Revolving credit      facilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 10,086,070                                                                                                                                 |   |                           |   | 9,013,025 |   |
| Other notes      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 961,198                                                                                                                                    |   |                           |   | 2,590,695 |   |
| Advances from related      parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 673,846                                                                                                                                    |   |                           |   | 677,794 |   |
| Deferred sales      tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 892,763                                                                                                                                    |   |                           |   | 794,990 |   |
| Total      liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 14,894,694                                                                                                                                 |   |                           |   | 14,125,174 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                       |   |                           |   |   |   |
| Commitments      and contingencies (Note K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                       |   |                           |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                       |   |                           |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                       |   |                           |   |   |   |
| Stockholders'      deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                       |   |                           |   |   |   |
| Preferred stock: no par,      10,000,000 shares authorized,   2,023,220      issued and outstanding at June 30,      2007.  Liquidation                     preference      of $5,058,050                                                                                                                                                                                                                                                                                                                                                                                                            |   | 4,253,735                                                                                                                                  |   |                           |   | - |   |
| Common stock: no par,      100,000,000 shares authorized,   7,040,575      issued and outstanding (6,018,570 at June 30,    2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 10,825,909                                                                                                                                 |   |                           |   | 5,768,364 |   |
| Accumulated      deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (17,688,663                                                                                                                                | )      |                           |   | (10,663,866 | ) |
| Total      stockholders' deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | (2,609,019                                                                                                                                 | )      |                           |   | (4,895,502 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                                                                                       |   |                           |   |   |   |
| Total      liabilities and stockholders’ deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $      | 12,285,675                                                                                                                                 |   |                           | $      | 9,229,672 |   |

| See      accompanying summary of accounting policies and notes to financial      statements. |
|----------------------------------------------------------------------------------------------|

----

| Auto      Underwriters of America, Inc. |
|-----------------------------------------|
| Statements      of Operations           |
| For      the Years Ended June 30        |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 2007   |                                                                                                                                       | 2006   |                           |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|
|                                                                                                                |   |                         |   |       |   |                         |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                       |   |                           |   |   |   |
| Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $      | 9,513,570                                                                                                                                  |   |                           | $ | 11,694,268 |   |
| Interest income – Finance      Receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 1,503,224                                                                                                                                  |   |                           |   | 1,967,492 |   |
| Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 158,471                                                                                                                                    |   |                           |   | 329,805 |   |
| Total      revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 11,175,265                                                                                                                                 |   |                           |   | 13,991,565 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
| Cost      and expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                       |   |                           |   |   |   |
| Cost of      sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 6,423,338                                                                                                                                  |   |                           |   | 9,999,673 |   |
| Selling, general and      administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 3,925,688                                                                                                                                  |   |                           |   | 3,870,683 |   |
| Provisions for credit      losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2,903,585                                                                                                                                  |   |                           |   | 5,056,597 |   |
| Discount on sale of      loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | -                                                                                                                                          |   |                           |   | 83,744 |   |
| Depreciation and      amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 307,092                                                                                                                                    |   |                           |   | 295,638 |   |
| Interest      expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 2,265,234                                                                                                                                  |   |                           |   | 1,381,259 |   |
| Total      costs and expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 15,824,937                                                                                                                                 |   |                           |   | 20,687,594 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
|              Loss      before income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | (4,649,672                                                                                                                                 | )      |                           |   | (6,696,029 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
| Income      tax benefit (expense)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | -                                                                                                                                          |   |                           |   | 121,676 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
| Net      loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (4,649,672)                                                                                                                                |   |                           |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   | - |   |
| Preferred      deemed dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | (2,375,323)                                                                                                                                |   |                           |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
| Net loss available to common      stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $      | (7,024,995                                                                                                                                 | )      |                           | $ | (6,574,353 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
| Loss      per share attributable to common stockholders:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                       |   |                           |   |   |   |
| Basic and      diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $      | (1.07                                                                                                                                      | )      |                           | $ | (1.09 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
| Weighted      average number of shares outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                       |   |                           |   |   |   |
| Basic and      diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 6,567,092                                                                                                                                  |   |                           |   | 6,054,532 |   |

| See      accompanying summary of accounting policies and notes to financial      statements. |
|----------------------------------------------------------------------------------------------|

----

| Auto      Underwriters of America, Inc.                |
|--------------------------------------------------------|
| Statement      of Stockholders’ Equity (Deficit) |
| For      the Years Ended June 30, 2007 and2006         |

|                                                                                                              |   | Common      Stock |      |   | Series      A Preferred |   |       | Deferred |   |   | Retained  |   |   |         |      |
|-------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|-------------------------|--------|------------|----------|--------|--------|-----------|--------|--------|--------------|-----------|
|                                                                                                              |   | Shares            |      |   | Amount                  |   |       | Shares   |   |   | Amount    |   |   | Compensation |      |   | Deficit |   |   | Total |   |
|                                                                                                              |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |
| Balances      at June 30, 2005                                                                                    |   |              | 6,020,053 |   |                    | $      | 5,453,878  |     |   |   |      |   | $      | -            |      |   | $ | (230,175 | ) |   | $ | (4,052,426 | ) |   | $ | 1,171,277 |   |
|                                                                                                              |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Common      stock issued for:                                                                                     |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Consulting      services                                                                                          |   |              | 40,000    |   |                    |   | 170,000    |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   | 170,000 |   |
| Conversion      of accounts payable                                                                               |   |              | 150,000   |   |                    |   | 75,000     |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   | 75,000 |   |
| Purchase of      assets                                                                                           |   |              | 108,517   |   |                    |   | 162,776    |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   | 162,776 |   |
| Cancellation      of shares                                                                                       |   |              | (300,000  | )      |                    |   | (150,000   | )        |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   | (150,000 | ) |
| Imputed      interest                                                                                             |   |              |      |   |                    |   | 40,400     |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   | 40,400 |   |
| Reclassification      of deferred compensation                                                                    |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   | 230,175 |   |   |   |   |   |   |   | 230,175 |   |
| Prior      year adjustment                                                                                        |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   | (37,087 | ) |   |   | (37,087 | ) |
|                                                                                                              |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                     |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   | (6,574,353 | ) |   |   | (6,574,353 | ) |
|                                                                                                              |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances      at June 30, 2006                                                                                    |   |              | 6,018,570 |   |                    | $      | 5,768,364  |     |   |   |      |   |   |         |      |   |   | - |   |   |   | (10,663,866 | ) |   |   | (4,895,502 | ) |
|                                                                                                              |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Series A Preferred shares      issued and 1,011,610 warrants to purchase common Stock, net of issuance      costs |   |              |      |   |                    |   |       |     |   |   | 2,023,220 |   |   |         | 4,253,735 |   |   |   |   |   |   |   |   |   |   |   | 4,253,735 |   |
| Conversion of Secured      Notes                                                                                  |   |              | 400,000   |   |                    |   | 700,000    |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   | 700,000 |   |
| Conversion of Unsecured      Notes                                                                                |   |              | 622,000   |   |                    |   | 933,000    |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   | 933,000 |   |
| Imputed interest on related      party loans                                                                      |   |              |      |   |                    |   | 40,059     |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   | 40,059 |   |
| Fair value of warrants      issued in   connection with debt                                       |   |              |      |   |                    |   | 1,185,218  |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   | 1,185,218 |   |
| Stock-based compensation      cost - options                                                                      |   |              |      |   |                    |   | 11,694     |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   | 11,694 |   |
| Fractional      shares                                                                                            |   |              | 5         |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      deemed dividends                                                                                   |   |              |      |   |                    |   | 2,187,574  |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   | (2,187,574 | ) |   |   | - |   |
| Dividend      accrued on Series A Preferred Stock                                                                 |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   | (187,749 | ) |   |   | (187,749 | ) |
| Prior year      adjustment                                                                                        |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   | 198 |   |   |   | 198 |   |
| Net loss                                                                                                          |   |              |      |   |                    |   |       |     |   |   |      |   |   |         |      |   |   |   |   |   |   |   | (4,649,672 | ) |   |   | (4,649,672 | ) |
| Balances at June 30,      2007                                                                                    |   |              | 7,040,575 |   |                    | $      | 10,825,909 |     |   |   | 2,023,220 |   |   | $            | 4,253,735 |   |   | $ | - |   |   | $ | (17,688,663 | ) |   | $ | (2,609,019 | ) |

| See      accompanying summary of accounting policies and notes to financial      statements. |
|----------------------------------------------------------------------------------------------|

----

| Auto      Underwriters of America, Inc.        |
|------------------------------------------------|
| Statements      of Cash Flows                  |
| For      the Years Ended June 30, 2007 and2006 |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 2007   |                                                                                                                                       |   | 2006                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
| Operating      Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                       |   |                           |   |   |   |
|   Net      loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $      | (4,649,672                                                                                                                                 | )      |                           | $      | (6,574,353 | ) |
|   Adjustments      to reconcile net loss to net cash used in operating      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                       |   |                           |   |   |   |
|     Option      expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 11,694                                                                                                                                     |   |                           |   | 20,000 |   |
|     Warrant      expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 561,045                                                                                                                                    |   |                           |   | - |   |
|     Imputed      interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 40,059                                                                                                                                     |   |                           |   | 40,400 |   |
|     Bad      debt expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 35,000                                                                                                                                     |   |                           |   | - |   |
|     Depreciation      and amortization expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 307,092                                                                                                                                    |   |                           |   | 295,638 |   |
|     Amortization      of loan discounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 78,022                                                                                                                                     |   |                           |   | - |   |
|     Gain      from written off loan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (21,490                                                                                                                                    | )      |                           |   | - |   |
|     Discount      on sale of loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | -                                                                                                                                          |   |                           |   | 83,744 |   |
|     Changes      in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                       |   |                           |   |   |   |
|         Finance      receivable originations and purchases, net of payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (5,198,459                                                                                                                                 | )      |                           |   | (7,422,152 | ) |
|         Provision      for credit losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2,903,585                                                                                                                                  |   |                           |   | 4,904,157 |   |
|         Inventory      acquired in repossession                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 1,792,887                                                                                                                                  |   |                           |   | 3,343,683 |   |
|                Subtotal      finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | (501,987)                                                                                                                                  |   |                           |   | 825,688 |   |
|     Changes      in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                       |   |                           |   |   |   |
|         Accounts      receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | -                                                                                                                                          |   |                           |   | 1,119,708 |   |
|         Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (1,222,141                                                                                                                                 | )      |                           |   | 376,217 |   |
|         Prepaid      and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 12,054                                                                                                                                     |   |                           |   | (11,641 | ) |
|         Accounts      payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (58,653                                                                                                                                    | )      |                           |   | 166,560 |   |
|         Drafts      payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 1,130,870                                                                                                                                  |   |                           |   | - |   |
|         Income      taxes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | -                                                                                                                                          |   |                           |   | (121,676 | ) |
|         Deferred      sales taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 97,773                                                                                                                                     |   |                           |   | 25,483 |   |
|               Net      cash used in operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (4,180,334                                                                                                                                 | )      |                           |   | (3,754,232 | ) |
|                                                                                                                |   |                         |   |       |   |                         |   |
| Investing      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                       |   |                           |   |   |   |
|         Purchase      of property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | (18,753                                                                                                                                    | )      |                           |   | (3,564 | ) |
|         Proceeds      from the sale of finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | -                                                                                                                                          |   |                           |   | 1,146,174 |   |
|                Net      cash provided (used) by investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | (18,753                                                                                                                                    | )      |                           |   | 1,142,610 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
| Financing      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                       |   |                           |   |   |   |
|         Repayments      to related parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | (3,948                                                                                                                                     | )      |                           |   | 8,927 |   |
|         Proceeds      from revolving credit facilities, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 1,073,045                                                                                                                                  |   |                           |   | 867,497 |   |
|         Proceeds      from (repayments of) other debt, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | (556,476                                                                                                                                   | )      |                           |   | 1,671,247 |   |
|         Proceeds      from loan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 1,100,000                                                                                                                                  |   |                           |   | - |   |
|         Proceeds      from sale of  preferred stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 4,253,735                                                                                                                                  |   |                           |   | - |   |
|                Net      cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 5,866,356                                                                                                                                  |   |                           |   | 2,547,671 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
|   Increase      (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 1,667,269                                                                                                                                  |   |                           |   | (63,951 | ) |
|   Cash      and cash equivalents at:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                                                                                                       |   |                           |   |   |   |
|                                                         Beginning      of year                                                                                                                                                                                                                                                                                                               |   | 4,161                                                                                                                                      |   |                           |   | 68,112 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                       |   |                           |   |   |   |
|                                                         End      of year                                                                                                                                                                                                                                                                                                                     | $      | 1,671,430                                                                                                                                  |   |                           | $      | 4,161 |   |

| See      accompanying summary of accounting policies and notes to financial      statements. |
|----------------------------------------------------------------------------------------------|

----

| Auto      Underwriters of America, Inc. |
|-----------------------------------------|
| Notes      to Financial Statements      |

| Use      of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| The preparation of financial      statements in conformity with generally accepted accounting principles      requires management to make estimates and assumptions that affect the      reported amount of assets and liabilities and disclosure of contingent      assets and liabilities at the date of the financial statements, and the      reported amounts of revenues and expenses during the      period.  Actual results could differ from those      estimates.                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Concentration      of Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Auto Underwriters provides      financing in connection with the sale of substantially all of its used      vehicles.  These sales are made primarily to customers residing      in Texas.  As a result, Auto Underwriters’ portfolio performance      is directly tied to the economic prosperity of the local economies      surrounding the Houston, Texas metropolitan area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Cash      and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Auto Underwriters considers      all highly liquid debt instruments purchased with original maturities of      three months or less to be cash equivalents.  Cash equivalents      generally consist of interest-bearing money market      accounts.  Periodically, Auto Underwriters maintains cash in      financial institutions in excess of the amounts insured by the federal      government.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Finance      Receivables and Allowance for Credit Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Auto Underwriters originates      installment contracts from the sale of used vehicles at its      dealerships.  Finance receivables consist of contractually      scheduled payments from installment contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Auto Underwriters maintains an      allowance for credit losses at a level it considers sufficient to cover      anticipated losses in the collection of its finance      receivables.  The allowance for credit losses is based upon a      periodic analysis of the portfolio, economic conditions and trends,      historical credit loss experience, and collateral values.  Since      the loss reserve is based upon a number of factors, most of which are      subject to change over time (i.e. economic conditions), it is reasonably      possible that a change in such factors may cause the allowance for credit      losses to increase or decrease by a material amount in the near      term.  The allowance for credit losses is periodically reviewed      by management with any changes reflected in current      operations. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Inventory is valued at the      lower of cost or market on a specific identification      basis.  Inventory includes used vehicles and related      parts.  Repossessed vehicles are recorded at the lower of cost      or market, which approximates wholesale value.  Vehicle      reconditioning costs are capitalized as a component of      inventory.  The cost of used vehicles sold is determined using      the specific identificationmethod.                                                                                                                                                                                                                                                                                                                                                                                  |

----

| Property      and Equipment                                                                                                                                                                                                                                                                                                                           |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Property and equipment are      stated at cost.  Expenditures for additions, renewals and      improvements are capitalized.  Costs of repairs and maintenance      are expensed as incurred.  Depreciation is computed principally      using the straight-line method over the following estimated useful      lives: |

| Furniture,      fixtures and equipment |                 | 5      years |
|----------------------------------------|--------------------------------------------------------------------------------------------|--------------|
| Software                               |                                                                                       | 5      years |

| Income      Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Income      tax expense is based on reported earnings before income taxes. Deferred      income taxes reflect the impact of temporary differences between assets      and liabilities recognized for financial reporting purposes and such      amounts recognized for tax purposes, and are measured by applying enacted      tax rates in effect in years in which the differences are expected to      reverse.  The Company recognizes deferred tax assets and      liabilities for the expected future tax consequences of events that have      been included in the Company’s financial statements or tax returns. A      valuation allowance is provided against deferred tax assets if it is more      likely than not that such assets will not be  realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Revenue      Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Interest income on finance      receivables is recognized using the interest method.  Revenue      from the sale of used vehicles is recognized when the sales contract is      signed and the customer has taken possession of the      vehicle.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Advertising      Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Advertising costs are expensed      as incurred by Auto Underwriters and include radio, television, and print      media marketing costs. Advertising costs amounted to $134,114 and $157,761      for the years ended June 30, 2007 and 2006,    respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Stock      Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                In      December 2004, the FASB issued SFAS No. 123R, “Share-Based Payments” (“FAS      123R”). Auto Underwriters adopted the provisions of FAS 123R as of January      1, 2006 using the modified prospective transition method approach as      allowed under FAS 123R. FAS 123R establishes standards for the accounting      for transactions in which an entity exchanges its equity instruments for      goods or services. FAS 123R focuses primarily on accounting for      transactions in which an entity obtains employee services in share-based      payment transactions. FAS 123R requires that the fair value of such equity      instruments be recognized as expense in the historical financial      statements as services are performed. Prior to FAS 123R, only certain pro      forma disclosures of fair value were required.   Prior      to January 1, 2006 we accounted for stock-based compensation under      Statement of Financial Accounting Standards No. 123, “Accounting for      Stock-Based Compensation” (“FAS 123”). As permitted under this standard,      compensation cost was recognized using the intrinsic value method      described in Accounting Principles Board Opinion No. 25, “Accounting for      Stock Issued to Employees” (“APB 25”). Effective January 1, 2006, the      Company has adopted Statement of Financial Accounting Standards No. 123      (Revised 2004), “Share-Based Payment” (“FAS 123R”) and applied the      provisions of the Securities and Exchange Commission Staff Accounting      Bulletin No. 107 using the modified-prospective transition method. Prior      periods were not restated to reflect the impact of adopting the new      standard. As a result of the adoption of FAS 123R, stock-based      compensation expense recognized during the six months ended June 30, 2006      includes compensation expense for all share-based payments granted on or      prior to, but not yet vested as of January 1, 2006, based on the grant      date fair value estimated in accordance with the original provisions of      FAS 123, and compensation cost for all share-based payments granted on or      subsequent to January 1, 2006, based on the grant date fair value      estimated in accordance with the provisions of FAS 123R.   APB      25 did not require any compensation expense to be recorded in the      financial statements if the exercise price of the award was not less than      the market price on the date of grant. Since all options granted by Auto      Underwriters had exercise prices equal or greater than the market price on      the date of grant, no compensation expense was recognized for stock option      grants prior to January 1, 2006.   During      the year ended June 30, 2006, Auto Underwriters did not make any option      grants, and therefore, did not recognize any stock-based compensation      expense.   Prior      to the adoption of FAS 123R and for the six months ended December 31,      2005, no tax benefits from the exercise of stock options has been      recognized. Any future excess tax benefits derived from the exercise of      stock options will be recorded prospectively and reported as cash flows      from financing activities in accordance with FAS  123R. |

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| Earnings      Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| The basic earnings per common      share is computed by dividing the net earnings / (loss) by the weighted      average number of common shares outstanding. Diluted net earnings / (loss)      per common share is computed by dividing the net earnings / (loss)      adjusted on an "as if converted" basis, by the weighted average number of      common shares outstanding plus potential dilutive securities. For the      years ended June 30, 2007 and 2006, potential dilutive securities had an      anti-dilutive effect and were not included in the calculation of diluted      net earnings / (loss) per commonshare. |

| Recently      Issued Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             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|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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|   Statement      of Financial Accounting Standards No. 155   In      February 2006, the Financial Accounting Standards Board (“FASB”) issued      Statement of Financial Accounting Standards (“SFAS”) No. 155,      “Accounting for Certain Hybrid Financial Instruments” (“SFAS 155”). SFAS      155 amends SFAS 133, “Accounting for Derivative Instruments and Hedging      Activities”, and SFAS 140, “Accounting for Transfers and Servicing of      Financial Assets and Extinguishments of Liabilities”. SFAS 155      (i) permits the fair value remeasurement for any hybrid financial      instrument that contains an embedded derivative that otherwise would      require bifurcation, (ii) clarifies which interest-only strips and      principal-only strips are not subject to the requirement of SFAS 133,      (iii) establishes a requirement to evaluate interests in securitized      financial assets to identify interests that are freestanding derivatives      or that are hybrid financial instruments that contain an embedded      derivative requiring bifurcation, (iv) clarifies that concentrations      of credit risk in the form of subordination are not embedded derivatives      and (v) amends SFAS 140 to eliminate the prohibition on a qualifying      special purpose entity from holding a derivative financial instrument that      pertains to a beneficial interest other than another derivative financial      instrument. SFAS 155 is effective for all financial instruments acquired      or issued after the beginning of our fiscal year ending June 30,      2008. Management has evaluated the impact of the adoption of this      statement and it is not expected to have a material impact on our      consolidated financial position, results of operations or cash      flows.   Statement      of Financial Accounting Standards No. 156   In      March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing      of Financial Assets – an amendment of FASB Statement No. 140” (“SFAS      156”). SFAS 156 requires an entity to recognize a servicing asset or      servicing liability each time it undertakes an obligation to service a      financial asset by entering into a servicing contract in specific      situations. Additionally, the servicing asset or servicing liability shall      be initially measured at fair value, if practicable. SFAS 156 permits an      entity to choose either the amortization method or fair value measurement      method for subsequent measurement of the servicing asset or servicing      liability. SFAS 156 is effective for our fiscal year ending June 30,      2008. Management has evaluated the impact of the adoption of this      statement and it is not expected to have a material impact on our      consolidated financial position, results of operations or cash      flows.   FASB      Interpretation No. 48   In      July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48),      “Accounting for Uncertainty in Income Taxes—an interpretation of FASB      Statement 109.” FIN 48 prescribes a comprehensive model for recognizing,      measuring, presenting and disclosing in the financial statements tax      positions taken or expected to be taken on a tax return, including a      decision whether to file or not to file in a particular jurisdiction. FIN      48 is effective for our fiscal year ending June 30, 2008. We are      currently evaluating the potential impact FIN 48 will have on our      financial position and results of operations.   Statement      of Financial Accounting Standards No. 157   In      September 2006, the FASB issued SFAS No. 157, “Fair Value      Measurements” (“SFAS 157”), which defines fair value, establishes a      framework for measuring fair value under GAAP and expands disclosures      about fair value measurements. SFAS 157 requires companies to disclose the      fair value of its financial instruments according to a fair value      hierarchy. Additionally, companies are required to provide certain      disclosures regarding instruments within the hierarchy, including a      reconciliation of the beginning and ending balances for each major      category of assets and liabilities. SFAS 157 applies to other accounting      pronouncements that require or permit fair value measurements. SFAS 157 is      effective for our fiscal year ending June 30, 2009. Management is      evaluating the impact of the statement but it is not expected to have a      material impact on our consolidated financial position, results of      operations or cash flows.   Statement      of Financial Accounting Standards No. 159   In      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option      for Financial Assets and Financial Liabilities” (“SFAS 159”), which      provides the option to report certain financial assets and liabilities at      fair value, with the intent to mitigate volatility in financial reporting      that can occur when related assets and liabilities are recorded on      different bases. SFAS 159 also amends SFAS No. 115, “Accounting for      Certain Investments in Debt and Equity Securities,” by providing the      option to record unrealized gains and losses on securities currently      classified as held-for-sale and held-to-maturity. SFAS    159 |

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| ·   | From      September 2007 through December 2007 the Company issued a total of 403,164      shares of Series A convertible preferred stock (“Series A Stock”) at $2.50      per share, for net total proceeds of $866,803 (net of issuance costs      totaling $141,108).  For every two shares of Series A Stock      issued, investors received a warrant to purchase the Company’s common      stock at $2.50 per share.  The warrants are immediately vested      and are exercisable and expire five years from the date of      issuance. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Auto      Underwriters has available $913,930 under its line of credit with Oak Rock      Financial, LLC at June 30,2007. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 2007   |                                                                                                                           |   | 2006                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
| Finance      receivables                                                                                                                                                                                                                                                                                                                                                                               |                           | $      | 11,438,029                                                                                                                     |   |                           | $      | 10,847,405 |   |
| Less:      allowance for credit losses                                                                                                                                                                                                                                                                                                                                                                 |                           |   | (2,505,938                                                                                                                     | )      |                           |   | (2,417,300 | ) |
|                                                                   |                           |   |                       |   |       |   |                       |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                  |       | $      | 8,932,091                                                                                                                      |   |                           | $      | 8,430,105 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 2007   |       |   | 2006                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------|------------|--------|--------------------------------|--------|
| Balance      at beginning of the period                                                                                                                                                                                                                                                                                                                                                                |                           | $      | 2,417,300  |   |                           | $      | 2,323,089 |   |
| Provision      for credit losses                                                                                                                                                                                                                                                                                                                                                                       |                           |   | 2,903,585  |   |                           |   | 5,056,597 |   |
| Recoveries                                                                                                                                                                                                                                                                                                                                                                                             |                           |   | 1,792,887  |   |                           |   | 3,343,683 |   |
| Net      charge-offs                                                                                                                                                                                                                                                                                                                                                                                   |                           |   | (4,607,834 | )      |                           |   | (8,306,069 | ) |
|                                                                   |                           |   |       |   |       |   |   |   |
| Balance      at end of year                                                                                                                                                                                                                                                                                                                                                                            |       | $      | 2,505,938  |   |                           | $      | 2,417,300 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 2007   |                                                                                                                           |   | 2006                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
| Accounts      payable                                                                                                                                                                                                                                                                                                                                                                                  |                           | $      | 193,130                                                                                                                        |   |                           | $      | 289,081 |   |
| Payroll      and related taxes                                                                                                                                                                                                                                                                                                                                                                         |                           |   | 523,774                                                                                                                        |   |                           |   | 372,641 |   |
| Recourse      obligation                                                                                                                                                                                                                                                                                                                                                                               |                           |   | 175,000                                                                                                                        |   |                           |   | 152,440 |   |
| Other                                                                                                                                                                                                                                                                                                                                                                                                  |                           |   | 97,914                                                                                                                         |   |                           |   | 234,508 |   |
|                                                                   |                           |   |                       |   |       |   |                       |   |
| Total      liabilities                                                                                                                                                                                                                                                                                                                                                                                 |       | $      | 989,818                                                                                                                        |   |                           | $      | 1,048,670 |   |

| Lender                                                                                                                         |                           | FacilityAmount                                                                                                           |                           | InterestRate                                                                                                             |                           | Maturity                                                                                                                 |                           | June 30,      2007Balance                                                                                           |                           | June 30,      2006Balance                                                                                           |
|--------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------|
|                       |                           |                      |                           |                      |                           |                      |                           |                      |                           |                      |
| Oak      Rock Financial, LLC                                                                                                   |       | $ 11,000,000                                                                                                        |       | Prime      + 7%                                                                                                          |       | March      31, 2008                                                                                                      |       | $  10,086,070                                                                                                  |       | $       9,013,025                                                                                                   |

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|                                                                                    |   | 2007   |      |   | 2006   |   |
|-----------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Unsecured      Convertible Promissory Notes                                             |   | $      | -         |   |   | $      | 990,000 |   |
|                                                                                    |   |   |      |   |   |   |   |   |
| Secured      Promissory Notes                                                           |   |   | 50,000    |   |   |   | 1,000,000 |   |
|                                                                                    |   |   |      |   |   |   |   |   |
| Short-term      Bridge Loans:                                                           |   |   |      |   |   |   |   |   |
|    Principal      payments due in less than 12 months                    |   |   | 1,100,000 |   |   |   | - |   |
|    Discount      on debt – fair value of warrants attached to debt |   |   | (624,173  | )      |   |   | - |   |
|    Amortized      discount – 2007                                  |   |   | 78,022    |   |   |   | - |   |
|                                                                                    |   |   | 553,849   |   |   |   | - |   |
|                                                                                    |   |   |      |   |   |   |   |   |
| Notes      Payable – Gunnels Interests, Inc.                                      |   |   | 352,349   |   |   |   | 590,243 |   |
|                                                                                    |   |   |      |   |   |   |   |   |
| Notes      Payable – Other                                                        |   |   | 5,000     |   |   |   | 26,490 |   |
|                                                                                    |   |   |      |   |   |   |   |   |
|                                                                                    |   | $      | 961,198   |   |   | $      | 2      ,590,695 |   |

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|                                                      |                           | 2007   |        |   | 2006   |   |
|-----------------------------------------------------------|--------------------------------|--------|-------------|--------|--------|--------|
|                                                      |                           |   |        |   |   |   |   |   |
| Deferred      tax asset, net operating loss carryforwards |                           |   | 4,700,000   |   |   |   | 2,900,000 |   |
| Valuation      allowance                                  |                           |   | (4,700,000) | )      |   |   | (2,900,000 | )  |
|                                                      |                           |   |        |   |   |   |                       |   |
| Net      deferred tax asset                               |       |   | -           |   |   |   | - |   |

|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | 2007   |                                                                                                                           |   | 2006                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|
| Income      tax provision                                                                                                                                                                                                                                                                                                                                                                              |                           |   |                                                                                                                           |   |                           |   |   |   |
|      Current                                                                                                                                                                                                                                                                                                                                                                  |                           | $      | -                                                                                                                              |   |                           | $      | (121,676 | ) |
|      Deferred                                                                                                                                                                                                                                                                                                                                                                 |                           |   | -                                                                                                                              |   |                           |   | - |   |
|                                                                   |                           |   |                       |   |       |   |                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |       | $      | -                                                                                                                              |   |                           | $      | (121,676 | ) |

----

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|                          |   | Number      of Common Stock Shares |      |   | Weighted      Average Exercise Price |   |
|-------------------------------|--------|------------------------------------|-----------|--------|--------------------------------------|--------|
| Balance      at June 30, 2005 |   |                               | 0         |   |                                 |   | - |   |
|   Granted           |   |                               | 1,250,000 |   |                                 | $      | 1.10 |   |
| Balance      at June 30, 2006 |   |                               | 1,250,000 |   |                                 |   | 1.10 |   |
|   Granted           |   |                               | 1,436,610 |   |                                 |   | 4.14 |   |
|   Cancelled         |   |                               | (422,000  | )      |                                 |   | 1.00 |   |
| Balance      at June 30, 2007 |   |                               | 2,264,610 |   |                                 |   | 3.75 |   |

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|    Exercise      Price |   |   Number      Outstanding |   | Weighted      Average      Remaining Contractual      Life (Years) |
|----------------------------------|--------|--------------------------------|--------|--------------------------------------------------------------------|
| $1.00                            |   | 578,000                        |   | 3.75                                                               |
| 1.50                             |   | 305,000                        |   | 3.87                                                               |
| 1.75                             |   | 150,000                        |   | 4.09                                                               |
| 2.50                             |   | 220,000                        |   | 4.96                                                               |
| 5.00                             |   | 1,011,610                      |   | 4.55                                                               |
|                             |   | 2,264,610                      |   |                                                               |

| Weighted      average estimated value per share | $1.86 |
|-------------------------------------------------|-------|
| Expected      option life in years              | 4.0   |
| Weighted      average expected volatility       | 141%  |
| Expected      dividend yield                    | 0%    |
| Weighted      average risk free interest rate   | 4.8%  |

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|     Year      Ended June 30,                    |   | Stock      Option Compensation Expense |    |
|----------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                           |   |                                   |    |
| 2008                                                           |   | $                                      | 46,522  |   |
| 2009                                                           |   |                                   | 46,395  |   |
| 2010                                                           |   |                                   | 46,395  |   |
| 2011                                                           |   |                                   | 34,574  |   |
| Total      estimated future non-cash      compensation expense |   | $                                      | 173,886 |   |

|                          |   | Options      Outstanding |    |   | Weighted-Average      Exercise Prices |   |
|-------------------------------|--------|--------------------------|---------|--------|---------------------------------------|--------|
| Balance      at June 30, 2005 |   |                     | 50,000  |   |                                  | $      | 0.50 |   |
| Granted                       |   |                     | 0       |   |                                  |   | 0.00 |   |
| Balance      at June 30,2006  |   |                     | 50,000  |   |                                  |   | 0.50 |   |
| Granted                       |   |                     | 100,000 |   |                                  |   | 2.50 |   |
| Balance      at June 30, 2007 |   |                     | 150,000 |   |                                  | $      | 1.83 |   |

| Years      Ending June 30,                                                                                                                                                                                                      |                           | Amount |                                                                                                                           |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
|                                        |                           |   |                       |   |
| 2008                                                                                                                                                                                                                                 |                           | $      | 350,112                                                                                                                        |   |
| 2009                                                                                                                                                                                                                                 |                           |   | 175,678                                                                                                                        |   |
| 2010                                                                                                                                                                                                                                 |                           |   | 37,172                                                                                                                         |   |
| Thereafter                                                                                                                                                                                                                           |                           |   | 0                                                                                                                              |   |
|                                                                                                                                                                                                                                 |       | $      | 562,962                                                                                                                        |   |

----

----

|                                                                                  |   | 2007   |      |   | 2006   |   |
|---------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Cash      for:                                                                        |   |   |      |   |   |   |   |   |
| Interest                                                                              |   | $      | 1,586,108 |   |   | $      | 1,381,259 |   |
| Income      taxes                                                                     |   |   | -         |   |   |   | - |   |
|                                                                                  |   |   |      |   |   |   |   |   |
| Non-cash      supplemental disclosures:                                               |   |   |      |   |   |   |   |   |
| Preferred      deemed dividend                                                        |   |   | 546,894   |   |   |   | - |   |
| Common      stock issued to repay debt                                                |   |   | 1,633,000 |   |   |   | 75,000 |   |
|        Common      stock issued to purchase assets |   |   | -         |   |   |   | 162,776 |   |

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