<PAGE>


                              WASHINGTON, DC 20549
                                    FORM 10-K
(Mark  One)
[X]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF  THE SECURITIES
      EXCHANGE  ACT  OF  1934

For  the  fiscal  year  ended  December  31,  1998
                                       OR
[   ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR 15(d) OF THE SECURITIES
       EXCHANGE  ACT  OF  1934

For  the  transition  period  from  _______  to  _______

                        COMMISSION FILE NUMBER 000-21673
                         AUTOBOND ACCEPTANCE CORPORATION
             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>



<S>                                                           <C>

                                   TEXAS                            75-2487218


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


                    100 CONGRESS AVENUE, AUSTIN, TEXAS                   78701


                 (Address of principal executive offices)              (Zip Code)

</TABLE>


       Registrant's telephone number, including area code: (512) 435-7000
           Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>


<S>                                       <C>
Title of class                            Name of each exchange on which registered
----------------------------------------  -----------------------------------------
COMMON STOCK, NO PAR VALUE PER SHARE      AMERICAN STOCK EXCHANGE

15% SERIES A CUMULATIVE PREFERRED STOCK,
NO PAR VALUE PER SHARE                    AMERICAN STOCK EXCHANGE
</TABLE>


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


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

                                    -- i --
<PAGE>
     The  aggregate  market  value of the voting stock held by non-affiliates of
the  registrant  on  March  29, 1999 (based on the closing price on such date as
reported  on  the  American  Stock  Exchange)  was  $1,841,396.1
                                                    ------------
FOOTNOTE:  1  Calculated  by  excluding  all  shares  that  may  be deemed to be
beneficially  owned  by  executive  officers,  directors  and  five  percent,
shareholders  of  the  registrant,  without  conceding that all such persons are
"affiliates"  of  the  registrant  for  purposes of the Federal securities laws.


     As  of  March  31,  1999,  there  were 6,531,311 shares of the registrant's
Common  Stock,  no  par  value,  and  1,125,000 of the registrant's 15% Series A
Cumulative  Preferred  Stock,  no  par  value,  outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

Part  III - Portions of the registrant's definitive Proxy Statement with respect
to  the  registrant's 1999 Annual Meeting of Shareholders, to be filed not later
that  120  days  after  the  close  of  the  registrant's  fiscal  year.

                                    -- ii --
<PAGE>


<TABLE>
<CAPTION>

<S>                                                                                     <C>

TABLE OF CONTENTS
PART I                                                                                   1
Item 1.     Business                                                                     1
Item 2.     Properties                                                                  17
Item 3.     Legal Proceedings                                                           18
Item 4.     Submission Of Matters To A Vote Of Security Holders                         20
PART II                                                                                 21
Item 5.     Market For Registrants' Common Equity And Related Stockholder Matters       21
Item 6.     Selected Financial Data                                                     22
Item 7.     Management's Discussion And Analysis Of Financial Condition And Results Of
            Operations                                                                  23
item 7a    Quantitative and qualitative disclosures about market risk                   41
Item 8.     Financial Statements And Supplementary Data                                 41
Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial
            Disclosure                                                                  42
PART III                                                                                43
Item 10.     Directors And Executive Officers Of The Registrant                         43
Item 11.     Executive Compensation                                                     43
Item 12.     Security Ownership of Certain Beneficial Owners and Management             43
Item 13.     Certain Relationships And Related Transactions                             43
PART IV                                                                                 44
Item 14.    Exhibits, Financial Statement Schedule and Reports on Form 8-K              44
SIGNATURES                                                                              48
</TABLE>



<PAGE>


                                   -- iii --
<PAGE>

                                     ------
                                     PART I
                                     ------



ITEM  1.     BUSINESS


GENERAL


     AutoBond  Acceptance  Corporation  (the  "Company") is a specialty consumer
finance  company  engaged  in  underwriting, acquiring, servicing and selling or
securitizing  retail  installment  contracts ("finance contracts") originated by
franchised  automobile  dealers  in  connection  with the sale of used and, to a
lesser  extent,  new  vehicles  to  selected  consumers  with  limited access to
traditional  sources  of  credit  ("sub-prime  consumers").  Sub-prime consumers
generally  are  borrowers unable to qualify for traditional financing due to one
or  more  of  the  following reasons: negative credit history (which may include
late  payments,  charge-offs,  bankruptcies, repossessions or unpaid judgments);
insufficient  credit;  employment or residence histories; or high debt-to-income
or  payment-to-income  ratios  (which  may  indicate  payment or economic risk).

     The Company acquires finance contracts generally from franchised automobile
dealers, makes credit decisions using its own underwriting guidelines and credit
personnel  and  performs the collection function for finance contracts using its
own  collections  department.  The  Company also acquires finance contracts from
third  parties  other  than  dealers  for  which  the  Company reunderwrites and
collects  such  finance  contracts  in  accordance  with  the Company's standard
guidelines.  The  Company  sells  or  securitizes  portfolios  of  these  retail
automobile installment contracts to efficiently utilize limited capital to allow
continued  growth  and  to  achieve  sufficient finance contract volume to allow
profitability. The Company markets a single finance contract acquisition program
with  five  pricing  tiers  to  automobile  dealers  which adheres to consistent
underwriting  guidelines  involving  the  purchase  of primarily late-model used
vehicles.  This  has  enabled  the  Company  to  securitize those contracts into
investment  grade  securities  with  similar  terms  from  one  issue to another
providing consistency to investors. For the period of inception through December
31,  1998,  the  Company  acquired  33,604  finance  contracts with an aggregate
current  outstanding  principal  balance  of  $221 million. Since inception, the
Company  has  completed  8 securitizations pursuant to which it privately placed
$205  million in finance contract-backed securities. The Company has also placed
$170  million  in  finance  contract-backed  securities with Dynex Capital, Inc.
("Dynex")  through  January  29,  1999.


RECENT  DEVELOPMENTS

     Included  in  this  report  is  the  report  of  Deloitte  &  Touche  LLP
("Deloitte"),  the  Company's  independent  accountants,  with  respect to their
examination  of  the  Company's financial statements for the year ended December
31,  1998.  As  stated  in  Deloitte's  report:
     The  accompanying  consolidated financial statements for
     the year ended December 31,  1998  have been prepared assuming 
     that the Company will continue as a going concern.  As  discussed  
     in Note 1 to the consolidated financial statements, the termination
     of  the  Company's primary source of funding for its acquisition of
     finance  contracts, the ability of a lender to accelerate a debt 
     obligation, the possibility  of  certain  trustees  removing  the 
     company as servicer on certain transactions,  and  litigation  brought
     against the company by a preferred stock holder raise substantial 
     doubt about its ability to continue as a going concern.  Management's  
     plans  concerning these matters are also described in Note 1.  The
     financial  statements  do not include any adjustments that might result
     from the outcome  of  this  uncertainty.
On  March  31,  1999,  when the Company filed its notification of late filing of
this  report  as  well  as an earnings release, the Company had not received the
opinion  of  Deloitte.  Prior  to the issuance of Deloitte's opinion the Company
received  notice  of  the  preferred  shareholder  lawsuit  discussed  below.

     Since  June 1998, the Company's primary source of funding finance contracts
has  been Dynex. Shortly after execution of the parties' various agreements, and
from  time  to  time  thereafter,  Dynex  requested  that  the  Company agree to
renegotiate  the  terms  of  the  transaction,  including  the reduction of the 
                                    -- 1 --
<PAGE>
advance  rate  on funded loans from 105% to 104% of the principal balance of the
loan,  and  then  again  down  to 88% (with the 16% difference to be paid to the
Company by December 31, 1998). The Company accommodated Dynex on these requests,
but rejected others, including the request by Dynex on October 12, 1998 that the
Company  lend  $6  million to Dynex. On December 7, 1998, the President of Dynex
threatened  that  Dynex  would  assign  its  funding obligations to an insolvent
affiliate  that  would  then  file  for  bankruptcy.  On  December 14, 1998, the
President  of  Dynex presented this threat to the Company in writing, along with
two  other  "alternatives":  (a)  no  acquisition of the Company, but funding to
continue  through February 28, 1999, only upon certain conditions, including the
ability of Dynex to obtain financing and a reduction in the advance rate; or (b)
the  acquisition  of  the Company, but with a material reduction from the $6 per
share  previously  agreed  pursuant  to  an existing stock option agreement (the
"Stock  Option")  offered by Dynex Holding, Inc. ("Dynex Holding"), an affiliate
of Dynex, for the Company's common stock, along with numerous other unacceptable
conditions.  The  Company's management rejected these "alternatives", since none
of  them  could  be  justified to its shareholders, and management believed that
Dynex  would  ultimately  choose  to  honor its contractual commitments. Despite
Dynex'  apparent  liquidity  pressures,  the Company believed, that given Dynex'
reported  shareholders'  equity,  Dynex would have the ability to sell assets or
take  other  necessary  actions to generate the requisite liquidity. To be safe,
the  Company's  management  did  request  Dynex  to  allow  the  Company to seek
alternative  funding  sources,  but  Dynex  refused  this  request.

     In  addition  to  Dynex' requests to renegotiate the terms of its strategic
alliance  with  the  Company,  throughout  the  latter  part  of 1998, Dynex was
habitually  slow  in  honoring  funding  requests.  On December 31, 1998, Dynex,
claiming  inadequate  cash  resources,  defaulted  on  its  obligation  to  pay
$6,573,107.44 to the Company for the funding accommodations mentioned above. The
full  amount  was  not  received  until  February  2,  1999. The January funding
requests  were  filled  by  Dynex  either  after the contractually required time
period or not at all. No February funding requests were honored. On December 31,
1998,  the  Company  was  informed  by  Dynex that it had determined to have its
affiliate  Dynex  Holding  exercise  its  option  to  acquire the Company and in
connection  therewith  would  visit  the Company during January 1999 in order to
perform  final  due  diligence.  The  ensuing  two-week due diligence review was
extensive  and  comprehensive,  included  a  review  of loan files and servicing
records,  and  was  completed  on  January  21, 1999. On January 26, 1999, Dynex
Holding,  an  affiliate  of  Dynex  and  holder  of  the  Stock  Option, filed a
Notification  and Report Form under the Hart-Scott-Rodino Antitrust Improvements
Act  of  1976  (the  "Hart-Scott  filing").  The  Hart-Scott  filing contained a
description  of the Stock Option and included an affidavit wherein the President
of Dynex swore to the Federal Trade Commission that "[Dynex Holding] intends, in
good  faith,  to  make  the  acquisition  referred  to  in the attached notice."
Concurrently,  the  President of Dynex sent a letter to the Company stating that
"[Dynex Holding] intends to acquire 5,474,500 shares of Common Stock of AutoBond
which  will  represent  all  securities  of  AutoBond  owned  by [Dynex Holding]
subsequent  to the acquisition." While apparently misleading the Company and the
government  by its Hart-Scott filing, Dynex requested and received a waiver, for
potential  violations,  from  Daiwa  Finance Corporation ("Daiwa") on its credit
facility  supporting  the Company's loans, prior to informing the Company of any
breaches  by  the Company. Dynex apparently knew enough to request a waiver from
Daiwa, and yet at no time informed the Company during this time of any problems.

     It  was  not  until  the first week of February 1999 that Dynex' management
notified  the  Company  that  Dynex  was refusing to make additional fundings of
finance  contracts,  based  upon  the purported findings of its consultants with
respect  to  the  Company's breach of representations regarding loan origination
standards. However, a refusal to fund  by Dynex is not the prescribed remedy for
such  breaches;  rather, a repurchase provision applies, allowing a 30-day grace
period  for  cure.  The  Company's management pleaded with Dynex throughout this
week  for the information necessary to analyze this assertion, but Dynex refused
to  provide  any substantive information. Over the weekend of February 5 through
7,  representatives  of  Dynex  and  the Company met at the Company's offices to
review  the  finance  contracts  against  the  origination criteria. The Company
determined  that  Dynex'  January  due  diligence  utilized  a  flawed  "grid",
reflecting  criteria  inconsistent  with  the  Company's  written  guidelines
previously  provided to Dynex.  After reaching apparent agreement on the correct
criteria,  the  Dynex  team  changed its mind on underwriting the following day,
insisting  on  grading  the loans against criteria that differed materially from
the criteria that had been previously agreed-upon and employed by the Company in
accordance  with  its  written guidelines. It should be noted that actual credit
performance  of  the  loans  in  question  is  such  that  (a)  Dynex'
overcollateralization  has  increased  through the application of available cash
flow  and (b) there have been no defaults in the amounts owed to Dynex under the
Credit  Agreement.

                                    -- 2 --
<PAGE>
     At  this juncture, it became clear to the Company that Dynex was not really
interested  in  objectively  appraising  the  Company's  performance,  but  in
concocting  reasons  for refusing to fund. The Company believes that Dynex fully
utilized  its  funding  line  with Daiwa, and had no funding line for its future
funding  commitments.  Through  March  1,  1999,  Dynex had breached commitments
totaling  at  least  $30  million  owed  to the Company. On March 3, 1999, Dynex
announced  its  intent  to pay dividends on its preferred stock, thereby further
hindering and delaying the payments owed to the Company and possibly other Dynex
creditors.  Having  attempted  to  cripple  the  Company (through termination of
funding  as  well  as  litigation)  and in order to pay off its line with Daiwa,
Dynex  apparently  believes  it  would  be  easier  to securitize or finance the
approximately  $140  million  in  outstanding  paper  by removing the Company as
servicer  for  those finance contracts. Accordingly, on February 22, 1999, Dynex
purported  to terminate the Company as servicer based on a false allegation of a
servicing  termination  event.  On  March  1,  1999,  Dynex' attempt to obtain a
temporary  restraining  order  to  force  the relinquishment of servicing by the
Company  was  defeated  by  a  federal  district  court in New York.  See "Legal
Proceedings".

     Since  early February 1999, the Company's management has been attempting to
procure  alternative  sources  of  funding  and other strategic alternatives, in
order  to  mitigate  the  situation  with  Dynex.  The  Company  is currently in
discussions  with  several  investment bankers and direct sources regarding such
alternatives  which  may  include  joint  ventures, or changes in control of the
Company.  While  management  hopes  that  an  alternative  opportunity  will  be
consummated,  the Company has suspended acquisitions and dispositions of finance
contracts  until alternative funding sources are obtained, however, there can be
no  assurance  that such funding will be obtained. As a consequence, the Company
expects  to  report  a  loss  for the first quarter of 1999 and will not pay the
quarterly  dividend  on its preferred stock otherwise payable on March 31, 1999.
Unless  financing  or other strategic alternatives are found the Company may not
continue  its  business  of originating loans and would take steps to reduce its
personnel  and operating expenses associated with such activities. Also, parties
to  the  Company's  various  securitization  transactions could request that the
Company  surrender  servicing, although management does not believe such parties
have  the  right  to  terminate  servicing under the respective agreements.  See
"Funding/Securitization  of  Finance  Contracts,  Securitization  Program".  The
Company  expects  to continue its servicing operations.  Management believes the
Company  has  sufficient  liquidity  to  meet  its  obligations and continue its
servicing  activities  for  a  reasonable  period  of  time.

     In February 1997 the Company discovered certain breaches of representations
and  warranties by certain dealers with respect to finance contracts sold into a
securitization.  The Company honored its obligations to the securitization trust
and  repurchased  finance contracts totaling $619,520 from that trust during the
three  months  ended  March  31,  1997.  Of  the  total  amount of these finance
contracts,  $190,320  were  purchased  from  one  dealer.  Although  the Company
requested  that this dealer repurchase such contracts, the dealer refused. After
such  dealer's  refusal  to  repurchase,  the Company commenced an action in the
157th  Judicial  District  Court for Harris County, Texas against Charlie Thomas
Ford,  Inc.  to  compel such repurchase. In February 1999, the Company reached a
favorable  settlement  agreement  with  the defendants. The Company has received
funds  related to such settlement sufficient to reimburse it for the repurchased
finance  contracts.

     On  March  31,  1999,  a  suit  naming the Company and William O. Winsauer,
Adrian  Katz  and  John  S.  Winsauer  (in  their  capacities  as  controlling
shareholders  of  the  Company)  as defendants was filed in the federal district
court  for the Western District of Texas by a holder of the Company's 15% Series
A  Cumulative  Preferred  Stock.  See  "Legal  Proceedings."


GROWTH  AND  BUSINESS  STRATEGY

     The  Company's growth strategy anticipates the acquisition of an increasing
number  of  finance  contracts  contingent  upon  finding  financing  for  such
transactions  The  key  elements  of  this  strategy include: (i) increasing the
number  of  finance contracts acquired per automobile dealer; (ii) expanding the
Company's  presence  within existing markets; (iii) penetrating new markets that
meet  the  Company's  economic,  demographic  and  business  criteria  and  (iv)
securitizing  or  otherwise monetizing portfolios of acquired finance contracts.

                                    -- 3 --
<PAGE>
     To  foster its growth and increase profitability, the Company will continue
to  pursue  a  business  strategy  based  on  the  following  principles:

     Targeted  Market  and  Product Focus-The Company has targeted the sub-prime
auto  finance market because it believes that sub-prime finance presents greater
opportunities  than  does  prime  lending. This greater opportunity stems from a
number of factors, including the relative newness of sub-prime auto finance, the
range  of  finance  contracts  that  various  sub-prime  auto  finance companies
provide,  the  relative  lack  of competition compared to traditional automotive
financing  and  the  potential  returns  sustainable  from  large  interest rate
spreads.  The  Company  focuses  on late model used rather than new vehicles, as
management  believes  the  risk  of  loss is lower on used vehicles due to lower
depreciation  rates,  while  interest  rates  are  typically  higher than on new
vehicles.  For the period from inception through December 31, 1998, new vehicles
and  used  vehicles  represented  7.1 % and  92.9%, respectively, of the finance
contract  portfolio.  In addition, the Company concentrates on acquiring finance
contracts  from dealerships franchised by major automobile manufacturers because
they  typically  offer higher quality vehicles, are better capitalized, and have
better  service  facilities  than  used  car  dealers.
     Efficient  Funding  Strategies-Through  warehouse facilities and a periodic
securitization  program,  the  Company  increases  its  liquidity, redeploys its
capital  and reduces its exposure to interest rate fluctuations. The strategy of
the  Company's  funding  and  securitization  program  has  been to provide more
proceeds  than  the  Company's  acquisition costs, resulting in positive revenue
cash  flow  and  lower  overall  costs of funding, and permitting loan volume to
increase  with  limited  additional  equity  capital.

     Uniform Underwriting Criteria-To manage the risk of delinquency or defaults
associated  with  sub-prime  consumers, the Company has utilized since inception
underwriting  criteria  which  are  uniformly  applied  in  evaluating  credit
applications.  This  evaluation  process  is  conducted  on  a centralized basis
utilizing  experienced  personnel.  These  uniform  underwriting criteria create
consistency in the securitization portfolios of finance contracts that make them
more  easily  analyzed  by  the  rating  agencies and more marketable and permit
static  pool  analysis  of loan defaults to optimally structure securitizations.
See  "Management's  Discussion  and Analysis-Repossession Experience-Static Pool
Analysis".

     Centralized Operating Structure-While the Company establishes and maintains
relationships  with  dealers  through  sales  representatives  located  in  the
geographic  markets  served  by  the  Company,  all  of the Company's day-to-day
operations  are  centralized  at  the  Company's  offices in Austin, Texas. This
centralized  structure  allows  the  Company  to  closely monitor its marketing,
funding,  underwriting  and  collections  operations and eliminates the expenses
associated  with  full-service  branch  or  regional  offices.

     Experienced  Management  Team-The  Company  actively  recruits  and retains
experienced  personnel  at the executive, supervisory and managerial levels. The
senior  operating  management  of  the  Company  consists of seasoned automobile
finance  professionals  with  substantial experience in underwriting, collecting
and  financing  automobile  finance  contracts.

     Intensive  Collection  Management-The  Company  believes  that  intensive
collection  efforts are essential to ensure the performance of sub-prime finance
contracts  and  to  mitigate  losses. The Company's collections managers contact
delinquent accounts frequently, working cooperatively with customers to get full
or  partial  payments,  but  will  initiate repossession of financed vehicles no
later than the 90th day of delinquency. As of December 31, 1998, a total of$28.6
million  or  13.56%,  of  the  Company's  active finance contract portfolio were
between  30  and  89 days past due and $ 5.2 million, or approximately 2.47%, of
the  Company's  active  finance  contracts  outstanding were 90 days past due or
greater. The aforementioned percentages and amounts include finance contracts in
the  Company's  portfolio where the Company has discontinued collection efforts,
such  as  where  the underlying vehicle has been repossessed, the borrower is in
bankruptcy,  the  dealer is to buy back the loan, or an insurance claim has been
filed,  but  a final loss has not been recorded. From inception through December
31,  1998,  the Company repossessed  7,966 (approximately 23.9%) of its financed
vehicles,  and  the  Company  had 
                                    -- 4 --
<PAGE>
completed  the disposal and recovery process of  4,457 vehicles, resulting in an
average  loss  per  repossession  of  approximately  $  2,682  per  vehicle. See
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations-Net  Loss  Per  Repossession".

     Limited  Loss  Exposure-To reduce its potential losses on defaulted finance
contracts,  the  Company historically has insured each finance contract it funds
against  damage  to the financed vehicle through a vendor's comprehensive single
interest  physical  damage  insurance  policy  (a "VSI Policy"). In addition, in
connection with certain of the Company's warehouse financing and securitizations
through  December  31,  1997,  the  Company  purchased  credit default insurance
through  a  deficiency balance endorsement ("Credit Endorsement") to the related
VSI  Policy.  The  Credit  Endorsement reimburses the Company for the difference
between  the  unpaid  contract  finance balance and the net proceeds received in
connection  with  the  sale  of  the  repossessed vehicle. Moreover, the Company
limits loan-to-value ratios and applies a purchase price discount to the finance
contracts  it  acquires.  The  Company's  combination  of underwriting criteria,
intensive  collection  efforts  and  the  VSI  Policy and Credit Endorsement has
resulted  in  net  charge-offs  (after  receipt  of  liquidation  and  insurance
proceeds)  of  21.91%  (excluding  repossession  costs) of the principal balance
outstanding  on  disposed repossessed vehicles for which the liquidation process
has  been  completed  as  of  December  31,  1998.  For  its  1997-B  and 1997-C
securitizations, the Company purchased credit default insurance from Progressive
Northern  Insurance  Company.  See  "Legal  Proceedings",  "Insurance"  and
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations-Net  Loss  per  Repossession".

     As  discussed,  the  Company's  business strategy depends on its ability to
increase  the  rate  of  revenue  growth more rapidly than the rate of expenses,
which  would  involve a reversal of an adverse trend experienced through much of
1997  and  1998. Thus, continued growth in revenues is important for the Company
to  succeed  in  its  business  strategy. Unless a comprehensive solution to the
liquidity  problems  caused  by  the  Dynex  situation  is  reached,  the future
viability  of  the  Company's  business  of originating loans is threatened. The
Company expects to continue its servicing operations for the foreseeable future.


BORROWER  CHARACTERISTICS

     Borrowers  under  finance  contracts  in  the  Company's  finance  contract
portfolio  are generally sub-prime consumers. Sub-prime consumers are purchasers
of  financed  vehicles  with limited access to traditional sources of credit and
are  generally  individuals  with  weak  or  no  credit  histories.

CONTRACT  PROFILE

     From  inception  to  December 31, 1998, the Company acquired 33,371 finance
contracts  with  an aggregate initial principal balance of $ 389 million. Of the
finance  contracts acquired, approximately  7.1% have related to the sale of new
automobiles  and  approximately  92.9%  have  related  to  the  sale  of  used
automobiles.  The  average  age  of  used finance vehicles was approximately two
years  at  the  time  of  sale.  The finance contracts had, upon acquisition, an
average  initial principal balance of $11,556; a weighted average APR of 19.87%;
and  a  weighted average contractual maturity of 53.5 months. As of December 31,
1998,  the  finance  contracts  in the finance contract portfolio had a weighted
average  remaining  maturity  of  43  months.


DEALER  NETWORK

     General  Description.  The Company acquires finance contracts originated by
automobile  dealers  in  connection  with  the sale of late-model used and, to a
lesser  extent,  new  cars  to  sub-prime  borrowers. Accordingly, the Company's
business  development  strategy  depends  on  enrolling  and  promoting  active
participation  by automobile dealers in the Company's financing program. Dealers
are selected on the basis of geographic location, financial strength, experience
and  integrity  of  management,  stability  of  ownership,  quality  of used car
inventory,  participation  in  sub-prime financing programs, and the anticipated
quality  and  quantity  of  finance  contracts which they originate. The Company
principally  targets  dealers  operating 
                                    -- 5 --
<PAGE>
under  franchises  from  major automobile manufacturers, rather than independent
used  car  dealers.  The  Company believes that franchised dealers are generally
more  stable and offer higher quality vehicles than independent dealers. This is
due,  in  part,  to  careful  initial  screening  and  ongoing monitoring by the
automobile  manufacturers  and to the level of financial commitment necessary to
secure  and  maintain  a  franchise.  As  of  December 31, 1998, the Company was
licensed  or  qualified  to  do  business in 40 states.  Over the near term, the
Company  intends  to  focus  its  proposed geographic expansion on states in the
Midwest  and  Mid-Atlantic  regions.

     Location  of  Dealers.  Approximately  34 % of the Company's dealer network
consists of dealers located in Texas, where the Company has operated since 1994.


DEALER  SOLICITATION

     Marketing Representatives. As of December 31, 1998, the Company utilized 41
marketing  representatives,  40 of whom were individuals employed by the Company
and  one  of  whom  were  marketing  organizations  serving  as  independent
representatives.  These representatives have an average of ten years' experience
in  the  automobile  financing industry. The marketing representatives reside in
the  region  for  which  they  are  responsible.  Marketing  representatives are
compensated  on  the  basis  of a salary plus commissions based on the number of
finance  contracts  purchased  by  the  Company  in  their respective areas. The
Company  maintains  an  exclusive  relationship  with  the independent marketing
representatives  and compensates such representatives on a commission basis. All
marketing  representatives  undergo  training  and  orientation at the Company's
Austin  headquarters.

     The  Company's  marketing representatives establish financing relationships
with new dealerships, and maintain existing dealer relationships. Each marketing
representative  endeavors to meet with the managers of the finance and insurance
("F&I")  departments  at  each  targeted  dealership  in his or her territory to
introduce  and  enroll dealers in the Company's financing program, educating the
F&I  managers about the Company's underwriting philosophy, its practice of using
experienced  underwriters  (rather  than  computerized credit scoring) to review
applications,  and  the Company's commitment to a single lending program that is
easy  for  dealers to master and administer. The marketing representatives offer
training  to  dealership  personnel  regarding the Company's program guidelines,
procedures  and  philosophy.

     After  each  dealer relationship is established, a marketing representative
continues to actively monitor that relationship with the objective of maximizing
the  volume  of  applications  received  from the dealer that meet the Company's
underwriting  standards.  Due  to  the  non-exclusive  nature  of  the Company's
relationships  with  dealers, the dealers retain discretion to determine whether
to  seek  financing  from  the  Company  or  another  financing  source.  Each
representative submits a weekly call report describing contacts with prospective
and  existing dealers during the preceding week and a monthly competitive survey
relating  to the competitive situation and possible opportunities in the region.
The  Company  provides  each  representative  with  a  weekly  report  detailing
applications  received  and  finance contracts purchased from all dealers in the
region. The marketing representatives regularly telephone and visit F&I managers
to  remind them of the Company's objectives and to answer questions. To increase
the  effectiveness  of  these contacts, the marketing representatives can obtain
real-time  information from the Company's newly installed management information
systems,  listing  by  dealership  the  number  of  applications  submitted, the
Company's  response  to  such  applications  and  the  reasons  why a particular
application  was  rejected. The Company believes that the personal relationships
its  marketing  representatives establish with the F&I managers are an important
factor  in creating and maintaining productive relationships with its dealership
customer  base.

     The role of the marketing representatives is generally limited to marketing
the Company's financing program and maintaining relationships with the Company's
dealer  network.  The  marketing representatives do not negotiate, enter into or
modify  dealer agreements on behalf of the Company, do not participate in credit
evaluation  or  loan  funding decisions and do not handle funds belonging to the
Company  or its dealers. The Company intends to develop notable finance contract
volume in each state in which it initiates coverage. The Company has elected not
to  establish  full  service  branch  offices,  believing  that  the expense and
administrative burden of such offices are generally unjustified. The Company has
concluded  that the ability to closely monitor the critical functions of finance
contract  approval and contract administration and collection are best performed
and  controlled  on  a  centralized  basis  from  its  Austin  facility.
                                    -- 6 --
<PAGE>
     Dealer  Agreements.  Each  dealer  with  which  the  Company  establishes a
financing  relationship  enters into a non-exclusive written dealer agreement (a
"Dealer  Agreement")  with  the  Company, governing the Company's acquisition of
finance  contacts  from  such dealer. A Dealer Agreement generally provides that
the  dealer  shall  indemnify  the  Company  against any damages or liabilities,
including  reasonable  attorney's  fees,  arising  out  of  (i)  any breach of a
representation  or  warranty  of the dealer set forth in the Dealer Agreement or
(ii)  any claim or defense that a borrower may have against a dealer relating to
financing  contract.  Representations  and  warranties  in  a  Dealer  Agreement
generally  relate to matters such as whether (a) the financed automobile is free
of  all  liens,  claims and encumbrances except the Company's lien, (b) the down
payment  specified in the finance contract has been paid in full and whether any
part  of  the  down payment was loaned to the borrower by the dealer and (c) the
dealer has complied with applicable law. If the dealer violates the terms of the
Dealer  Agreement  with respect to any finance contract, the dealer is obligated
to  repurchase such contract on demand for an amount equal to the unpaid balance
and  all  other  indebtedness  due  to  the  Company  from  the  borrower.


FINANCING  PROGRAM

     Unlike  certain  competitors who offer numerous marketing programs that the
Company  believes  serve to confuse dealers and borrowers, the Company markets a
single  financing  contract  acquisition  program with five pricing tiers to its
dealers.  The Company believes that by focusing on a single program, it realizes
consistency  in  achieving  its  contract  acquisition  criteria, which aids the
funding  and  securitization  process.  The  finance  contracts purchased by the
Company  must meet several criteria, including that each contract: (i) meets the
Company's  underwriting  guidelines; (ii) is secured by a new or late-model used
vehicle  of  a  type  on  the Company's approved list; (iii) was originated in a
jurisdiction in the United States in which the Company was licensed or qualified
to  do  business,  as  appropriate;  (iv)  provides  for  level monthly payments
(collectively, the "Scheduled Payments") that fully amortize the amount financed
over  the  finance  contract's  original  contractual  term; (v) has an original
contractual  term  from 24 to 60 months; (vi) provides for finance charges at an
APR  of at least 14%; (vii) provides a verifiable down payment of 10% or more of
the cash selling price; and (viii) is not past due or does not finance a vehicle
which  is  in  repossession  at  the  time  the finance contract is presented to
Company  for  acquisition.  Although  the  Company  has  in  the past acquired a
substantial  number  of  finance  contracts for which principal and interest are
calculated  according  to  the "Rule of 78s," the Company's present policy is to
acquire primarily finance contracts calculated using the simple interest method.

     The amount financed with respect to a finance contract will generally equal
the aggregate amount advanced toward the purchase price of the financed vehicle,
which  equals the net selling price of the vehicle (cash selling price less down
payment  and trade-in), plus the cost of permitted automotive accessories (e.g.,
air  conditioning,  standard transmission, etc.), taxes, title and license fees,
credit  life,  accident  and  health  insurance  policies,  service and warranty
contracts  and other items customarily included in retail automobile installment
contracts  and  related costs. Thus, the amount financed may be greater than the
Manufacturer's  Suggested  Retail  Price ("MSRP") for new vehicles or the market
value  quoted  for  used  vehicles. Down payments must be in cash, real value of
traded-in  vehicles,  or  rebates. Dealer-assisted or deferred down payments are
not  permitted.

     The  Company's current purchase criteria limit acceptable finance contracts
to  a  maximum  of the (a) net selling price of 112% of wholesale book value (or
dealer  invoice  for new vehicles) or (b) amount financed of 120% of retail book
value  in  the  case  of  a  used  vehicle, or 120% of MSRP in the case of a new
vehicle.

     The  credit  characteristics  of an application approved by the Company for
acquisition  generally  consist  of  the following: (i) stability of applicant's
employment,  (ii)  stability  of applicant's residence history, (iii) sufficient
borrower  income,  (iv)  credit  history,  and  (v)  amount  of  down  payment.

     All  of the Company's finance contracts are prepayable at any time. Finance
contracts  acquired  by  the  Company  must prohibit the sale or transfer of the
financed  vehicle  without  the  Company's  prior  consent  and  provide  for
acceleration  of  the  maturity  of  the finance contract in the absence of such
consent.  For  an  approved  finance contract, the Company will agree to acquire
such  finance  contract from the originating dealer at a non-refundable contract
acquisition  discount  of  approximately  0%  to  10%  of  the amount financed. 
                                    -- 7 --
<PAGE>
CONTRACT  ACQUISITION  PROCESS

     General. Having selected an automobile for purchase, the sub-prime consumer
typically  meets  with  the  dealership's  F&I  manager  to  discuss options for
financing  the  purchase  of  the  vehicle.  If the sub-prime consumer elects to
finance  the  vehicle's  purchase  through the dealer, the dealer will typically
submit  the  borrower's  credit  application  to a number of potential financing
sources  to  find  the  most  favorable  terms.  In general, an F&I department's
potential  sources  of  financing  will  include banks, thrifts, captive finance
companies  and  independent  finance  companies.

     For  the  year  ended  December  31, 1998, 129,461 credit applications were
submitted  to  the  Company.  Of these 129,461 applications, approximately 36.3%
were  approved  and  8%,  or 10,176 contracts, were acquired by the Company. The
difference between the number of applications approved and the number of finance
contracts  acquired  is  attributable  to  a  common  industry practice in which
dealers  often  submit  credit applications to more than one finance company and
select  on  the  basis  of  the  most  favorable  terms offered. The prospective
customer may also decide not to purchase the vehicle notwithstanding approval of
the  credit  application.

     Contract  Processing.  Dealers  send  credit  applications along with other
information  to  the  Company's  Credit Department in Austin via facsimile. Upon
receipt,  the  credit application and other relevant information is entered into
the  Company's  computerized  contract  administration  system  by the Company's
credit  verification  personnel  and  a  paper-based  file  where  the  original
documents  are  created.  Once  logged  into  the system, the applicant's credit
bureau  reports  are  automatically  accessed  and  retrieved  directly into the
system.  At  this  stage,  the  computer  assigns  the credit application to the
specific credit manager assigned to the submitting dealer for credit evaluation.

     Credit  Evaluation.  In  evaluating  the  applicant's  creditworthiness the
credit  underwriter  reviews  each  application in accordance with the Company's
guidelines  and  procedures,  which  take  into account, among other things, the
individual's stability of residence, employment history, credit history, ability
to  pay,  income,  discretionary  income and debt ratio. In addition, the credit
underwriter evaluates the applicant's credit bureau report in order to determine
if  the  applicant's  (i)  credit  quality is deteriorating, (ii) credit history
suggests a high probability of default or (iii) credit experience is too limited
for  the  Company  to  assess  the  probability of performance. The Company also
assesses  the  value  and  useful  life  of  the  automobile  that will serve as
collateral  under  the  finance  contract.  Moreover,  the  credit  underwriters
consider the suitability of a proposed loan under its financing program in light
of  the (a) proposed contract term and (b) conformity of the proposed collateral
coverage  to  the  Company's  underwriting  guidelines.

     Verification  of  certain applicant-provided information is required before
the  Company funds the contract. Such verification typically requires submission
of  supporting documentation, such as a paycheck stub or other substantiation of
income,  or  a  telephone  bill  evidencing  a  current  address.

     The  Company's  underwriting standards are applied uniformly by experienced
credit  underwriters  with  a  personal  analysis of each application, utilizing
experienced  judgment.  These  standards  have been developed and refined by the
Company's senior credit and collections management who, on average, possess more
than  20  years  of  experience  in the automobile finance industry. The Company
believes  that  having its credit underwriters personally review and communicate
to  the  submitting  dealership  the  decision with respect to each application,
including  the  reasons  why  a  particular  application may have been declined,
enhances  the Company's relationship with such dealers. This practice encourages
F&I  managers  to submit contracts meeting the Company's underwriting standards,
thereby increasing the Company's operating efficiency by eliminating the need to
process  applications  unlikely  to  be  approved.

     The Company's Credit Department personnel undergo ongoing internal training
programs are attended by such personnel depending on their responsibilities. All
of these personnel are located in the Company's offices in Austin where they are
under  the  supervision  of the Vice President-Credit. The Vice President-Credit
has  of  more than 20 years of experience in the automobile finance business. In
addition,  the  Company reviews all repossessions to identify factors that might
require  refinements  in  the  Company's  credit  evaluation  procedures.

                                    -- 8 --
<PAGE>
     Approval  Process.  The  time  from  receipt of application to final credit
approval  is a significant competitive factor, and the Company seeks to complete
its  funding  approval  decision  in  an average of two to three hours. When the
Company approves the purchase of a finance contract, the credit manager notifies
the  dealer  by  facsimile  or  telephone.  Such  notice specifies all pertinent
information  relating to the terms of approval, including the interest rate, the
term,  information  about  the  automobile to be sold and the amount of discount
that  the  Company  will  deduct from the amount financed prior to remitting the
funds  to  the  dealer.  The  discount  is  not  refundable  to  the  dealer.

     Contract  Purchase and Funding. Upon final confirmation of the terms by the
borrower, the dealer completes the sale of the automobile to the borrower. After
the  dealer  delivers  all  required documentation (including an application for
title  or  a  dealer guaranty of title, naming the Company as lienholder) to the
Company,  the  Company remits funds to the dealer via overnight delivery service
within  a  commercially  reasonable  time  of  having received the complete loan
funding  package.  As  a matter of policy, the Company takes such measures as it
deems  necessary to obtain a perfected security interest in the related financed
vehicles  under  the  laws  of the states in which such vehicles are originated.
This  generally  involves  taking the necessary steps to obtain a certificate of
title which names the Company as lienholder. Each finance contract requires that
the  automobile  be  adequately  insured  and  that the Company be named as loss
payee,  and  compliance  with  these  requirements  is  verified  prior  to  the
remittance  of  funds  to  the  dealer.

     From  time  to  time,  the Company also acquires bulk portfolios from other
originators.  In  this event, the Company reunderwrites such contracts to ensure
appropriate  credit standards are maintained. The Company acquired approximately
$14.8  million  in  finance  contracts  in 1996 from Greenwich Capital Financial
Products  which  were  originated  by First Fidelity Acceptance Corp. During the
first  quarter  of  1997,  the  Company  acquired approximately $12.8 million in
finance  contracts from Credit Suisse First Boston Mortgage Capital LLC ("CSFB")
which were originated by Jefferson Capital Corporation. During the third quarter
of  1997, the Company acquired a total of $7.9 million in finance contracts from
three  originators.  During  the  fourth quarter of 1997, the Company acquired a
total  of  $7.4  million  in finance contracts from third party originators and,
from  CSFB,  approximately  $12.5  million  in  finance  contracts,  which  were
originated  by  several  third parties. CSFB also provided acquisition financing
for  the  purchase.


CONTRACT  SERVICING  AND  COLLECTION

     Contract servicing includes contract administration and collection. Because
the  Company  believes that an active collection program is essential to success
in the sub-prime automobile financing market, the Company retains responsibility
for  finance  contract  servicing  and  collection.  Prior to December 1997, the
Company  engaged  CSC  Logic/MSA  L.L.P.  (a Texas limited liability partnership
doing  business  as  "Loan  Servicing  Enterprise"  ("LSE")) to provide contract
administration  for  its  warehouse  arrangements  and  securitizations.

     Contract  Administration.  The  Company,  as  servicer,  performs  certain
contract  administration  functions  in  connection  with  finance  contracts
warehoused  or  sold  to  securitization  trusts,  including payment processing,
statement rendering, insurance tracking, data reporting and customer service for
finance  contracts. The Company inputs newly originated finance contracts on the
contract  system daily. The servicer then mails a welcome letter to the borrower
and subsequently mails monthly billing statements to each borrower approximately
ten  days  prior to each payment due date. All borrower remittances are directed
to a lock box. Remittances received are then posted to the proper account on the
system.  The  Company  also  handles  account inquiries from borrowers, performs
insurance  tracking  services  and  sends out notices to borrowers for instances
where  proper  collateral  insurance  is  not  documented.

     Contract  Collection.  As  collection agent, the Company is responsible for
pursuing  collections  from delinquent borrowers. The Company utilizes proactive
collection  procedures,  which  include  making  early and frequent contact with
delinquent  borrowers,  educating  borrowers as to the importance of maintaining
good  credit,  and  employing  a  consultative  and customer service approach to
assist  the borrower in meeting his or her obligations. The Company's ability to
monitor performance and collect payments owed by contract obligors is a function
of  its  collection  approach and support systems. The Company's approach to the
collection of delinquent contracts is to minimize repossessions and charge-offs.
The  Company maintains a computerized collection system specifically designed to
service  sub-prime  automobile  finance  contracts. The Company believes that if
problems  are  identified  early,  it  is possible to correct many delinquencies
before  they  deteriorate  further.

     The  Company has invested in equipment and training for a predictive dialer
system.  This  system  will  allow  for  more effective and efficient collection
efforts.  Employees  have  been  trained  to  manage the benefits allowing fewer
collection  representatives  to  handle  a  higher  volume of calls. The Company
believes  that  it  has  already,  and  will  continue  to  see  improvements in
delinquencies  as  a  direct  result  of  the  predictive  dialer  system.

     As  of  December  31,  1998,  the  Company  employed  227 people full-time,
including  63  collection  specialists  and  other  support  personnel,  in  the
Collections  Department.  Each  employee  is  devoted  exclusively to collection
functions.  The  Collections  Department  is  managed  by  the  Vice President -
Collections,  who  possesses  30  years experience in the automotive and finance
industry. The Company hires additional collection specialists in advance of need
to  ensure  adequate  staffing  and  training.

     Accounts  reaching  five  days past due are assigned to collectors who have
specific  responsibility  for  those  accounts.  These  collectors  contact  the
customer  frequently,  both by phone and in writing. Accounts that reach 60 days
past  due  are  assigned  to  senior  collectors who handle those accounts until
resolved.  To  facilitate  collections from borrowers, the Company has increased
its  utilization  of  Western Union's "Quick Collect," which allows borrowers to
pay  from  remote locations, with a confirmation printed at the Company's office

     Payment  extensions  may  be  granted  if, in the opinion of the collection
department,  such extension is warranted.  An extension fee is generally paid by
the  customer prior to the extension. Generally, there can be only one extension
during  the  first  18  months of a finance contract and two for the term of the
contract.  Payment  due dates can be modified during the term of the contract to
facilitate  current  payment  by  the  customer.

     Repossessions  and  Recoveries.  If  a  delinquency exists and a default is
deemed  inevitable  or the collateral is in jeopardy, and in no event later than
the  90th  day  of  delinquency  (as required by the applicable VSI Policy), the
Company's  Collections Department will initiate the repossession of the financed
vehicle.  Bonded,  insured  outside  repossession  agencies  are  used to secure
involuntary  repossessions.  In  most  jurisdictions, the Company is required to
give  notice  to the borrower of the Company's intention to sell the repossessed
vehicle,  whereupon  the borrower may exercise certain rights to cure his or her
default  or  redeem  the  automobile.  Following  the  expiration of the legally
required  notice  period,  the  repossessed  vehicle is sold at a wholesale auto
auction  (or  in limited circumstances, through dealers), usually within 60 days
of  the repossession. The Company closely monitors the condition of vehicles set
for  auction, and procures an appraisal under the applicable VSI Policy prior to
sale.  Liquidation proceeds are applied to the borrower's outstanding obligation
under  the finance contract and loss deficiency claims under the VSI Policy and,
if  applicable,  any deficiency balance policy are then filed. See "-Insurance".


INSURANCE

     Each  finance  contract  requires  the borrower to obtain comprehensive and
collision  insurance  with  respect  to  the  related  financed vehicle with the
Company  named  as  a  loss payee. The Company relies on representation from the
selling  dealer  and  independently  verifies  that  a borrower in fact has such
insurance  in effect when it purchases contracts. Each finance contract acquired
by  the  Company  prior  to  December  31, 1996 is covered by the Interstate VSI
Policy,  including  the  Credit  Endorsement. The Interstate VSI Policy has been
issued  to  the  Company  by  Interstate Fire & Casualty Company ("Interstate").
Interstate  is  an  indirect wholly-owned subsidiary of Fireman's Fund Insurance
Company.  Certain  finance  contracts acquired by the Company after December 31,
1996  are  covered  by  either  the  Interstate VSI Policy, including the Credit
Endorsement,  another  VSI Policy (which does not include a Credit Endorsement),
or  the VSI Policy and deficiency balance endorsement (the "Progressive Policy")
issued  by  Progressive  Northern  Insurance  Company  ("Progressive").

                                    -- 9 --
<PAGE>
     Physical  Damage  and  Loss  Coverage.  The Company initially relies on the
requirement,  set  forth in its underwriting criteria, that each borrower obtain
adequate  levels  of  physical  damage  loss coverage on the respective financed
vehicle  prior  to  funding. The Company tracks the physical damage insurance of
borrowers  and  notifies  borrowers  in  the  event  of  a  lapse in coverage or
inadequate  documentation.  Moreover,  the  VSI Policies insure against: (i) all
risk  of  physical  loss  or damage from any external cause to financed vehicles
which  the  Company  holds as collateral; (ii) any direct loss which the Company
may  sustain  by  unintentionally  failing  to  record  or  file  the instrument
evidencing  each contract with the proper public officer or public office, or by
failing  to  cause  the  proper  public  officer  or  public  office to show the
Company's  encumbrance  thereon,  if  such instrument is a certificate of title;
(iii) any direct loss sustained during the term of the applicable VSI Policy, by
reason  of  the  inability  of the Company to locate the borrower or the related
financed  vehicle,  or  by  reason  of confiscation of the financed vehicle by a
public  officer  or  public office; and (iv) all risk of physical loss or damage
from  any  external  cause  to a repossessed financed vehicle for a period of 60
days  while  such financed vehicle is (subject to certain exceptions) held by or
being  repossessed  by  the  Company.

     The  physical  damage provisions of a VSI Policy generally provide coverage
for  losses  sustained on the value of the financed vehicle securing a contract,
but in no event is the coverage to exceed: (i) the cost to repair or replace the
financed  vehicle  with  material of like kind and quality; (ii) the actual cash
value of the financed vehicle at the date of loss, less its salvage value; (iii)
the  unpaid  balance  of the contract; (iv) $40,000 per financed vehicle (or, in
the case of losses or damage sustained on repossessed financed vehicles, $25,000
per  occurrence),  or  $50,000 in the case of the Progressive Policy; or (v) the
lesser of the amounts due the Company under clauses (i) through (iv) above, less
any  amounts due under all other valid insurance on the damaged financed vehicle
less  its salvage value. No assurance can be given that the insurance will cover
the  amount  financed  with  respect  to  a  financed  vehicle.

     All  claim  settlements  for  physical  damage  and loss coverage under the
Interstate  Policy  are  subject  to  a  $500  deductible per loss ($250 for the
Progressive  Policy).  There  is no aggregate limitation or other form of cap on
the number of claims under the VSI Policy. Coverage on a financed vehicle is for
the term of the related contract and is noncancellable. Each VSI Policy requires
that,  prior  to  filing  a claim, a reasonable attempt be made to repossess the
financed  vehicle  and, in the case of claims on skip losses, every professional
effort  be  made  to  locate  the  financed  vehicle  or  the  related borrower.

     Deficiency  Balance  Endorsements.  In addition to physical damage and loss
coverage, the Interstate VSI Policy contains a Credit Endorsement which provides
that Interstate shall indemnify the Company for certain losses incurred due to a
deficiency  balance  following  the repossession and resale of financed vehicles
securing  defaulted  finance contracts eligible for coverage. Coverage under the
Credit  Endorsement  is  strictly conditioned upon the Company's maintaining and
adhering  to  the  credit  underwriting  criteria  set  forth  in  the  Credit
Endorsement.  Losses on each eligible contract are covered in an amount equal to
the  deficiency balance resulting from the Net Payoff Balance (as defined below)
less  the  sum  of  (I) the Actual Cash Value (as defined below) of the financed
vehicle  plus  (ii)  the  total  amount  recoverable  from  all other applicable
insurance,  including  refunds  from  cancelable  add-on  products.  The maximum
coverage  under  the  Credit  Endorsement  is  $15,000  per  contract.

     "Actual  Cash Value" for the purposes of the Credit Endorsement only, means
the  greater  of (i) the price for which the subject financed vehicle is sold or
(ii)  the  wholesale  market  value  at the time of the loss as determined by an
automobile  guide  approved  by Interstate applicable to the region in which the
financed  vehicle  is  sold.

     "Net  Payoff Balance" for the purposes of the Credit Endorsement, means the
outstanding  principal  balance  as  of  the  default  date  plus  late fees and
corresponding  interest  no  more  than 90 days after the date of default. In no
event  shall  Net  Payoff Balance include non-approved fees, taxes, penalties or
assessments  included  in the original instrument, or repossession, disposition,
collection  or  remarketing  expenses  and  fees  or  taxes  incurred.

     The  Progressive  Policy  contains  a  Deficiency  Balance Endorsement (the
"DBE"),  pursuant to which Progressive will insure the Company's interest in the
Financed Vehicles against direct loss incurred due to the Company's inability to
recover  one  hundred  percent  (100%)  of  the  balance due under an instrument
representing  a  finance  contract.  Under  the DBE, Progressive will cover such
impairment  of  the  Company's interest in the financed vehicle, measured as the
Net  Payoff  Amount,  reduced  by  (a)  claim  settlements  from other insurance
policies,  (b)  claim  settlements  due  under other coverage provisions of the 
                                    -- 10 --
<PAGE>
VSI Policy or its other endorsements, and (c) monies recoverable under any other
recourse  or  repurchase agreement or through any dealer hold-back, or any other
source.  The  maximum  liability under the DBE is Five Thousand Dollars ($5,000)
for  any financed contract.  Claims payments may not exceed, on a monthly basis,
88%  of  the  premiums  paid,  however,  any  unpaid claims in a given month are
carried over for payment in succeeding months. Progressive stopped paying claims
under  the  Progressive  Policy  in  April  1998.  See  "Legal  Proceedings".


MANAGEMENT  INFORMATION  SYSTEMS

     Management  believes  that  a  high level of real-time information flow and
analysis  is essential to manage the Company's informational and reporting needs
and  to enhance the Company's competitive position. Throughout 1998, the Company
handled  in-house  major  servicing  and  reporting  functions  which  had  been
out-sourced  in  the  past,  relying  heavily  on  its significant investment in
in-house technology. This has allowed the Company to realize significant savings
in  servicing fees, as well as to provide improved service and responsiveness to
its  customers  and  investors.

     The  Company  had,  in  1998,  and  will  continue to have certain expenses
associated  with maintaining and supporting its in-house technology. While these
expenses  increased  from  1997 to 1998 due to the increased in-house technology
needs,  the  Company does not anticipate a significant increase in this area for
1999.

     The  Company  has, in 1998, continued its investment expanding its in-house
technology  capabilities,  and such investments are expected to continue, albeit
at  a  reduced  rate  as  the  major  technology contributions have already been
realized.  The  Company  has invested in equipment and training for a predictive
dialer  system.  This  system  will  allow  for  more  effective  and  efficient
collection  efforts. Employees have been trained to manage the benefits allowing
fewer  collections  representatives  to  handle  a  higher  volume of calls. The
Company  believes  that it has already, and will continue to see improvements in
delinquencies  as  a  direct  result  of  the  predictive  dialer  system.

     Management feels that the technology the Company has in place is sufficient
to  handle its current and future needs, and feels that only a modest additional
investment in extending and enhancing its capabilities are needed to solidify it
in-house  technology  needs.

     In addition, management feels that neither the Company nor its customers or
investors  should  expect  any  significant adverse impact relating to the 'Year
2000'  bug.  This  is  based  on  a  number  of considerations, such as in-house
testing;  the fact that the recently designed in-house technology was written to
cater  to  the  year  2000 bug; and the fact that many key year 2000 issues have
already past (e.g., loan maturity dates). Management thus feels that the Company
is  'Year  2000 Compliant'. See "Management's Discussion and Analysis, Year 2000
Compliance".

                                    -- 11 --
<PAGE>

FUNDING/SECURITIZATION  OF  FINANCE  CONTRACTS

     Warehouse  Credit  Facilities. The Company obtains a substantial portion of
its  working  capital for the acquisition of finance contracts through warehouse
credit  facilities.  Under  a  warehouse facility, the lender generally advances
amounts  requested  by  the  borrower  on  a  periodic basis, up to an aggregate
maximum  credit  limit  for  the  facility, for the acquisition and servicing of
finance  contracts or other similar assets. Until proceeds from a securitization
transaction are used to pay down outstanding advances, as principal payments are
received  on  the finance contracts, the principal amount of the advances may be
paid  down  incrementally  or  reinvested  in  additional finance contracts on a
revolving  basis.

     The  Company  and its wholly owned subsidiary, AutoBond Funding Corporation
II,  entered  into  a  $50  million  revolving  warehouse  facility  (the "Daiwa
Facility")  with Daiwa Finance Corporation ("Daiwa") effective as of February 1,
1997.  Advances  under  the  Daiwa  Facility  matured  as of March 31, 1998. The
proceeds  from  the  borrowings  under  the  Daiwa Facility were used to acquire
finance  contracts  and  to  make  deposits  to a reserve account.  Interest was
payable  at  the lesser of (x) 30 day LIBOR plus 1.15% or (y) 11% per annum. The
Company paid a non-utilization fee of .25% per annum on the unused amount of the
line  of  credit.  These  notes  were repaid on July 1, 1998 through the Funding
Agreement  with  Dynex.

     On  December  31, 1997, the Company entered into a warehouse/securitization
arrangement  with  Credit  Suisse First Boston Mortgage Capital L.L.C. ("CSFB"),
whereby  $12.5  million  of  finance  contracts  were  sold  to  a  qualifying
unconsolidated  special  purpose subsidiary, AutoBond Master Funding Corporation
II.  These  finance  contracts  secured  variable  funding notes, in the initial
amount  of $11.3 million, which were repaid on June 30, 1998 through the Funding
Agreement  with  Dynex.

     On  March  31,  1998,  the  Company entered into a warehouse/securitization
arrangement  with  Infinity Investors Limited ("Infinity"), whereby $7.2 million
of  finance  contracts  were sold to a qualifying unconsolidated special purpose
subsidiary,  AutoBond  Master  Funding  Corporation  IV. These finance contracts
collateralized  variable funding notes bearing interest at 10% per annum through
May 31, 1998 and thereafter at 17% per annum. In connection with the transaction
with  Infinity, the Company issued a warrant to purchase up to 100,000 shares of
Common  Stock,  at an exercise price of $8.73 per share. These notes were repaid
on  June  30,  1998  through  the  Funding  Agreement  with  Dynex.

     On  June 9, 1998, the Company and Dynex entered into an arrangement whereby
the  Company  obtained  a  commitment  from  Dynex  to  purchase  all  currently
warehoused  and future automobile finance contract acquisitions through at least
May  31,  1999  (the  "Credit Agreement") The terms of the Credit Agreement were
modified  on June 30, October 20, and October 28, 1998. Under the prior terms of
the  Credit  Agreement,  the  Company  transferred finance contracts to AutoBond
Master  Funding  Corporations V ("Master Funding V"), a qualified unconsolidated
special  purpose  subsidiary,  and Dynex provided warehouse credit facilities in
the  amount  equal  to  104%  of  the  unpaid  principal  balance of the finance
contracts  (the  "Advance Rate"), with the proceeds of such fundings received by
the  Company. Under the modified terms of the Credit Agreement, the Advance Rate
was reduced from 104% to 88% for an interim period (the "Interim Period") ending
on  the  earlier  of  (a)  December  31,  1998  and (b) the settlement date of a
securitization  by Dynex of any finance contracts originated by the Company.  At
the  end  of  the  Interim  Period,  the Advance Rate reverted to 104% and Dynex
agreed  to  advance  the Company an additional amount equal to 16% of the unpaid
principal  balance  of  finance  contracts  financed by Dynex during the Interim
Period, less any amounts that otherwise would have been paid as principal on the
Notes  (as  defined  below)  during  such  period.  Advances  under  the  Credit
Agreement  are  limited  to  $25  million  per  month  after June 1998 until the
commitment termination date.  Under the modified terms of the Funding Agreement,
the commitment terminates on July 31, 1999 (provided that 90 days' prior written
notice  from Dynex is given), or if such notice is not given, July 31, 2000.  At
the  Company's  option  the  commitment  termination  date  can  be  extended an
additional  four  months  to  November  30,  1999  (provided that 90 days' prior
written  notice  from  Dynex is given), or if such notice is not given, November
30,  2000.  Advances  under  the  Credit  Agreement are evidenced by Class A and
Class  B  Notes (collectively, the "Notes") issued by Master Funding V to Dynex.
The  Class A Notes are issued in a principal amount equal to 94.0% of the unpaid
principal balance of the finance contracts (88.0% for advances funded during the
Interim  Period)  and bear interest at a rate equal to 190 basis points over the
corporate  bond  equivalent yield on the three-year Treasury note on the closing
date  for  each  such  advance  (equal to an average of 7.02% as of December 31,
1998);  provided  however,  that during the Interim Period, the interest rate on
the  Company's  Class  A 
                                    -- 12 --
<PAGE>
Notes  equaled  one-month  LIBOR  plus 1.50%.  The Class B Notes are issued in a
principal  amount  equal to 10.0% of the unpaid principal balance of the finance
contracts (0.0% for advances funded during the Interim Period) and bear interest
at  a  rate equal to 16% per annum.  The Company retains a subordinated interest
in  the  pooled  finance  contracts.  Transfers  of  finance contracts to Master
Funding  V  have  been  recognized as sales under SFAS No. 125.  At December 31,
1998, advances under the Dynex Credit Agreement totaled $155 million. During the
first  week of February, 1999, Dynex' management informed the Company that Dynex
was  refusing  to  make  additional  fundings  of finance contracts. See "Recent
Developments"  and  "Legal  Proceedings".

     At  December  31,  1998,  the Company had no outstanding balance on a $10.0
million  revolving credit facility (the "Sentry Facility") with Sentry Financial
Corporation  ("Sentry"),  which  expires on December 31, 2000. The proceeds from
borrowings  under  the Sentry Facility are used to acquire finance contracts, to
pay  applicable  credit  default  insurance  premiums  and to make deposits to a
reserve  account  with Sentry. The Company pays a utilization fee of up to 0.21%
per  month  on  the  average  outstanding balance under the Sentry Facility. The
Sentry  Facility also requires the Company to pay up to 0.62% per quarter on the
average  unused  balance. Interest is payable monthly and accrues at a per annum
rate  of  prime plus 1.75%.  The Sentry Facility contains certain conditions and
imposes  certain  requirements, including, among other things, minimum net worth
and  cash  and  cash  equivalent  balances  in  the reserve accounts. The Sentry
Facility was amended in May 1998 to add additional representations, covenants, a
general  release  of Sentry, the guarantee of William O. Winsauer, and the right
of  Sentry  to refuse future advances at its sole discretion.  Management has no
current  plans  to  request  an  advance  under  the  Sentry  Facility.

     The  Company's  ability to obtain warehouse facilities or similar financing
will  depend  on, among other things, the willingness of financial organizations
to participate in funding subprime finance contracts and the Company's financial
condition  and results of operations. The Company's growth is dependent upon its
ability  to  obtain  sufficient  financing under warehouse credit facilities, at
rates and upon terms acceptable to the Company. See "Management's Discussion and
Analysis  of Financial Condition and Results of Operations-Liquidity and Capital
Resources".

     Securitization  Program.  The  periodic securitization of finance contracts
has  been an integral part of the Company's business. Securitizations enable the
Company  to monetize its assets and redeploy its capital resources and warehouse
credit facilities for the purchase of additional finance contracts. To date, the
Company  has  completed  8  securitizations  and  the  sales  to Dynex involving
approximately  $360  million in aggregate principal amount of finance contracts.

     In  its  securitization transactions through December 31, 1996, the Company
sold  pools  of  finance  contracts  to a special purpose subsidiary, which then
assigned  the  finance  contracts  to  a  trust in exchange for cash and certain
retained  beneficial  interests  in  the  trust. The trust issued two classes of
fixed  income  investor  certificates:  Class  A Certificates which were sold to
investors,  generally at par with a fixed coupon, and subordinated excess spread
certificates  (representing  a  senior interest in excess spread cash flows from
the  finance  contracts)  which  were  retained  by the Company's securitization
subsidiary  and  which  collateralize  borrowings  on  a non-recourse basis. The
Company  also  funded a cash reserve account that provides credit support to the
Class A Certificates. The Company's securitization subsidiaries also retained an
interest  in  the  trust  that  is  subordinate  to the interest of the investor
certificate  holders.  The retained interests entitle the Company to receive the
future  excess  spread  cash  flows  from  the trust after payment to investors,
absorption  of  losses,  if  any,  that  arise  from defaults on the transferred
finance  contracts  and  payment  of  the  other expenses and obligations of the
trust. In accounting for its securitization transactions after December 31, 1996
the  Company  followed  the provisions of SFAS 125. In these securitizations the
Company  sold  pools of finance contracts to a special purpose subsidiary, which
then issued notes under a trust indenture secured by such finance contracts. The
special  purpose  corporations  may  issue  multiple  classes  of secured notes,
including  subordinated  excess  spread  notes.  The  Company also funded a cash
reserve  account that provides credit support to the senior notes. The Company's
securitization  subsidiaries  also  have  retained  an  interest  in the finance
contracts  that is subordinate to the interest of the note holders. The retained
interests  entitle  the  Company  to receive the future excess spread cash flows
from  the trust estate after payment to investors, absorption of losses, if any,
that arise from defaults on the transferred finance contracts and payment of the
other  expenses  and  obligations  of  the  trust  estate.

                                    -- 13 --
<PAGE>

     Securitization  transactions  impact the Company's liquidity in two primary
ways.  First,  the  application  of  proceeds  toward payment of the outstanding
advances on warehouse credit facilities makes additional borrowing available, to
the  extent  of  such  proceeds,  under  those facilities for the acquisition of
additional  finance  contracts.  Second,  additional working capital is obtained
through  the  Company's  practice  of  borrowing,  through  the  issuance  of
non-recourse  debt,  against  the  value  of the senior interest in the retained
excess  spread.  If  the  structure of the securitizations was changed, it could
impact  the  Company's ability to generate liquidity. See "Recent Developments".

     Upon  each  securitization,  the  Company  recognizes  the  sale of finance
contracts  and  records  a  non-cash  gain or loss in an amount which takes into
account  the  amounts  expected  to  be  received  as  a  result of its retained
interests.  See "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations  -  Revenues  -  Gain  on Sale of Finance Contracts." At
December  31,  1998,  the  Company  held retained interest in securitizations of
$13,873,351,  a  portion  of which had been pledged to secure non-recourse notes
payable  of  $3,185,050.

     If  the  Company  were  unable to securitize and/or sell its contracts in a
financial  reporting  period,  the  Company would incur a significant decline in
total  revenues  and net income or report a loss for such period. If the Company
were  unable  to  securitize  its  contracts  and did not have sufficient credit
available,  either  under its warehouse credit facilities or from other sources,
the  Company  would have to sell portions of its portfolio directly to investors
or  curtail  its  finance  contract  acquisition  activities.  See  "Recent
Developments"  and  "Management's Discussion and Analysis of Financial Condition
and  Results  of  Operations  -  Liquidity  and  Capital  Resources".

     The  securitization  trust  agreements  and the servicing agreement contain
certain  events  of  administrator termination, the occurrence of which entitles
the  trustee  to  terminate  the  Company's right to act as collection agent and
administrator.  Events  of  administrator  termination  typically  include:  (i)
defaults  in  payment  obligations  under  the trust agreements; (ii) unremedied
defaults  in  the  performance  of  certain  terms  or covenants under the trust
agreements, the servicing agreements or related documents; (iii) the institution
of  certain  bankruptcy  or  liquidation  proceedings  against the Company; (iv)
material  breaches  by  the Company of representations and warranties made by it
under  the servicing agreements and the sale agreements pursuant to which it has
sold  the  securitized  finance contracts; (v) the occurrence of a trigger event
whereby  the  ratio of delinquent finance contracts to total securitized finance
contracts for each transaction exceeds the percentage set forth in the servicing
agreements;  or  (vi)  any  of  the  rating  agencies  rating the securitization
transactions determines that the Company's serving as collection agent under the
related  servicing  agreement  would  prevent  such  agency from maintaining the
required  ratings  on  such  transactions,  or would result in such transactions
being  placed  on  negative  review  suspension  or  downgrade.

     The  trust agreements contain amortization events, the occurrence of any of
which  may  affect  the  Company's  rights to receive payments in respect of the
future  excess  spread  cash  flows  otherwise payable to it until principal and
interest payments due the holders of all investor certificates are paid in full.
Such  amortization  events  include:

     (i)  defaults in certain payments or repurchase obligations under the trust
agreements;  (ii)  unremedied  defaults  in  the performance of any covenants or
terms  of  the  trust  agreements  by  a  securitization  subsidiary;  (iii) the
occurrence  of  certain  bankruptcy  or  insolvency  events  of a securitization
subsidiary;  (iv)  unremedied material breaches of representations or warranties
of  a  securitization  subsidiary;  (v)  occurrence of an event of administrator
termination;  (vi)  failure  of  a securitization subsidiary to transfer certain
required  amounts  of  unpaid  principal  balance  of  finance contracts to each
securitization  trust  or  to  retain  the resulting shortfall in the collection
accounts; (vii) failure of any transfer under the trust agreements to create, or
failure  of  any  investor certificates to evidence, a valid and perfected first
priority  undivided  ownership  or

                                    -- 14 --
<PAGE>
security  interest  in  the  pool  of  securitized finance contracts and related
collateral;  (viii)  failure of the Company to own, directly or indirectly, 100%
of the outstanding shares of common stock of any securitization subsidiary; (ix)
entry  of  unpaid  and  unstayed  judgments aggregating in excess of $25,000 are
entered against any securitization subsidiary; or (x) occurrence of a "change in
control"  with  respect  to  the  Company.


COMPETITION

     The  sub-prime  credit  market  is  highly  fragmented,  consisting of many
national,  regional and local competitors, and is characterized by relative ease
of  entry  and  the recent arrival of a number of well capitalized publicly-held
competitors.  Existing  and  potential  competitors  include  well-established
financial institutions, such as banks, savings and loan associations, small loan
companies,  industrial  thrifts, leasing companies and captive finance companies
owned  by  automobile  manufacturers  and  others.  Many  of  these  financial
organizations  do  not  consistently  solicit  business  in the sub-prime credit
market.  The  Company  believes  that  captive finance companies generally focus
their  marketing  efforts  on  this  market  only  when inventory control and/or
production  scheduling requirements of their parent organizations dictate a need
to  enhance  sales  volumes  and  exit  the  market  once such sales volumes are
satisfied.  The  Company  also  believes that increased regulatory oversight and
capital requirements imposed by market conditions and governmental agencies have
limited  the  activities  of many banks and savings and loan associations in the
sub-prime  credit  market. In many cases, those organizations electing to remain
in the automobile finance business have migrated toward higher quality customers
to  allow  reductions  in  their  overhead  cost  structures.

     As  a  result, the sub-prime credit market is primarily serviced by smaller
finance organizations that solicit business when and to the extent their capital
resources  permit.  The  Company  believes no one of its competitors or group of
competitors  has  a  dominant  presence in the market. The Company's strategy is
designed to capitalize on the market's relative lack of major national financing
sources.  Nonetheless,  several  of  these  competitors  have  greater financial
resources  than  the  Company  and may have a significantly lower cost of funds.
Many  of these competitors also have long-standing relationships with automobile
dealerships  and  may  offer  dealerships  or  their  customers  other  forms of
financing  or  services  not  provided  by the Company. The Company's ability to
compete successfully depends largely upon its relationships with dealerships and
the  willingness  of  dealerships to offer finance contracts to the Company that
meet  the  Company's  underwriting  criteria. There can be no assurance that the
Company  will  be  able  to continue successfully in the markets it serves.  See
"Recent  Developments".


REGULATION

     The Company's business is subject to regulation and licensing under various
federal,  state  and local statues and regulations. As of December 31, 1998, the
Company  was  licensed to conduct business operations with dealers located in 40
states,  and,  accordingly,  the  laws and regulations of such states govern the
Company's  operations.  Most  states  where  the  Company operates (i) limit the
interest  rates,  fees  and  other  charges that may be imposed by, or prescribe
certain  other  terms  of,  the finance contracts that the Company purchases and
(ii)  define the Company's rights to repossess and sell collateral. In addition,
the  Company  is  required  to  be licensed or registered to conduct its finance
operations  in  certain states in which the Company purchases finance contracts.
As  the Company expands its operations into other states, it will be required to
comply  with  the  laws  of  such  states.

     Numerous federal and state consumer protection laws and related regulations
impose  substantive  disclosure requirements upon lenders and servicers involved
in  automobile  financing.  Some of the federal laws and regulations include the
Truth-in-Lending  Act,  the  Equal  Credit  Opportunity  Act,  the Federal Trade
Commission  Act, the Fair Credit Reporting Act, the Fair Credit Billing Act, the
Fair  Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal
Reserve  Board's Regulations B and Z and the Soldiers' and Sailors' Civil Relief
Act.

                                    -- 15 --
<PAGE>

     In  addition,  the  Federal  Trade  Commission  ("FTC")  has  adopted  a
holder-in-due-course  rule  which  has  the  effect  of  subjecting persons that
finance  consumer  credit  transactions  (and  certain related lenders and their
assignees)  to  all claims and defenses which the purchaser could assert against
the  seller  of  the  goods  and  services.  With  respect  to  used automobiles
specifically,  the FTC's Rule on Sale of Used Vehicles requires that all sellers
of used automobiles prepare, complete and display a Buyer's Guide which explains
the  warranty  coverage  for such automobiles. The Credit Practices Rules of the
FTC  impose  additional  restrictions  on  sales  contract provisions and credit
practices.

     The  Company  believes  that  it  is  in  substantial  compliance  with all
applicable  material  laws  and  regulations.  Adverse  changes  in  the laws or
regulations to which the Company's business is subject, or in the interpretation
thereof,  could  have  a  material  adverse effect on the Company's business. In
addition,  due  to  the  consumer-oriented  nature  of the industry in which the
Company  operates  and  the unclear application of various truth-in-lending laws
and  regulations  to  certain  products  offered  by  companies in the industry,
industry  participants are sometimes named as defendants in litigation involving
alleged  violations  of federal and state consumer lending or other similar laws
and  regulations.  A  significant  judgment  against  the  Company or within the
industry  in connection with any litigation could have a material adverse effect
on  the  Company's  financial  condition  and  results  of  operations.

     In the event of default by a borrower under a finance contract, the Company
is  entitled  to  exercise  the  remedies  of  a secured party under the Uniform
Commercial  Code  ("UCC"). The UCC remedies of a secured party include the right
to  repossession by self-help means, unless such means would constitute a breach
of  the  peace.  Unless the borrower voluntarily surrenders a vehicle, self-help
repossession  by  an  independent  repossession  agent engaged by the Company is
usually employed by the Company when a borrower defaults. Self-help repossession
is  accomplished by retaking possession of the vehicle. If a breach of the peace
is  likely  to  occur,  or if applicable state law so requires, the Company must
obtain  a court order from the appropriate state court and repossess the vehicle
in  accordance  with  that  order.

     In most jurisdictions, the UCC and other state laws require a secured party
to  provide an obligor with reasonable notice of the date, time and place of any
public  sale or the date after which any private sale of collateral may be held.
Unless  the  obligor  waives  his  rights  after  default,  the  obligor in most
circumstances  has  a right to redeem the collateral prior to actual sale (i) by
paying  the  secured  party  all  unpaid  installments  on  the obligation, plus
reasonable  expenses  for repossessing, holding and preparing the collateral for
disposition  and  arranging for its sale, plus in some jurisdictions, reasonable
attorneys'  fees  or  (ii)  in some states, by paying the secured party past-due
installments.  Repossessed  vehicles are generally resold by the Company through
wholesale  auctions,  which  are  attended  principally  by  dealers.


EMPLOYEES

     As of December 31, 1998, the Company employed 227 persons, none of whom was
covered  by  a  collective  bargaining  agreement. The Company believes that its
relationship  with  its  employees  is  satisfactory.



ITEM  2.     PROPERTIES


PROPERTIES  AND  FACILITIES

     The  Company has leased approximately 40,530 square feet of office space at
a  monthly rent of $46,863 plus operating expense of $28,100 for a term of seven
years  following  the  initial  commencement date on June 1, 1998. The Company's
headquarters contain the Company's executive offices as well as those related to
automobile  finance  contract  acquisition.  The  Company  does not maintain any
regional  office  facilities,  although  its  securitization  subsidiaries  are
incorporated  and  maintain  an  office  in  Nevada.

                                    -- 16 --
<PAGE>
ITEM  3.     LEGAL  PROCEEDINGS

     In the normal course of its business, the Company is from time to time made
a  party  to  litigation  involving  consumer-law claims. These claims typically
allege  improprieties on the part of the originating dealer and name the Company
and/or  its  assignees  as subsequent holders of the finance contracts. To date,
none  of  these actions have resulted in the payment of damages or any judgments
therefor,  by  the Company or its assignees, nor have any actions been certified
as  eligible  for  class-action  status.

     On  February 8, 1999, the Company, AutoBond Master Funding Corporation V, a
wholly-owned  subsidiary of the Company ("Master Funding"), William O. Winsauer,
the  Chairman  and  Chief  Executive Officer of the Company, John S. Winsauer, a
Director  and  the Secretary of the Company, and Adrian Katz, the Vice-Chairman,
Chief  Financial  Officer  and  Chief  Operating  Officer  of  the  Company
(collectively,  the  "Plaintiffs")  commenced an action in the District Court of
Travis  County,  Texas  (250th  Judicial District) against Dynex and James Dolph
(collectively,  the "Defendants"). This action is hereinafter referred to as the
"Texas  Action". The Company and the other Plaintiffs assert in the Texas Action
that Dynex breached the terms of the Credit Agreement (the "Credit  Agreement"),
dated  June  9,  1998,  by and among the Company, Master Funding and Dynex. Such
breaches  include chronic delays and shortfalls in funding the advances required
under  the  Credit  Agreement  and  ultimately  the refusal by Dynex to fund any
further  advances  under the Credit Agreement. Plaintiffs also allege that Dynex
and Mr. Dolph conspired to misrepresent and mischaracterize the Company's credit
underwriting  criteria  and its compliance with such criteria with the intention
of  interfering  with  and  causing  actual  damage  to  the Company's business,
prospective  business  and  contracts. The Plaintiffs assert that Dynex' funding
delays  and  ultimate  breach of the Credit Agreement were intended to force the
Plaintiffs  to  renegotiate the terms of their various agreements with Dynex and
related  entities.  Specifically,  the  Plaintiffs assert that Dynex intended to
force  the  Company to accept something less than Dynex' full performance of its
obligations  under  the  Credit  Agreement. Further, Dynex intended to force the
controlling  shareholders  of  the  Company  to agree to sell their stock in the
Company  to  Dynex or an affiliate at a share price substantially lower than the
$6.00  per share price specified in the Stock Option Agreement, dated as of June
9,  1998,  by and among Messrs. William O. Winsauer, John S. Winsauer and Adrian
Katz  (collectively,  the  "Shareholders") and Dynex Holding, Inc. Plaintiffs in
the  Texas  Action request declaratory judgement that (a) Dynex has breached and
is  in  breach  of its various agreements and contracts with the Plaintiffs, (b)
Plaintiffs  have  not  and  are  not  in  breach of their various agreements and
contracts  with  Defendants,  (c)  neither  the  Company  nor Master Funding has
substantially  or materially violated or breached any representation or warranty
made to Dynex, including but not limited to the representation and warranty that
all  or  substantially  all  finance  contracts  funded or to be funded by Dynex
comply  in  full with, and have been acquired by the Company in accordance with,
the Company's customary underwriting guidelines and procedures; and (d) Dynex is
obligated  to  fund the Company in a prompt and timely manner as required by the
parties'  various  agreements.  In  addition  to  actual, punitive and exemplary
damages,  the  Plaintiffs  also  seek injunctive relief compelling Dynex to fund
immediately  all  advances  due  to  the  Company  under  the  Credit Agreement.

     On March 1, 1999, the Company and the other Plaintiffs filed an application
in the Texas Action for a temporary injunction joining Dynex (a) from continuing
to  suspend  or  withhold  funding  pursuant  to  the Credit Agreement, (b) from
removing  or  attempting  to remove the Company as servicer, and (c) from making
any  further  false  or defamatory public statements regarding the Plaintiffs. A
hearing  is scheduled for mid-April,1999 to consider this application. Dynex has
yet  to  file  any  responsive  pleadings  in  the  Texas  Action.

     On  February  9, 1999, Dynex commenced an action against the Company in the
United  States  District  Court  for  the Eastern District of Virginia (Richmond
District)  (the  "Virginia Action") seeking declaratory relief that Dynex is (a)
not  obligated  to  advance  funds  to Master Funding under the Credit Agreement
because  the  conditions  to  funding set forth in the Credit Agreement have not
been  met,  and (b) entitled to access to all books, records and other documents
of  Master  Funding,  including  all finance contract files. Specifically, Dynex
alleges  that  as  a  result of a partial inspection of certain finance contract
files  by  Mr.  Dolph  and  Virgil  Baker  &  Associates  in January 1999, Dynex
concluded  that  a  significant  number  of  such  contracts  contained material
deviations  from  the  applicable  credit  criteria  and procedures, an apparent
breach of the Credit Agreement. Dynex also alleges that on February 8, 1999, the
Company refused to permit Mr. Dolph and representatives from Dynex access to the
books,  records  and finance contract files of the Company. Dynex concludes that
as  a  result  of such alleged breaches, it is not obligated to provide advances
under  the  Credit Agreement. The Company, Messrs. William O. Winsauer, John S. 
                                    -- 17 --
<PAGE>
Winsauer  and  Adrian  Katz  filed  a responsive pleading on March 25, 1999. The
Company intends to seek dismissal of the Virginia Action on the basis that these
matters  are  being  litigated  in  the  previously  filed  Texas  Action.

     On  February  22,  1999,  the same day that Dynex notified the Company of a
purported  servicing termination, Dynex filed another action against the Company
in  the  United States District Court for the Southern District of New York (the
"New  York  Action"),  seeking  damages  and injunctive relief for the Company's
alleged  breaches  under  the  servicing  agreement among the Company, Dynex and
Master  Funding. The Company was not notified of the New York Action until March
1,  1999,  when  Dynex sought a temporary restraining order against the Company.
After  hearing  argument  from counsel for both sides, the temporary restraining
order  was denied. On March 23, 1999, the court issued an order transferring the
action  to the federal district court in the Eastern District of Virginia. To be
clear,  notwithstanding Dynex' assertion in past statements, the Company remains
the  servicer,  is  performing  in its capacity as servicer, and has not hit any
triggering  event  thresholds,  as  defined  in  the  servicing  agreement.

     In March 1998, after Progressive Northern Insurance purported to cancel the
VSI  and  deficiency  balance insurance policies issued in favor of the Company,
the  Company  sued  Progressive, its affiliate United Financial Casualty Co. and
their  agent  in  Texas,  Technical  Risks, Inc. in the district court of Harris
County,  Texas.  The  action  seeks  declaratory relief confirming the Company's
interpretation  of  the  policies,  as  discussed  under  "Business  --  Recent
Developments",  as well as claims for damages based upon breach of contract, bad
faith  and  fraud.  The  Company  has  not yet received the defendants' answers.
Also  in  March  1998,  the Company commenced an action in Travis County, Texas,
against  Loan  Servicing  Enterprise,  alleging  LSE's contractual breach of its
servicing  obligations  on  a  continuing  basis.  LSE  has  commenced an action
against the Company in Illinois State court seeking recovery from the Company of
putative termination fees in connection with LSE's termination as servicer.  The
Company  expects  the  two  actions  to  be  consolidated.

     The  Company's carrier for the credit deficiency insurance obtained through
1996,  Interstate  Fire & Casualty Co. ("Interstate") determined in late 1996 to
no  longer  offer  such  coverage  to  the  auto finance industry, including the
Company.  In  connection  with  Interstate's  attempt  to no longer offer credit
deficiency  coverage  for  contracts originated after December 1996, the Company
commenced an action in the United States District Court for the Western District
of  Texas,  Austin Division, seeking a declaratory judgment that (a) the Company
was  entitled  to  180 days' prior notice of cancellation and (b) Interstate was
not  entitled  to  raise  premiums  on  finance contracts for which coverage was
obtained  prior  to  the  effectiveness of such cancellation, as well as seeking
damages  for  Interstate's  alleged  deficiencies  in  paying  claims.  Prior to
receiving  the  Company's  complaint in the Texas action, Interstate commenced a
similar  action  for  declaratory  relief  in  the  United  States Court for the
Northern  District  of  Illinois.  While  settlement  discussions  are  ongoing,
Interstate  and  the  Company  have to date acted on the basis of a cancellation
date  of May 12, 1997 (i.e., no finance contracts presented after that date will
be  eligible for credit deficiency coverage by Interstate, although all existing
contracts  for which coverage was obtained will continue to have the benefits of
such  coverage),  no  additional  premiums having been demanded or paid, and the
claims-paying  process having been streamlined. In particular, in order to speed
the  claims-paying  process,  Interstate has paid lump sums to the Company as an
estimate  of  claims  payable  prior  to  completion  of processing. Pending the
Company's determination of the appropriate beneficiary for such claims payments,
the  Company  has  deposited  and  will  continue  to  deposit such funds into a
segregated  account.

     In February 1997 the Company discovered certain breaches of representations
and  warranties by certain dealers with respect to finance contracts sold into a
securitization.  The Company honored its obligations to the securitization trust
and  repurchased  finance contracts totaling $619,520 from that trust during the
three  months  ended  March  31,  1997.  Of  the  total  amount of these finance
contracts,  $190,320  were  purchased  from one dealer. Although the Company has
requested  that  this  dealer repurchase such contracts, the dealer has refused.
After  such  dealer's  refusal to repurchase, the Company commenced an action in
the  157th  Judicial  District  Court  for  Harris County, Texas against Charlie
Thomas Ford, Inc. to compel such repurchase. On favorable terms, the Company has
reached  a  settlement  agreement with Charlie Thomas Ford, Inc. The Company has
received  funds  related  to  such  settlement.

     On  March  31,  1999,  a  suit  naming the Company and William O. Winsauer,
Adrian  Katz  and  John  S.  Winsauer  (in  their  capacities  as  controlling
shareholders  of  the Company) as defendants (the "Defendants") was filed in the
United States District Court for the Western District of Texas (Austin Division)
by  Bruce  Willis  (the  "Plaintiff"),  a  holder  of the Company's 15% Series A
Cumulative  Preferred 
                                    -- 18 --
<PAGE>
Stock.  The  suit  alleges,  among  other  things,  that the Defendants violated
Section  10(b)  of  the  Securities  and  Exchange  Act  of 1934 (and Rule 10b-5
promulgated  thereunder)  in  failing  to  disclose  adequately  and  in causing
misstatements  concerning  the  nature  and condition of the Company's financing
sources.  The  suit  also  alleges that such actions constituted statutory fraud
under  the  Texas  Business  Corporation  Act,  common  law  fraud and negligent
misrepresentation.  The  Plaintiff  seeks  class  action  certification.  The
Plaintiff  also  seeks,  among other things, actual, special, consequential, and
exemplary  damages in an unspecified sum, as well as costs and expenses incurred
in  connection  with pursuing the action against the Company.  While the Company
has yet to file a responsive pleading, the Company nevertheless believes that it
has  consistently  and  accurately  informed  the  public  of  its  business and
operations,  including  the  viability  of  its  funding  sources,  and,  as  a
consequence  believes  the  suit  to  be without merit and intends to vigorously
defend  against  this  action.



ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
Not  Applicable.

                                    -- 19 --
<PAGE>


                                    --------
                                    PART  II
                                    --------


ITEM  5.     MARKET  FOR  REGISTRANTS'  COMMON  EQUITY  AND  RELATED STOCKHOLDER
MATTERS

     On  November  8,  1996, the Company's Common Stock was listed for quotation
and  began trading on NASDAQ National Market ("NASDAQ") under the symbol "ABND".
Prior  to  such date, the Company's stock was closely held and not traded on any
regional  or national exchange. On February 27, 1998, the Company's common stock
listing  was  transferred to the American Stock Exchange and began trading under
the  symbol  "ABD".

<TABLE>
<CAPTION>

HIGH  AND  LOW  SALE  PRICES  BY  PERIOD

<S>                 <C>       <C>
QUARTER ENDED. . .  HIGH      LOW
------------------  --------  --------
December 31, 1996.  $     11  $  9 1/4

March 31, 1997 . .  $ 10 3/8  $      4
June 30, 1997. . .  $  4 3/4  $  2 1/4
September 30, 1997  $  5 1/8  $3 13/16
December 31, 1997.  $  4 1/2  $  2 5/8

March 31, 1998 . .  $  8 7/8  $2 13/16
June 30, 1998. . .  $  8 1/4  $  5 1/8
September 30, 1998  $7 15/16  $  5 3/8
December 31, 1998.  $  5 3/8  $      3
</TABLE>



     The  transfer  agent  and  registrar for the Common Stock is American Stock
Transfer & Trust Company. As of December 31, 1998, the Company had approximately
16 stockholders of record, exclusive of holders who own their shares in "street"
or  nominee  names.

     The  Company  has  not  paid  and  does  not  presently  intend to pay cash
dividends on its common stock. The Company anticipates that its earnings for the
foreseeable  future  will  be  retained  for  use  in operation and expansion of
business.  Payment  of cash dividends, if any, in the future will be at the sole
discretion  of  the  Company's  Board  of  Directors  and  will  depend upon the
Company's  financial  condition,  earnings,  current  and  anticipated  capital
requirements,  terms  of  indebtedness  and other factors deemed relevant by the
Company's  Board  of  Directors.  See  "Recent  Developments" and "Liquidity and
Capital  Resources".

                                    -- 20 --
<PAGE>


ITEM  6.     SELECTED  FINANCIAL  DATA

     The following table sets forth selected consolidated financial data for the
Company  and  its  subsidiaries for  the periods and at the dates indicated. The
selected  financial  data  were  derived  from  the  financial  statements  and
accounting  records  of  the Company. The data presented below should be read in
conjunction  with the consolidated financial statements, related notes and other
financial  information  included  herein.  (Dollars in thousands, except for per
share  amounts.)
<TABLE>
<CAPTION>


                                                      Year Ended December 31,

                                                           1994(2)       1995         1996         1997         1998
                                                         -----------  -----------  -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>          <C>          <C>
Statement of operations data:
Interest income . . . . . . . . . . . . . . . . . . . .  $       38   $    2,881   $    2,520   $    4,119   $    1,499 
Gain on sale of finance contracts . . . . . . . . . . .           -        4,086       12,820       18,667       17,985 
Servicing fee income. . . . . . . . . . . . . . . . . .           -            -          658        1,131        3,222 
Other income (loss) . . . . . . . . . . . . . . . . . .           -            -          388         (173)         348 
                                                         -----------  -----------  -----------  -----------  -----------
Total revenues. . . . . . . . . . . . . . . . . . . . .          38        6,967       16,386       23,743   $   23,054 
                                                         -----------  -----------  -----------  -----------  -----------
Provision for credit losses . . . . . . . . . . . . . .          45           49          412          613          100 
Interest expense. . . . . . . . . . . . . . . . . . . .          19        2,100        2,383        3,880        3,117 
Salaries and benefits . . . . . . . . . . . . . . . . .         226        1,320        4,529        7,357       10,472 
General and administrative. . . . . . . . . . . . . . .         245        1,463        2,331        6,075        6,782 
Impairment of retained interest in securitizations. . .           -            -        1,312        9,932 
Other operating expenses. . . . . . . . . . . . . . . .          48          963        1,120        2,005        3,422 
                                                         -----------  -----------  -----------  -----------  -----------
Total expenses. . . . . . . . . . . . . . . . . . . . .         543        5,895       10,775       21,242       33,825 
                                                         -----------  -----------  -----------  -----------  -----------
Income (loss) before taxes and extraordinary loss . . .        (545)       1,072        5,611        2,501      (10,771)
Provision for income taxes. . . . . . . . . . . . . . .           -          199        1,926          888       (3,626)
Extraordinary loss, net of tax benefit. . . . . . . . .           -            -         (100)           -            - 
                                                         -----------  -----------  -----------  -----------  -----------
Net income (loss) . . . . . . . . . . . . . . . . . . .  $     (545)  $      873   $    3,585   $    1,613       (7,145)
                                                         -----------  -----------  -----------  -----------  -----------
Net income (loss) attributable to common shareholders .        (545)         873        3,585        1,613       (8,584)
Earnings per share before extraordinary item. . . . . .  $    (0.11)  $     0.17   $     0.64   $     0.25       ($1.31)
Earnings per share-diluted. . . . . . . . . . . . . . .  $    (0.11)  $     0.17   $     0.62   $     0.25       ($1.31)
Weighted average shares outstanding-diluted . . . . . .   5,118,753    5,190,159    5,809,157    6,965,877    6,531,311 
Cash flow data:
Cash provided by (used in) operating activities . . . .      (2,514)      (5,458)      (5,730)     (14,455)       4,721 
Cash provided by (used in) investing activities . . . .         (16)        (442)         421          513           80 
Cash provided by financing activities . . . . . . . . .       2,530        5,992        9,337        9,980          211
Balance sheet data:
Cash and cash equivalents . . . . . . . . . . . . . . .  $        -   $       93   $    4,121   $      159   $    5,171 
Restricted funds. . . . . . . . . . . . . . . . . . . .           -        1,683        2,982        6,904            - 
Finance contracts held for sale, net. . . . . . . . . .       2,361        3,355          228        1,366          867 
Retained interests in securitization. . . . . . . . . .           -        4,206       16,943       32,017       13,873 
Total assets. . . . . . . . . . . . . . . . . . . . . .       2,500       11,065       26,133       43,210       30,331 
Revolving credit agreement. . . . . . . . . . . . . . .       2,055        1,150            -        7,639            - 
Notes payable & non-recourse debt . . . . . . . . . . .           -        2,675       10,175        9,841       13,352 
Repurchase agreement. . . . . . . . . . . . . . . . . .           -        1,061            -            -            - 
Total debt. . . . . . . . . . . . . . . . . . . . . . .       2,055        4,886       10,175       17,480       13,352 
Shareholders' equity. . . . . . . . . . . . . . . . . .        (109)       3,026       12,142       15,348       15,552 

Asset quality data:
Delinquencies as a percentage of principal balance of
finance contract portfolio serviced (end of period) (1)
30-59 days past due . . . . . . . . . . . . . . . . . .           -         4.69%        7.55%       11.48%        9.81%
60+ days past due . . . . . . . . . . . . . . . . . . .           -         2.32%        4.63%        5.85%        3.75%

<FN>

1  Includes  the  Company's  entire finance contract portfolio of contracts held and contracts securitized. Excluded are
loans that are repossessed, with total loss insurance claim paid, charged-off, or identified to be repurchased by dealer
(or  seller).
2  The  Company  was  incorporated  on  June  15,  1993  and  commenced  operations  on  August  1994.
</TABLE>

                                    -- 21 --
<PAGE>

ITEM  7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS

     The following analysis of the financial condition and results of operations
of  the  Company  should  be  read  in  conjunction with the preceding "Selected
Financial  Data"  and  the Company's Consolidated Financial Statements and Notes
thereto  and  the other financial data included herein. Certain of the financial
information  set  forth  below  has  been  rounded  in  order  to  simplify  its
presentation. However, the ratios and percentages set forth below are calculated
using  the  detailed financial information contained in the Financial Statements
and  the  Notes  thereto, and the financial data included elsewhere in this Form
10-K.

     The  Company  is  a  specialty  consumer  finance  company  engaged  in
underwriting, acquiring, servicing and securitizing retail installment contracts
("finance  contracts") originated by franchised automobile dealers in connection
with  the  sale  of  used  and,  to  a  lesser  extent, new vehicles to selected
consumers  with  limited  access  to  traditional  sources of credit ("sub-prime
consumers").  Sub-prime  consumers generally are borrowers unable to qualify for
traditional  financing  due  to  one  or more of the following reasons: negative
credit  history  (which  may  include  late payments, charge-offs, bankruptcies,
repossessions or unpaid judgments); insufficient credit; employment or residence
histories;  or  high  debt-to-income  or  payment-to-income  ratios  (which  may
indicate  payment  or  economic  risk).

     The Company acquires finance contracts generally from franchised automobile
dealers, makes credit decisions using its own underwriting guidelines and credit
personnel  and  performs the collection function for finance contracts using its
own  collections  department.  The  Company also acquires finance contracts from
third  parties  other  than  dealers,  for  which  the Company reunderwrites and
collects  such  finance  contracts  in  accordance  with  the Company's standard
guidelines.  The  Company  securitizes  portfolios  of  these  retail automobile
installment  contracts to efficiently utilize limited capital to allow continued
growth and to achieve sufficient finance contract volume to allow profitability.
The  Company markets a single finance contract acquisition program to automobile
dealers,  which  adheres  to  consistent  underwriting  guidelines involving the
purchase  of  primarily  late-model  used  vehicles. The Company has experienced
significant  growth  in  its  finance  contract  portfolio  since  it  commenced
operations  in  August  1994.

     The  continued  acquisition and servicing of sub-prime finance contracts by
an  independent finance company under current market conditions is a capital and
labor intensive enterprise. Capital is needed to fund the acquisition of finance
contracts  and to effectively securitize them so that additional capital is made
available  for  acquisition activity. While a portion of the Company's financing
has  been  obtained  with  investment  grade  ratings at relatively low interest
rates, the remainder is difficult to obtain and requires the Company to pay high
coupons,  fees  and other issuance expenses, with a negative impact on earnings.
The underwriting and servicing of a growing sub-prime finance contract portfolio
requires  a  higher  level  of  experienced  personnel  than that required for a
portfolio  of  higher  credit-quality consumer loans. Accordingly, the Company's
growth  in  finance  contract  volume  since  inception  has corresponded with a
significant  increase  in  expenses  related  to  building  the  infrastructure
necessary  for  effective  underwriting  and  servicing.  Although the Company's
assumption  of  all  servicing  functions  in  late 1997 has increased servicing
income,  and  the Company began to realize overall improvements in net income as
the  growth in acquisition volume continued through January 1999, in view of the
Dynex situation and the high cost of capital, the Company does not expect to see
profitability  until  alternate  funding  is  obtained.



REVENUES
     The  Company's  primary  sources  of  revenues consist of three components:
interest  income,  gain  on  sale of finance contracts and servicing fee income.

     Interest  Income.  Interest  income  consists  of  the  sum  of two primary
components: (i) interest income earned on finance contracts held for sale by the
Company  and  (ii)  interest  income  earned  on  retained  interests  in
securitizations.  Other  factors  influencing  interest  income  during  a given
fiscal  period  include  (a) the annual percentage rate of the finance contracts
acquired,  (b) the aggregate principal balance of finance contracts acquired and
funded  through  the  Company's  warehouse  and other credit facilities prior to
securitization,  and  (c)  the  length  of time such contracts are funded by the
warehouse  and  other  credit  facilities.

                                    -- 22 --
<PAGE>

     Gain  on  Sale  of  Finance Contracts. The Company implemented Statement of
Financial  Accounting  Standards  No.  125  "Transfer and Servicing of Financial
Assets  and  Extinguishment  of  Liabilities"  ("SFAS No. 125") as of January 1,
1997. SFAS No. 125 provides new accounting and reporting standards for transfers
and  servicing  of  financial  assets  and  extinguishment  of liabilities. This
statement  also  provides  consistent  standards for distinguishing transfers of
financial  assets  that are sales from transfers that are secured borrowings and
requires that liabilities and derivatives incurred or obtained by transferors as
part  of a transfer of financial assets be initially measured at fair value. For
transfers  that  result in the recognition of a sale, SFAS No. 125 requires that
the newly created assets obtained and liabilities incurred by the transferors as
a  part  of  a transfer of financial assets be initially measured at fair value.
Interests  in  the  assets  that  are  retained  are  measured by allocating the
previous  carrying  amount  of  the  assets (e.g. finance contracts) between the
interests  sold  (e.g.  investor  certificates)  and interests retained based on
their  relative  fair  values at the date of the transfer. The amounts initially
assigned to these financial components is a determinant of the gain or loss from
a  securitization  transaction  under  SFAS  No.  125.

     The retained interests in securitizations available for sale are carried at
estimated  fair  value  with unrealized gains (losses) recorded in stockholders'
equity as part of accumulated other comprehensive income and those classified as
trading  are  carried  at  estimated  fair  value  with unrealized gain (losses)
recorded  currently  in  income.  The  fair  value  of the retained interests in
securitizations is determined by discounting expected cash flows at a rate based
on  assumptions  that  market  participants  would  use  for  similar  financial
instruments  subject  to prepayment, default, collateral value and interest rate
risks.  The  Company's  retained  interests  are  subordinated  to  other  trust
securities,  consequently  cash  flows are paid by the securitization trustee to
the  investor  security holders until such time as all accrued interest together
with  principal  have  been paid in full. Subsequently, all remaining cash flows
are  paid  to  the  Company.

     An  impairment  review  of  the  retained  interest  in  securitizations is
performed  quarterly by calculating the net present value of the expected future
excess  spread  cash  flows after giving effect to changes in assumptions due to
market  and  economic  changes  and  the  performance  of the loan pool to date.
Impairment  is  determined  on  a  disaggregated  basis consistent with the risk
characteristics  of  the underlying finance contracts as well as the performance
of  the  pool  to  date.  To  the  extent that the Company deems the asset to be
permanently  impaired,  the  Company  would record a charge against earnings and
write  down  the  asset  accordingly. The Company recorded a charge to income of
$9,932,169 during the year ended December 31, 1998 as a result of the impairment
review.  See  Notes  2  and  5  to  the  Consolidated  Financial  Statements.

     The  Company's  cost  basis  in  finance  contracts  sold  has  varied from
approximately  92% to 103% of the value of the principal balance of such finance
contracts. This portion of recognized gain on sale varies based on the Company's
cost  of insurance covering the finance contracts and the discount obtained upon
acquisition  of  the  finance  contracts.  Generally,  the  Company has acquired
finance contracts from dealers at a greater discount than with finance contracts
acquired  from  third parties. Additionally, costs of sale reduce the total gain
recognized.

     Further,  the retained interest component of recognized gain is affected by
various factors, including most significantly, the coupon on the senior investor
securities  and  the  age  of  the  finance contracts in the pool, as the excess
spread  cash  flow  from a pool of aged, as opposed to new, finance contracts is
less.  The  aging (capture of excess spread prior to securitization) necessarily
results  in  less  available  excess  spread  cash flow from the securitization.

     The  gain  on  sale  of  finance  contracts  is  affected  by the aggregate
principal  balance  of  contracts  securitized  and the gross interest spread on
those  contracts.  The following table illustrates the gross interest spread for
each  of  the  Company's  securitizations  through  December 31, 1998(dollars in
thousands):
                                    -- 23 --
<PAGE>


<TABLE>
<CAPTION>


                    Finance Contracts(1)               Senior Investor Certificates
                    --------------------               ----------------------------

                                Principal    Weighted      Balance
                                  Amount      Average   December 31,              Gross
Securitization                 Securitized     Rate         1998        Rate    Spread(2)
-----------------------------  ------------  ---------  -------------  -------  ---------
<S>                            <C>           <C>        <C>            <C>      <C>
AutoBond Receivables
Trust 1995-A. . . . . . . . .  $ 26,261,009      18.9%  $   6,019,329     7.2%      11.7%

Trust 1996-A. . . . . . . . .    16,563,366      19.7%      5,416,372     7.2%      12.5%

Trust 1996-B. . . . . . . . .    17,832,885      19.7%      6,671,800     7.7%      12.0%

Trust 1996-C. . . . . . . . .    22,296,719      19.7%     10,436,867     7.5%      12.2%

Trust 1996-D. . . . . . . . .    25,000,000      19.5%     12,446,374     7.4%      12.1%

Trust 1997-A (4). . . . . . .    28,037,167      20.8%     13,862,448     7.8%      13.0%

Trust 1997-B. . . . . . . . .    34,725,196      19.9%     22,936,843     7.7%      12.2%

Trust 1997-C. . . . . . . . .    34,430,079      20.0%     24,455,075     7.6%      12.4%
AutoBond Master Funding
Corporation V Trust(Dynex)(3)   137,772,888      20.0%    110,049,311  7.4%(3)      12.6%
                               ------------             -------------                    
Total . . . . . . . . . . . .  $342,919,309             $ 212,294,419
                               ============             =============                    


<FN>

1  Refers  only  to  balances  on  senior  investor  certificates.
2  Difference  between  weighted  average  contract  rate  and  senior  certificate rate.
3  Includes  $26  million  of  finance contracts from securitizations previously retired
4  Weighted  average  of  senior  investor  coupon  rates
</TABLE>




     Servicing  Fee Income. The Company earns substantially all of its servicing
fee  income  on  the  contracts  it services on behalf of securitization trusts.
Servicing  fee  income consists of: (i) contractual administrative fees received
through  securitizations, equal to $7.00 per month per contract included in each
trust  (excluding  amounts paid to third-party servicers by the trust); and (ii)
contractual  servicing fees received through securitizations, equal to $8.00 per
month  per  contract  included  in  each  trust;  and (iii) fee income earned as
servicer for such items as late charges and documentation fees, which are earned
whether  or  not  a  securitization  has  occurred.



FINANCE  CONTRACT  ACQUISITION  ACTIVITY

     The  following  table  sets  forth  information about the Company's finance
contract  acquisition  activity  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                                         Year Ended December 31,

                                                      1997          1998
                                                  ------------  ------------
<S>                                               <C>           <C>
Number of finance contracts acquired . . . . . .        13,189        10,176
 Principal balance of finance contracts acquired  $148,931,331  $119,166,628
 Number of active dealerships 1. . . . . . . . .         1,060         1,064
 Number of enrolled dealerships. . . . . . . . .         1,621         2,254

<FN>

1  Dealers who have sold at least one finance contract to the Company during the
period.

</TABLE>


                                    -- 24 --
<PAGE>

RESULTS  OF  OPERATIONS

     Period-to-period  comparisons  of  operating results may not be meaningful,
and  results  of  operations  from prior periods may not be indicative of future
results.  The  following  discussion  and analysis should be read in conjunction
with  the  Company's  Consolidated  Financial  Statements and the Notes thereto.


Year  Ended  December  31,  1998  Compared  To  Year  Ended  December  31,  1997


Net  Income

     In  the  year ended December 31, 1998, net income decreased $8,757,476 to a
net loss of $7,144,423 from $1,613,053 for the year ended December 31, 1997. The
decrease  in  net  income  was  primarily  attributable  to  an  increase  in
infrastructure  costs to support higher anticipated finance contract acquisition
and  servicing  volumes,  impairment  charges  on  retained  interest  in
securitizations,  and  actual  decreases  in  acquisition  volume. The principal
balance  of  finance  contracts  acquired decreased due to the delay between the
expiration  of  the  Daiwa  warehouse  facility  on  March  31,  1998  and  the
implementation  of  the  Dynex funding agreement in June 1998. This delay forced
the  Company to slow its acquisition of finance contracts in the second quarter.
Third quarter acquisitions improved over the second quarter, but nonetheless had
not  yet  returned  to  earlier  levels.  Growth continued throughout the fourth
quarter  with  a finance contract origination volume of $48.1 million. Increased
hiring  of  qualified  personnel,  as they became available during the past year
added  to  the  growth  in  salary  and  benefit  expenses.



Total  Revenues

     Total  revenues  decreased  $688,883  to  $23,054,478  for  the  year ended
December  31,  1998  from  $23,743,361 for the year ended December 31, 1997. The
decrease was due primarily from the volume of finance activity for the first two
quarters.  Originations  and  sales  accelerated  in the later part of the third
quarter  and  continued  through  the  fourth  quarter.

     Interest Income. Interest income decreased $2,619,810 to $1,498,985 for the
year  ended  December  31,  1998 from $4,118,795 for the year ended December 31,
1997  due  to  the  timing  of finance contract acquisitions and the period held
before  securitization.

     Gain  on  Sale  of  Finance  Contracts.  The  Company realized gain on sale
totaling  $17,985,045  on  finance contracts carried at $111.17 million (16.10%)
during  the  year  ended  December  31,  1998. The Company realized gain on sale
totaling  $18,666,570  on  finance  contracts  carried at $136.4 million (13.7%)
during  the  year  ended  December  31, 1997. The increased profitability is the
result  of  the  arrangement with Dynex which provided higher cash proceeds upon
sale.

     Servicing  Fee  Income.  The Company reports servicing fee income only with
respect  to  finance contracts that are securitized. For the year ended December
31,  1998,  servicing  fee  income  was  $3,222,669,  consisting  of contractual
administrative  fees  and  servicer  fees.  Servicing  fee  income  increased by
$2,091,527  from  the  year  ended  December 31, 1997 as a result of the Company
assuming  servicer  functions  in  December  1997.

     Other  Income (Loss). For year ended December 31, 1998, other income (loss)
amounted  to $347,779, compared with a loss of  $173,146 for the comparable 1997
period.  The  increase  was  mainly attributable to recoveries on loans that had
previously  been  written-off.
                                    -- 25 --
<PAGE>

Total  Expenses

     Total expenses of the Company increased $12,583,132 to $33,825,270 for year
ended  December  31, 1998 from $21,242,138 for the year ended December 31, 1997,
due  primarily  to  impairment  of  retained  interest  in  securitizations  of
$9,932,169  for  the  year  ended  December  31,  1998,  as well as increases in
salaries and benefits and other expenses. The Company moved to larger facilities
in  June  1998  thereby  increasing  occupancy  costs.

     Provision  for  Credit  Losses.  Provision  for  credit  losses  on finance
contracts  decreased  $512,715  to $100,000 for the year ended December 31, 1998
from  $612,715 for the year ended December 31, 1997. The decrease was the result
of  a  reduction  in  the  number and amount of finance contracts held for sale.

     Interest Expense. Interest expense decreased $762,332 to $3,117,211 for the
year  ended  December  31,  1998 from $3,879,543 for the year ended December 31,
1997. The decrease resulted from a lower average balance outstanding relating to
revolving  credit  facilities.

     Salaries  and  Benefits.  Salaries  and  benefits  increased  $3,114,331 to
$10,471,615  for the year ended December 31, 1998 from $7,357,284 the year ended
December  31, 1997. This increase was due primarily to an increase in the number
of  the  Company's  employees  necessary  to  handle  the  increased  contract
acquisition  volume  and  the  servicing  and collection activities on a growing
portfolio of finance contracts. As of December 1, 1997 the Company completed the
transfer  of  certain  servicing  functions  from  LSE to in-house personnel and
equipment.

     General  and  Administrative  Expenses. General and administrative expenses
increased  $706,890  to  $6,782,015  for  the  year ended December 31, 1998 from
$6,075,125 the year ended December 31, 1997. In anticipation of expansion of its
operations  the  Company  relocated  its  offices  to  a  larger  facility.  The
associated  increased rent was the major reason for the increase. Rent increased
$401,130 to $647,255 for the year ended December 31, 1998 compared with $246,125
for  the  year  ended  December  31,  1997.

     Impairment  of  Retained  Interest  in  Securitizations.  The  Company
periodically reviews the fair value of the retained interest in securitizations.
The Company recorded a charge against earnings for impairment of these assets of
$9,932,169  for  the  year ended December 31, 1998. This impairment reflects the
revaluation  of  expected future cash flows to the Company from securitizations.
As  the  Company  assumed  all  servicing  functions, it accelerated the rate of
charge-offs  as  compared  with  previous periods, thereby allocating additional
cash collections and reserve account balances to paying down the senior investor
securities.  The effect of this was to stop payments of interest on subordinated
securities  issued  in  the  securitizations,  thereby  causing accretion in the
principal  balances of such securities, resulting in reduced residual cash flows
to  the  Company.  See Note 5 to the Notes to Consolidated Financial Statements.
See  "Legal  Proceedings".

     Other  Operating Expenses. Other operating expenses (consisting principally
of servicer fees, credit bureau reports, communications and insurance) increased
$1,417,023  to  $3,422,260  for the year ended December 31, 1998 from $2,005,237
for the year ended December 31, 1997.  This increase was due mainly to increases
in  finance  contract  acquisition  and  payment  of  insurance  premiums.


Year  Ended  December  31,  1997  Compared  To  Year  Ended  December  31,  1996

Net  Income

     In  the  year  ended  December 31, 1997, net income decreased $1,971,833 to
$1,613,053 from $3,584,886 for the year ended December 31, 1996. The decrease in
net  income was primarily attributable to an increase in infrastructure costs to
support  higher finance contract acquisition and servicing volume, as more fully
discussed  under  "Total  Expenses"  below.  The  principal  balance  of finance
contracts  acquired increased $62.4 million to $148.9 million for the year ended
December  31,  1997 from $86.5 million for the year ended December 31, 1996. Due
to weakened competitors, the Company more aggressively added qualified personnel
as  they became available in the year ended December 31, 1997, and this added to
the  growth  in  salary  and  benefit  expenses.

                                    -- 26 --
<PAGE>

Total  Revenues

     Total  revenues  increased  $7,356,821  to  $23,743,361  for the year ended
December  31,  1997 from $16,386,540 for the year ended December 31, 1996 due to
expansion  of  the  Company's  finance  contract  acquisition and securitization
activities.

     Interest Income. Interest income increased $1,599,183 to $4,118,795 for the
year  ended  December  31,  1997 from $2,519,612 for the year ended December 31,
1996  due  the  growth  and timing of finance contract acquisitions. The Company
acquired  finance  contracts  totaling  $148.9  million  during  the  year ended
December  31,  1997  compared  to  $86.5  million in the comparable 1996 period.
Accretion  on  retained  interest in securitizations increased $392,478 from the
respective  1996  period  to  $546,507  during the year ended December 31, 1997.

     Gain  on  Sale  of  Finance  Contracts.  The  Company realized gain on sale
totaling  $18,666,570  on  finance  contracts  carried at $136.4 million (13.7%)
during the year ended December 31, 1997. Gain on sale amounted to $12,820,700 on
finance  contracts  carried  at  $85.0  million  (15.1%)  in the comparable 1996
period.  Accordingly,  gain  on sale of finance contracts rose $5,845,870 during
the  year  ended  December  31,  1997  over  the  comparable  1996  period.

     Servicing  Fee  Income.  The Company reports servicing fee income only with
respect  to  finance contracts that are securitized. For the year ended December
31,  1997, servicing fee income was $1,131,142, primarily collection agent fees.
Servicing fee income increased by $473,192 from the year ended December 31, 1996
as  a  result  of increased securitization activity by the Company. The ratio of
servicing  fee  income  to  the  average  principal balance of finance contracts
outstanding  declined  from  1.0%  for  the  year ended December 31, 1996 to .7%
during  the  year  ended  December  31,  1997, as the Company waived $149,415 in
servicing  fees during the later period. The Company waived these servicing fees
to  enhance  the  liquidity of specific outstanding securitization trusts during
1997, increasing the rate of repayment of non-recourse notes. The result of such
waiver  is  the  deferral and subordination of the Company's ultimate receipt of
such  waived  fees.

     Other  Income (Loss). For year ended December 31, 1997, other income (loss)
amounted  to  ($173,146)  compared  with $388,278 for the comparable 1996 period



Total  Expenses

     Total expenses of the Company increased $10,467,037 to $21,242,138 for year
ended  December  31, 1997 from $10,775,101 for the year ended December 31, 1996.
As  of  December 1, 1997 the Company completed the transfer of certain servicing
functions  from  LSE  to  in-house personnel and equipment. The Company incurred
significant  expenses  in  the  hiring  and training of personnel as well as the
acquisition  and  leasing  of  equipment  primarily  to facilitate the servicing
transfer  during  the  year  ended  December  31,  1997.

     Provision  for  Credit  Losses.  Provision  for  credit  losses  on finance
contracts  increased  $200,328  to $612,715 for the year ended December 31, 1997
from  $412,387  for the year ended December 31, 1996 due to an evaluation of the
owned  finance  contracts  portfolio.

     Interest  Expense.  Interest  expense rose to $3,879,543 for the year ended
December 31, 1997 from $2,382,818 for the year ended December 31, 1996. Interest
expense  increased  by  $1,496,725  due  to higher borrowing volumes outstanding
under  the revolving credit facilities, along with increased debt issuance costs
amortization  of  $320,985.

     Salaries  and  Benefits.  Salaries  and  benefits  increased  $2,828,278 to
$7,357,284  for  the year ended December 31, 1997 from $4,529,006 the year ended
December  31, 1996. This increase was due primarily to an increase in the number
of  the  Company's  employees  necessary  to  handle  the  increased  contract
acquisition  volume  and  the  collection  activities  on a growing portfolio of
finance  contracts. As of December 1, 1997 the Company completed the transfer of
certain  servicing  functions  from LSE to in-house personnel and equipment. The
Company incurred significant expenses in the hiring and training of personnel as
well  as  the  acquisition  and leasing of equipment to facilitate the servicing
transfer during the year ended December 31, 1997. The number of employees of the
Company  increased  by 75 to 191 employees at December 31, 1997, compared to 116
employees  at  December  31,  1996.
                                    -- 27 --
<PAGE>

     General  and  Administrative  Expenses. General and administrative expenses
increased  $3,743,879  to  $6,075,125  for the year ended December 31, 1997 from
$2,331,246  the year ended December 31, 1996. This increase was due primarily to
growth  in the Company's operations. General and administrative expenses consist
principally  of  office,  furniture  and  equipment  leases,  professional fees,
non-employee  marketing commissions, communications and office supplies, and are
expected  to increase as the Company continues to grow and also due to the costs
of  operating  as  a  public  company.

     Impairment  of  retained interest in securitization: Impairment of retained
interest  in  securitization  increased  $1,312,234  to $1,312,234 as a result a
review  of  the  estimate  of  the  timing  and  ultimate receipt of cash flows.

     Other  Operating Expenses. Other operating expenses (consisting principally
of  servicer  fees,  credit  bureau reports and insurance) increased $885,593 to
$2,005,237  for  the  year  ended December 31, 1997 from $1,119,644 for the year
ended  December  31,  1996.  This increase was due to increased finance contract
acquisition  volume.


FINANCIAL  CONDITION

     Restricted Cash. Restricted cash decreased $6.9 million to none at December
31,  1998  from $6.9 million at December 31, 1997, reflecting the elimination of
cash  reserve  accounts  in the new funding agreement with Dynex.  In accordance
with  the  Company's  previous revolving credit facilities, proceeds advanced by
the  lender  for  purchase of finance contracts were held by a trustee until the
Company  delivered  qualifying  collateral  to  release the funds, normally in a
matter  of  days.  The Company was also required to maintain a cash reserve with
its  lenders  up  to  10%  of  the  proceeds  received  from  the lender for the
origination  of  the  finance contracts. Access to these funds was restricted by
the  lender.

     Finance  Contracts  Held  for Sale. Finance contracts held for sale, net of
allowance  for credit losses, decreased $0.5 million to $0.9 million at December
31,  1998,  from  $1.4  million  at  December 31, 1997. The number and principal
balance  of  contracts  held  for sale are largely dependent upon the timing and
size of the Company's securitizations. The Company securitized finance contracts
on  a  regular basis through the Dynex funding agreement. Future securitizations
are  uncertain.

     Retained  Interest in Securitizations. An impairment review of the retained
interest  in  securitizations  is  performed  quarterly  by  calculating the net
present  value  of the expected future cash flows after giving effect to changes
in  assumptions  due  to  market and economic changes and the performance of the
loan pool to date. The discount rate used is an estimated market rate, currently
15%  to  17%.  To  the extent that the Company deems the asset to be permanently
impaired,  the Company records a charge against earnings. The Company recorded a
charge against earnings of $9,932,169 during the year ended December 31, 1998 as
a  result  of  the  impairment  review.

     Finance  contracts  are  continuously  acquired  and sold and therefore the
retained  interest in securitizations can  demonstrate increases while realizing
impairments. The reduction of the Company's retained interest in securitizations
at  December  31,  1998  versus  the  prior  periods is primarily as a result of
increased  monetization  through  the  Dynex  warehouse  facility.


     The  following  table presents the valuation and recorded impairment of the
Company's  retained  interest in securitizations for the year ended December 31,
1998,  by  quarter:

<TABLE>
<CAPTION>


                    March 31, 1998   June 30, 1998   September 30, 1998   December 31, 1998
                    ---------------  --------------  -------------------  ------------------
<S>                 <C>              <C>             <C>                  <C>
Valuations of
retained interest
in securitizations  $    35,643,756  $   33,043,626  $        17,000,966  $       13,873,351
Impairment . . . .  $       288,022  $    5,589,802  $         1,637,191  $        2,417,154
                    ---------------  --------------  -------------------  ------------------
</TABLE>
                                    -- 28 --
<PAGE>


     Prior  to the Dynex funding agreement, at the time a securitization closes,
the  Company's  securitization  subsidiary  was  required to fund a cash reserve
account  within  the  trust  to provide additional credit support for the senior
investor  securities.  Additionally,  depending  on  the  structure  of  the
securitization,  a portion of the future excess spread cash flows from the trust
is  required to be deposited in the cash reserve account to increase the initial
deposit  to  a  specified  level.  A  portion  of  excess spread cash flows will
increase such reserves until they reach a target reserve level (initially 6%) of
the  outstanding  balance  of  the  senior  investor  certificates.  The  trust
receivables are ultimately payable to the Company as owner of retained interests
and  are  included  in the estimated cash flow of such retained interests. (i.e.
the  "cash  out"  method).



     The  cash  reserve  deposits  for  the  Company's  securitizations  follow:

<TABLE>
<CAPTION>



                                    Certificate   Initial Reserve   Reserve Balance
Securitization                      Amount (1)        Deposit        Dec. 31, 1998
---------------------------------  -------------  ----------------  ----------------
<S>                                <C>            <C>               <C>
AutoBond Receivables Trust 1995-A  $  26,261,009  $        525,220  $        320,000
AutoBond Receivables Trust 1996-A     16,563,366           331,267           207,042
AutoBond Receivables Trust 1996-B     17,833,885           356,658           223,000
AutoBond Receivables Trust 1996-C     22,297,719           445,934           278,700
AutoBond Receivables Trust 1996-D     25,000,000           500,000           312,500
AutoBond Receivables Trust 1997-A     28,037,167           560,744           350,464
AutoBond Receivables Trust 1997-B     34,725,196           868,130                 -
AutoBond Receivables Trust 1997-C     34,430,079           860,752            61,114
---------------------------------  -------------  ----------------  ----------------

<FN>

1  Refers  only  to  balances  on  senior  Investor  certificates  upon  issuance.
</TABLE>




DELINQUENCY  EXPERIENCE


     The  following  table  reflects the delinquency experience of the Company's
finance  contract  portfolio:
<TABLE>
<CAPTION>

                                              December 31, 1997 (2)          December 31, 1998
                                              ---------------------          -----------------

<S>                                                 <C>           <C>     <C>           <C>
Principal balance of finance contracts outstanding  $187,098,957          $210,947,939
Delinquent finance contracts (1):
Two payments past due. . . . . . . . . . . . . . .    21,484,450  11.48%    20,689,671   9.81%
Three payments past due. . . . . . . . . . . . . .    10,941,753   5.85%     7,901,166   3.75%
Four or more payments past due . . . . . . . . . .     8,368,493   4.47%     5,214,162   2.47%
Total. . . . . . . . . . . . . . . . . . . . . . .  $ 40,794,696  21.80%  $ 33,804,999  16.03%


<FN>

1 Percentage based upon outstanding balance. Delinquency balances outstanding excludes finance
contracts  where  the  underlying  vehicle  is repossessed, where a dealer (seller) buyback is
expected,  where  a  skip  claim  is  paid  and  where  a  primary  insurance  claim is filed.
2  As  of  December  31,  1997,  aging  was  calculated based on number of days past due using
categories  30-59  days  past  due,  60-89  days  past  due,  and  90  days past due and over.

</TABLE>
                                    -- 29 --
<PAGE>



CREDIT  LOSS  EXPERIENCE

     An  allowance  for credit losses is maintained for contracts held for sale.
The  Company reports a provision for credit losses on finance contracts held for
sale.  Management  evaluates  the  reasonableness of the assumptions employed by
reviewing  credit  loss experience, delinquencies, repossession trends, the size
of the finance contract portfolio and general economic conditions and trends. If
necessary,  assumptions  will  be  changed  in  the future to reflect historical
experience  to  the  extent  it deviates materially from that which was assumed.

                                    -- 30 --
<PAGE>
     If  a  delinquency  exists  and  a  default  is  deemed  inevitable  or the
collateral  is  in  jeopardy,  and  in  no  event  later  than  the  90th day of
delinquency, the Company's Collections Department will initiate the repossession
of  the financed vehicle. Bonded, insured outside repossession agencies are used
to  secure  involuntary  repossessions.  In  most  jurisdictions,  notice to the
borrower of the Company's intention to sell the repossessed vehicle is required,
whereupon  the  borrower  may exercise certain rights to cure his or her default
and  redeem  the  automobile.  Following  the expiration of the legally required
notice  period,  the repossessed vehicle is sold at a wholesale auto auction (or
in  limited  circumstances,  through  dealers),  usually  within  60 days of the
repossession.  The  Company  closely  monitors the condition of vehicles set for
auction,  and procures an appraisal under the relevant VSI policy prior to sale.
Liquidation  proceeds are applied to the borrower's outstanding obligation under
the  finance  contract  and  insurance  claims  under  the  VSI  policy  and, if
applicable,  the  deficiency  balance  policy  are  then  filed.

     Because  of  the  Company's limited operating history, its finance contract
portfolio  is somewhat unseasoned. This effect on the delinquency statistics can
be  observed in the comparison of 1998 versus 1997 delinquency percentages since
the  portfolio  is  tangibly more seasoned as of December 31, 1998. Accordingly,
delinquency  and  charge-off  rates  in  the portfolio may not fully reflect the
rates  that  may  apply when the average holding period for finance contracts in
the portfolio is longer. Increases in the delinquency and/or charge-off rates in
the  portfolio  would adversely affect the Company's ability to obtain credit or
securitize  its  receivables.


REPOSSESSION  EXPERIENCE  -  STATIC  POOL  ANALYSIS

     Because  the  Company's  finance  contract portfolio is continuing to grow,
management  does not manage losses on the basis of a percentage of the Company's
finance  contract  portfolio,  because  percentages can be favorably affected by
large  balances  of  recently  acquired  finance  contracts. Management monitors
actual dollar levels of delinquencies and charge-offs and analyzes the data on a
"static  pool"  basis.

     The following tables provide static pool repossession frequency analysis in
dollars of the Company's portfolio from inception through December 31, 1998. All
finance  contracts  have  been  segregated  by  quarter  of  acquisition.  All
repossessions  have  been  segregated  by  the  quarter in which the repossessed
contract was originally acquired by the Company. Cumulative repossessions equals
the  ratio  of  repossessions  as a percentage of finance contracts acquired for
each segregated quarter. Annualized repossessions equals an annual equivalent of
the  cumulative  repossession  ratio  for  each  segregated  quarter. This table
provides  information regarding the Company's repossession experience over time.
For  example,  recently  acquired  finance  contracts  demonstrate  very  few
repossessions  because  properly  underwritten  finance  contracts  to sub-prime
consumers  generally  do  not  normally  default  during the initial term of the
contract.  Between  approximately one year and 18 months of seasoning, frequency
of  repossessions  on  an  annualized  basis appear to reach a plateau. Based on
industry  statistics  and  the  performance  experience of the Company's finance
contract  portfolio,  the  Company  believes  that finance contracts seasoned in
excess  of  approximately  18  months  will  start  to  demonstrate  declining
repossession  frequency.  The  Company believes this may be due to the fact that
the  borrower  perceives  that  he or she has equity in the vehicle. The Company
also  believes  that  the finance contracts generally amortize more quickly than
the  collateral  depreciates,  and  therefore  losses  and/or repossessions will
decline  over  time.
                                    -- 31 --
<PAGE>


<TABLE>
<CAPTION>


ALL  INCLUSIVE(3)
                                           Repossession Frequency
                                           ----------------------

     Year and        Principal Balance at
     Quarter of   Default of Failed Loans by    Cumulative      Annualized    Principal Balance of
     Acquisition       Quarter Acquired       Percentage (1)  Percentage (2)   Contracts Acquired
     -----------  --------------------------  --------------  --------------  --------------------
<C>  <S>          <C>                         <C>             <C>             <C>
     1994
  1  Q3. . . . .                      22,046          21.79%           4.84%               101,161
  2  Q4. . . . .                     631,460          25.90%           6.10%             2,437,674
     1995
  3  Q1. . . . .                   1,860,450          29.48%           7.37%             6,310,421
  4  Q2. . . . .                   1,796,859          29.03%           7.74%             6,190,596
  5  Q3. . . . .                   2,185,377          30.19%           8.62%             7,239,813
  6  Q4. . . . .                   4,110,940          33.73%          10.38%            12,188,863
     1996
  7  Q1. . . . .                   5,159,590          33.37%          11.12%            15,460,823
  8  Q2. . . . .                   6,515,618          35.18%          12.79%            18,520,410
  9  Q3. . . . .                   7,376,986          26.25%          10.50%            28,098,899
 10  Q4. . . . .                   7,904,067          32.34%          14.37%            24,442,500
     1997
 11  Q1. . . . .                  10,860,604          31.14%          15.57%            34,875,869
 12  Q2. . . . .                  10,014,174          28.36%          16.21%            35,305,817
 13  Q3. . . . .                   7,843,269          22.65%          15.10%            34,629,616
 14  Q4. . . . .                   7,045,633          15.97%          12.78%            44,120,029
     1998
 15  Q1. . . . .                   3,555,380          11.94%          11.94%            29,775,406
 16  Q2. . . . .                   1,928,715           8.42%          11.22%            22,916,849
 17  Q3. . . . .                     596,547           2.54%           5.07%            23,518,889
 18  Q4. . . . .                      72,917           0.17%           0.68%            43,185,824
     -----------  --------------------------  --------------  --------------  --------------------

<FN>

(1)     For  each  quarter,  cumulative  loss frequency equals the gross principal loss divided by
     the  gross  amount  financed  of  the  contracts  acquired  during  that  quarter.
(2)     Annualized  loss  frequency  converts  cumulative  loss  frequency  into  an  annual
     equivalent  (e.g.  for  Q4  1997,  principal  balance  of  $7,045,633  in  losses  divided by
     $44,120,029  in  amount  financed  of  the  contracts  acquired,  divided  by  5  quarters
     outstanding  times  4  equals  an  annual  loss  frequency  of  12.78%).
(3)     Included are the loan that were repossessed, paid by customers' primary insurance, paid by
     skip  claim,  paid  by  dealer  and  charged  off  due  to  certain  reasons.
</TABLE>



                                    -- 32 --
<PAGE>


<TABLE>
<CAPTION>

REPO  AND  SKIP(3)
                                              Repossession Frequency
                                              ----------------------


     Year and      Principal Balance at
     Quarter of   Default of Failed Loans    Cumulative      Annualized    Original Principal Balance of
     Acquisition    by Quarter Acquired    Percentage (1)  Percentage (2)       Contracts Acquired
     -----------  -----------------------  --------------  --------------  -----------------------------
<C>  <S>          <C>                      <C>             <C>             <C>
     1994
  1  Q3. . . . .                   22,046          21.79%           4.84%                        101,161
  2  Q4. . . . .                  618,987          25.39%           5.97%                      2,437,674
     1995
  3  Q1. . . . .                1,697,362          26.90%           6.72%                      6,310,421
  4  Q2. . . . .                1,670,219          26.98%           7.19%                      6,190,596
  5  Q3. . . . .                1,977,491          27.31%           7.80%                      7,239,813
  6  Q4. . . . .                3,732,028          30.62%           9.42%                     12,188,863
     1996
  7  Q1. . . . .                4,754,416          30.75%          10.25%                     15,460,823
  8  Q2. . . . .                5,891,044          31.81%          11.57%                     18,520,410
  9  Q3. . . . .                6,495,843          23.12%           9.25%                     28,098,899
 10  Q4. . . . .                7,146,990          29.24%          13.00%                     24,442,500
     1997
 11  Q1. . . . .                9,722,823          27.88%          13.94%                     34,875,869
 12  Q2. . . . .                9,024,012          25.56%          14.61%                     35,305,817
 13  Q3. . . . .                6,953,128          20.08%          13.39%                     34,629,616
 14  Q4. . . . .                6,207,960          14.07%          11.26%                     44,120,029
     1998
 15  Q1. . . . .                3,063,194          10.29%          10.29%                     29,775,406
 16  Q2. . . . .                1,687,608           7.36%           9.82%                     22,916,849
 17  Q3. . . . .                  476,224           2.02%           4.05%                     23,518,889
 18  Q4. . . . .                   14,594           0.03%           0.14%                     43,185,824
     -----------  -----------------------  --------------  --------------  -----------------------------
<FN>

(1)     For  each  quarter,  cumulative  loss  frequency  equals  the  gross  principal  loss divided by
     the  gross  amount  financed  of  the  contracts  acquired  during  that  quarter.
(2)     Annualized  loss  frequency  converts  cumulative  loss  frequency  into  an  annual
     equivalent  (e.g.  for  Q4  1997,  principal  balance  of  $6,207,960  in  losses  divided  by
     $44,120,029  in  amount  financed  of  the  contracts  acquired,  divided  by  5  quarters
     outstanding  times  4  equals  an  annual  loss  frequency  of  11.26%).
(3)     Included  are  the  loan  that  were  repossessed,  and  paid  by  skip  claim


</TABLE>




NET  LOSS  PER  REPOSSESSION

     Upon  initiation of the repossession process, it is the Company's intent to
complete  the  liquidation  process  as  quickly  as  possible.  The majority of
repossessed  vehicles  are sold at wholesale auction. The Company is responsible
for  the  costs  of  repossession, transportation and storage. The Company's net
charge-off  per repossession equals the unpaid balance less the auction proceeds
(net  of  associated  costs) and less proceeds from insurance claims. As less of
the  Company's  finance contracts are acquired with credit deficiency insurance,
the  Company  expects  its  net loss per repossession to increase. The following
table  demonstrates  the  net  charge-off  per  repossessed  automobile  since
inception.
                                    -- 33 --
<PAGE>


<TABLE>
<CAPTION>



                                                                                   Loans
                                                                   Loans with     Without
From August 1, 1994 (Inception) to December 31, 1998                Default       Default
                                                                   Insurance     Insurance     All Loans
                                                                  ------------  ------------  ------------
<S>                                                               <C>           <C>           <C>
Number of finance contracts acquired                                                               33,371 
Number of vehicles repossessed . . . . . . . . . . . . . . . . .        5,829         2,137         7,966 
Repossessed units disposed of. . . . . . . . . . . . . . . . . .        3,220         1,237         4,457 
Repossessed units awaiting disposition (1) . . . . . . . . . . .        2,609           900         3,509 
Cumulative gross charge-offs (2) . . . . . . . . . . . . . . . .  $32,348,617   $12,981,206   $45,329,823 
Costs of repossession (2). . . . . . . . . . . . . . . . . . . .    1,481,622       537,234     2,018,856 
Proceeds from auction, physical damage insurance and refunds (2)   18,655,226     7,716,412    26,371,361 
                                                                  ------------  ------------  ------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $15,175,013   $ 5,802,028   $20,977,317 
Deficiency insurance settlement received (2) . . . . . . . . . .    9,024,588             0     9,024,588 
                                                                  ------------  ------------  ------------
Net charge-offs (2). . . . . . . . . . . . . . . . . . . . . . .  $ 6,150,425   $ 5,802,028   $11,952,730 
                                                                  ===========    ==========   ============
Net charge-offs per unit disposed. . . . . . . . . . . . . . . .  $     1,910   $     4,691   $     2,682 
Net loss as a percentage of cumulative gross charge-offs . . . .        46.91%        44.70%        46.28%
Recoveries as a percentage of cumulative gross charge-offs (3) .        80.99%        55.30%        73.63%
----------------------------------------------------------------  ------------  ------------  ------------
<FN>

1  The  vehicles  may have been sold at auction; however The Company might not have received all insurance
proceeds  as  of  December  31,  1998.
2  Amounts  are  based  on  actual  liquidation  and  repossession proceeds (including insurance proceeds)
received  on  units  for  which  the  repossession  process  had  been  completed as of December 31, 1998.
3  Not  including  the  costs  of  repossession  which  are  reimbursed  by  the  securitization  trusts.
</TABLE>




LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company  requires access to significant sources and amounts of cash to
fund  its  operations  and  to  acquire  and  securitize finance contracts.  The
Company's  primary  operating  cash  requirements include the funding of (i) the
acquisition  of finance contracts prior to securitization, (ii) the initial cash
deposits  to  reserve  accounts  in  connection  with  the  warehousing  and
securitization  of contracts in order to obtain such sources of financing, (iii)
fees and expenses incurred in connection with the warehousing and securitization
of  contracts and (iv) ongoing administrative and other operating expenses.  The
Company  has  traditionally  obtained  these  funds in three ways: (a) loans and
warehouse  financing  arrangements,  pursuant  to  which  acquisition of finance
contracts  are  funded  on  a  temporary  basis; (b) securitizations or sales of
finance contracts, pursuant to which finance contracts are funded on a permanent
basis;  and  (c) general working capital, which if not obtained from operations,
may  be  obtained  through  the  issuance of debt or equity.  Failure to procure
funding  from  all  or  any  one  of these sources could have a material adverse
effect  on  the  Company.

     Since  early February 1999, the Company's management has been attempting to
procure  alternative  sources  of  funding  and other strategic alternatives, in
order  to  mitigate  the  situation  with  Dynex.  The  Company  is currently in
discussions  with  several  investment bankers and direct sources regarding such
alternatives  which  may  include  joint  ventures, or changes in control of the
Company.  While  management  hopes  that  an  alternative  opportunity  will  be
consummated,  the Company has suspended acquisitions and dispositions of finance
contracts  until alternative funding sources are obtained, however, there can be
no  assurance  that such funding will be obtained. As a consequence, the Company
expects  to  report  a  loss  for the first quarter of 1999 and will not pay the
quarterly  dividend  on its preferred stock otherwise payable on March 31, 1999.
Unless  financing  or other strategic alternatives are found the Company may not
continue  its  business  of originating loans and would take steps to reduce its
personnel  and operating expenses associated with such activities. Also, parties
to  the  Company's  various  securitization  transactions could request that the
Company  surrender  servicing, although management does not believe such parties
have  the  right  to  terminate  servicing  under the respective agreements. The
Company  expects  to  continue  its  servicing  operations.

                                    -- 34 --
<PAGE>


     Management  believes  the  Company  has  sufficient  liquidity  to meet its
obligations  and  continue  its  servicing activities for a reasonable period of
time.

     Cash  Flows.  Significant  cash  flows  related  to the Company's operating
activities  include the use of cash for purchases of finance contracts, and cash
provided by payments on finance contracts, collections on retained interests and
sales  of  finance  contracts. Net cash provided by operating activities totaled
$4.9  million  during  the  year  ended  December  31,  1998.

     Significant  activities  comprising  cash  flows  from investing activities
include  proceeds  from  disposal  of  collateral.  Cash  flows  from  financing
activities  include  reduction  of  revolving  credit  facilities  $7.6 million,
proceeds  from  borrowings $10.5 million, and public offering of preferred stock
$9.6  million.

     Revolving  Credit  Facilities.  The  Company  historically  obtained  a
substantial  portion  of  its  working  capital  for  the acquisition of finance
contracts  through  revolving credit facilities. Under a warehouse facility, the
lender generally advances amounts requested by the borrower on a periodic basis,
up  to  an  aggregate maximum credit limit for the facility, for the acquisition
and  servicing of finance contracts or other similar assets. Until proceeds from
a  securitization  transaction  are  used  to  pay down outstanding advances, as
principal  payments  are received on the finance contracts, the principal amount
of  the  advances  may  be  paid  down incrementally or reinvested in additional
finance  contracts  on  a  revolving  basis.

     On  June  10,  1998, the Company and Dynex Capital, Inc., ("Dynex") entered
into  an  arrangement  whereby  the  Company obtained a commitment from Dynex to
purchase  all  currently  warehoused  and  future  automobile  finance  contract
acquisitions through at least May 31, 1999 (the "Funding Agreement").  The terms
of  the  Funding Agreement were modified on June 30, October 20, and October 28,
1998.  Under  the  prior terms of the Funding Agreement, the Company transferred
finance  contracts  to  AutoBond  Master Funding Corporation V ("Master Funding
V"),  a  qualified unconsolidated special purpose subsidiary, and Dynex provided
credit facilities in the amount equal to 104% of the unpaid principal balance of
the  finance contracts (the "Advance Rate"), the proceeds of such facilities are
received by the Company.  Under the modified terms of the Funding Agreement, the
Advance  Rate  was  reduced from 104% to 88% for an interim period (the "Interim
Period")  ending  on the earlier of (a) December 31, 1998 and (b) the settlement
date  of  a  securitization  by Dynex of any finance contracts originated by the
Company.  At the end of the Interim Period, the Advance Rate will revert to 104%
and  Dynex  was to advance to Master Funding V an additional amount equal to 16%
of  the  unpaid  principal balance of finance contracts financed by Dynex during
the  Interim  Period,  less  any  amounts that otherwise would have been paid as
principal  on  the  Notes (as defined below) during such period.  Advances under
the  Funding  Agreement  were  limited  to $25 million per month after June 1998
until  the commitment termination date.  Under the modified terms of the Funding
Agreement,  the  commitment  terminates on July 31, 1999 (provided that 90 days'
prior  written notice from Dynex is given), or if such notice is not given, July
31,  2000.  At  the  Company's  option  the  commitment  termination date can be
extended  an additional four months to November 30, 1999 (provided that 90 days'
prior  written  notice  to  Dynex  is  given),  or  if such notice is not given,
November  30, 2000.  Advances under the Funding Agreement are evidenced by Class
A  and  Class  B Notes (collectively, the "Notes") issued by Master Funding V to
Dynex.  The  Class  A  Notes were issued in a principal amount equal to 94.0% of
the unpaid principal balance of the finance contracts (88.0% for advances funded
during the Interim Period) and bear interest at a rate equal to 190 basis points
over  the corporate bond equivalent yield on the three-year Treasury note on the
closing  date for each such advance (equal to an average of 7.02% as of December
31,  1998);  provided however, that during the Interim Period, the interest rate
on the Company's Class A Notes will equal One-Month LIBOR plus 1.50%.  The Class
B  Notes are issued in a principal amount equal to 10.0% of the unpaid principal
balance  of  the  finance contracts (0.0% for advances funded during the Interim
Period) and bear interest at a rate equal to 16% per annum.  The Company retains
a  subordinated  interest in the pooled finance contracts.  Transfers of finance
contracts  to  the  qualified  special  purpose entities have been recognized as
sales  under  SFAS  No.  125.  At December 31, 1998, advances by Dynex under the
Funding  Agreement  totaled  $ 155 million. See "Recent Developments" and "Legal
Proceedings".

                                    -- 35 --
<PAGE>
     William  O.  Winsauer, Chief Executive Officer and Chairman of the Board of
Directors  of  the  Company (the "Board"), Adrian Katz, Chief Operating Officer,
Chief  Financial  Officer  and  Vice Chairman of the Board and John S. Winsauer,
Secretary  and a member or the Board (collectively, the "Shareholders"), entered
into  a  Stock  Option  Agreement  (the  "Option  Agreement") with Dynex Holding
wherein  the Shareholders granted to Dynex Holding the Option to purchase all of
the  shares  of  the  Company's  common  stock  owned  by  the  Shareholders,
(approximately 85% of the Company's current outstanding common stock) at a price
of  $6.00  per  share.  The  Option may be exercised in whole and not in part at
anytime up to and including July 31, 1999. If the Company elects to exercise its
option  to  extend  the  commitment termination date, the expiration date of the
Option shall be extended to match the commitment termination date.  In the event
that  Dynex  Holding exercises its Option, the exercise price of the Option will
be  payable in shares of a newly issued series of convertible preferred stock of
Dynex  ("Dynex  Preferred").  The  number of Dynex Preferred shares to be issued
will  be  equal  to  the product of the number of shares of the Company's common
stock  subject  to  the  Option and $6.00, divided by 115% of the average of the
closing  prices  per share of the common stock of Dynex ("Dynex Common") for the
ten  consecutive  trading  days  ending immediately prior to the exercise of the
Option.  Upon  exercise of the Option, Dynex Holding will deliver to each of the
Shareholders  80%  of his pro rata share of the Dynex Preferred shares, with the
balance  to  be  held  by  Dynex Holding subject to certain terms and conditions
contained in the Option Agreement and in each Shareholder's employment agreement
with  Dynex.  The  Dynex  Preferred  will  pay  dividends at 9% per annum and be
convertible  into shares of Dynex Common at an Initial conversion rate of one to
one.  See  "Recent  Developments"  and  "Legal  Proceedings"

     The  Company  and its wholly owned subsidiary, AutoBond Funding Corporation
II,  entered  into  a  $50  million  revolving  warehouse  facility  (the "Daiwa
Facility")  with Daiwa Finance Corporation ("Daiwa") effective as of February 1,
1997.  Advances  under  the  Daiwa  Facility  matured on the earlier of 120 days
following  the  date  of  the  advance  or March 31, 1998. The proceeds from the
borrowings  under  the Daiwa Facility were used to acquire finance contracts and
to  make deposits to a reserve account. The Daiwa Facility was collateralized by
the  finance  contracts  acquired  with  the  outstanding advances. Interest was
payable  upon  maturity  of the advances and accrued at the lesser of (x) 30 day
LIBOR  plus  1.15% or (y) 11% per annum.  The Company had no credit availability
under  the  Daiwa facility after March 31, 1998 and the total amount outstanding
was  repaid  in  July  1998  through  the  Dynex  funding  agreement.

     On  December  31,  1997,  the  Company  entered  into  a  similar
warehouse/securitization  arrangement  with  Credit Suisse First Boston Mortgage
Capital L.L.C. ("CSFB"), whereby $12.5 million of finance contracts were sold to
a  qualifying unconsolidated special purpose subsidiary, AutoBond Master Funding
Corporation  II.  These  finance contracts secured variable funding notes in the
initial  amount  of  $11.3  million, which were repaid through the Dynex funding
agreement  on  June  30,  1998.

     On  March  31,  1998,  the  Company entered into a warehouse/securitization
arrangement  with  Infinity Investors Limited ("Infinity"), whereby $7.2 million
of  finance  contracts  were sold to a qualifying unconsolidated special purpose
subsidiary,  AutoBond  Master  Funding  Corporation  IV. These finance contracts
secured variable funding notes in the initial amount of $6.5 million, increasing
up  to $10 million.  These variable funding notes bore interest at 10% per annum
through  May  31, 1998 and thereafter at 17% per annum.  These notes were repaid
through  the  Dynex  funding agreement on June 30, 1998.  In connection with the
transaction  with  Infinity,  the  Company  issued  a  warrant to purchase up to
100,000  shares  of  common  stock,  at  an  exercise  price of $8.73 per share.
                                    -- 36 --
<PAGE>

Notes  Payable  and  Non-Recourse  Debt


<TABLE>
<CAPTION>

     The  following  amounts  are  included  in  notes  payable  and  non-recourse  debt  as of:


                                                                    December 31,   December 31,
                                                                        1997           1998
                                                                    -------------  -------------

<S>                                                                 <C>            <C>
Non-recourse notes payable, collateralized by Class B Certificates  $   7,783,219  $   3,185,050
Subordinated notes payable . . . . . . . . . . . . . . . . . . . .              -      7,143,628
Convertible notes payable. . . . . . . . . . . . . . . . . . . . .      2,000,000      3,000,000
Other notes payable. . . . . . . . . . . . . . . . . . . . . . . .         57,824         23,342
                                                                    -------------  -------------
                                                                    $   9,841,043  $  13,352,020
                                                                    -------------  -------------
</TABLE>




     Pursuant to an agreement (the "Securities Purchase Agreement") entered into
on  June  30,  1997,  the  Company  issued  by  private  placement $2,000,000 in
aggregate  principal  amount  of  senior secured convertible notes ("convertible
notes"). Interest is payable quarterly at a rate of 18% per annum until maturity
on June 30, 2000. The convertible notes, collateralized by the retained interest
in  securitizations  from  the  Company's  first  four  securitizations,  are
convertible into shares of common stock of the Company upon the earlier to occur
of  (x)  an  event  of  default  on the convertible notes and (y) June 30, 1998,
through the close of business on June 30, 2000, subject to prior redemption. The
Company  paid  off the convertible notes in February 1998.  Also pursuant to the
Securities  Purchase  Agreement, the Company issued warrants which upon exercise
allow the holders to purchase up to 200,000 shares of common stock at $4.225 per
share.  The  warrants are exercisable to the extent the holders thereof purchase
up  to  $10,000,000 of the Company's subordinated asset-backed securities before
June  30,  1998.  The  holders purchased $5,800,000 of subordinated asset-backed
securities.  The  total  value  assigned  to  these  warrants  was approximately
$154,000  which  is  included as an adjustment of the gain (loss) on sale of the
related  finance  contracts.

     In  January 1998, the Company privately placed with BancBoston Investments,
Inc.  ("BancBoston")  $7,500,000 in aggregate principal amount of its 15% senior
subordinated  convertible  notes  (the  "Subordinated  Notes").  Interest on the
Subordinated  Notes is payable quarterly until maturity on February 1, 2001. The
Subordinated Notes are convertible at the option of the holder for up to 368,462
shares of common stock of the Company, at a conversion price of $3.30 per share,
subject to adjustment under standard anti-dilution provisions. In the event of a
change  of control transaction, the holder of the Subordinated Notes may require
the Company to repurchase the Subordinated Notes at 100% of the principal amount
plus  accrued  interest.  The Subordinated Notes are redeemable at the option of
the  Company  on  or after July 1, 1999 at redemption prices starting at 105% of
the principal amount, with such premium reducing to par on and after November 1,
2000,  plus  accrued interest. The Subordinated Notes were issued pursuant to an
Indenture,  dated  as  of January 30, 1998 (the "Indenture") between the Company
and  BankBoston,  N.A.,  as  agent.  The  Indenture contains certain restrictive
covenants  including  (i)  a  consolidated  leveraged ratio not to exceed 2 to 1
(excluding  non-recourse  warehouse  debt  and  securitization  debt),  (ii)
limitations  on restricted payments such as dividends (but excluding, so long as
no event of default has occurred under the Indenture, dividends or distributions
on  the  preferred  stock  of the Company), (iii) limitations on sales of assets
other  than  in  the  ordinary  course  of  business  and (iv) certain financial
covenants,  including  a  minimum  consolidated  net  worth of $12 million (plus
proceeds  from equity offerings), a  minimum ratio of EBITDA  to interest of 1.5
to  1,  and  a  maximum  cumulative repossession ratio of 27%. Events of default
under  the Indenture include failure to pay, breach of covenants, cross-defaults
in excess of $1 million or material breach of representations or covenants under
the  purchase  agreement  with  BancBoston.  Net  proceeds  from the sale of the
subordinated  notes  were used to pay short-term liabilities, with the remainder
available  to provide for the repayment of the Company's 18% Convertible Secured
Notes  and  for  working capital. The Company capitalized debt issuance costs of
$594,688, and recorded a discount of $507,763 on the debt representing the value
of  the  warrants issued. The debt issuance cost and discount is being amortized
as  interest  expense  on  the  interest  method  through  February  2001.

                                    -- 37 --
<PAGE>

     Due  principally  to  the  impairment  of  the  Company's  interest  in
securitizations,  the  Company  was  in breach, as of September 30, 1998, of the
minimum  net  worth  and  the  minimum  ratio  of earnings to interest covenants
contained in the Indenture.  On November 13, 1998, the Company received a waiver
of  such  covenants from BankBoston, N.A.   At December 31, 1998 the Company did
not  meet certain of its financial covenants, which failure constitutes an event
of  Default  on  the Subordinate Notes.  The ability of the company to meet such
covenants  is dependant upon future earnings.  The Company has made all payments
due  on its Subordinated Notes and expects to continue to meet such obligations.
The Subordinated Notes have not been formally accelerated by BankBoston; however
if  such  acceleration  were  made,  BankBoston  could  declare  such  amounts
immediately  due.

     On  June  10,  1998,  the  Company  sold  to Dynex at par $3 million of the
Company's  12% Convertible Senior Notes due 2003 (the "Senior Notes").  Interest
on  the  Senior Notes is payable quarterly in arrears, with the principal amount
due on June 9, 2003. The Senior Notes may be converted at the option of Dynex on
or before May 31, 1999 into shares of the Company's common stock at a conversion
price  of  $6.00  per  share.  Demand  and  "piggyback" registration rights with
respect to the underlying shares of common stock were granted. Dynex claims that
the  Senior  Notes are now in default due, among other things, to the impairment
of  the  Stock Option, an assertion which the Company disputes.  The Company has
made  all  payments due on the Senior Notes and expects to continue to meet such
obligations.  See  "Recent  Developments".

     Securitization Program.  In its securitization transactions through the end
of  1996,  the  Company  sold  pools  of  finance contracts to a special purpose
subsidiary, which then assigned the finance contracts to a trust in exchange for
cash  and  certain  retained  beneficial  interests in future excess spread cash
flows.  The  trust  issued  two  classes  of fixed income investor certificates:
"Class  A  Certificates"  which  were sold to investors, generally at par with a
fixed  coupon,  and  subordinated  excess  spread  certificates  ("Class  B
Certificates"),  representing a senior interest in excess spread cash flows from
the  finance  contracts,  which  were  typically  retained  by  the  Company's
securitization  subsidiary  and which collateralize borrowings on a non-recourse
basis.  The  Company  also  funded  a  cash reserve account that provides credit
support  to  the Class A Certificates. The Company's securitization subsidiaries
also  retained a "Transferor's Interest" in the contracts that is subordinate to
the  interest  of  the  investor  certificate  holders.

     In  the  Company's  March 1997, August 1997 and October 1997 securitization
transactions,  the Company sold a pool of finance contracts to a special purpose
subsidiary,  which  then assigned the finance contracts to an indenture trustee.
Under  the  trust indenture, the special purpose subsidiary issued three classes
of  fixed income investor notes, which were sold to investors, generally at par,
with  fixed  coupons.  The  subordinated  notes  represent  a senior interest in
certain  excess  spread  cash flows from the finance contracts. In addition, the
securitization  subsidiary  retained  rights to the remaining excess spread cash
flows. The Company also funded cash reserve accounts that provide credit support
to  the  senior  class  or  classes.

     The retained interests entitle the Company to receive the future cash flows
from  the  trust  after payment to investors, absorption of losses, if any, that
arise  from  defaults  on  the  transferred finance contracts and payment of the
other  expenses  and  obligations  of  the  trust.

     The  Company has relied significantly on a strategy of periodically selling
finance contracts through asset-backed securitizations. The Company's ability to
access  the  asset-backed  securities market is affected by a number of factors,
some  of  which  are  beyond  the Company's control and any of which could cause
substantial  delays  in  securitization  including,  among  other  things,  the
requirements  for  large cash contributions by the Company into securitizations,
conditions  in the securities markets in general, conditions in the asset-backed
securities  market  and  investor demand for sub-prime auto paper. Additionally,
gain  on  sale  of  finance  contracts  represents  a significant portion of the
Company's  total  revenues  and,  accordingly,  net  income. If the Company were
unable  to  sell  finance  contracts or account for any securitization as a sale
transaction  in  a  financial reporting period, the Company would likely incur a
significant  decline  in total revenues and net income or report a loss for such
period. Moreover, the Company's ability to monetize excess spread cash flows has
been an important factor in providing the Company with substantial liquidity. If
the  Company  were  unable  to  sell  its  finance  contracts  and  did not have
sufficient  credit  available,  either under warehouse credit facilities or from
other sources, the Company would have to sell portions of its portfolio directly
to  whole  loan  buyers  or curtail its finance contract acquisition activities.

                                    -- 38 --
<PAGE>

     On  May  19,  1998,  Moody's  announced  that  the  ratings  on  the senior
securities  issued  in the Company's term securitization were reduced to Bal (B2
for  the  1997B  and  1997C transactions), expressing concerns including (1) the
alleged  non-adherence  to  the  transaction documents with regard to charge-off
policy  and  the calculation of delinquency and loss triggers, (2) the Company's
procedures  for  allocating prepaid insurance among the trusts, (3) instances of
the  Company  waiving  fees and making cash contributions to the transactions to
enhance their performance, and (4) "instances of commingled collections."  While
the Company was not requested by Moody's to provide legal guidance as to whether
or  not  these  factors would as a matter of law "increase the uncertainty" with
respect  to the transactions, the Company does note the following:  (1) with the
transfer  of servicing from Loan Servicing Enterprise ("LSE") now completed, the
Company  believes that it is servicing in accordance with the documentation; (2)
the  transaction  documents  did  not  contemplate  the  allocation  of  prepaid
insurance  claims,  a  phenomenon brought about by the Company's prevailing upon
Interstate  to speed up the payment of claims for the benefit of the trusts in a
manner the Company believes is fair to the trusts; (3) the transaction documents
do  not prohibit fee waivers and explicitly permit the Company to make voluntary
capital  contributions  to  the  trusts; and (4) at the insistence of the former
servicer, collections have always been directed to omnibus lockboxes in the name
of,  and  under  the control of the former servicer and the transaction trustees
and,  the trustee is holding cash that is to be paid to certificate holders upon
reconciliation  instructions  from  LSE.

     The  Company  has  engaged  counsel  who  is  presently  performing  the
deal-by-deal  analysis  of  the  structural  and  legal  integrity  of  these
transactions  and  resolve the concerns raised by Moody's.  In the meantime, the
Company has been notified by the trustees on certain of the securitizations that
the  action  of  Moody's  and  the alleged causes constituted events of servicer
termination under such transactions.  The trustees have threatened to remove the
Company  as  servicer  on certain transactions, and have withheld servicing fees
due  to  the  Company.  Since  the  Company  is  of  the  view that no events of
servicing  termination have occurred and that the transactions documents did not
intend  for  servicing compensation to the Company to be cut off where the cause
of  an event of default is due to the actions of Progressive and LSE (the former
servicer), the Company is seeking to resolve those issues to the satisfaction of
all  parties.


     Equity Offerings.  In February 1998, the Company completed the underwritten
public  offering  of  1,125,000  shares of its 15% Series A Cumulative Preferred
Stock  (the  "Preferred Stock"), with a liquidation preference of $10 per share.
The  price  to  public  was  $10  per share, with net proceeds to the Company of
approximately  $10,386,000.  Such  net  proceeds  have been utilized for working
capital  purposes,  including the funding of finance contracts. Dividends on the
Preferred  Stock  are cumulative and payable quarterly on the last day of March,
June,  September  and December of each year, commencing on June 30, 1998, at the
rate  of 15% per annum. After three years from the date of issuance, the Company
may,  at  its option, redeem one-sixth of the Preferred Stock each year, in cash
at  the  liquidation price per share (plus accrued and unpaid dividends), or, if
in Common Stock, that number of shares equal to $10 per share of Preferred Stock
to  be  redeemed, divided by 85% of the average closing sale price per share for
the  Common  Stock  for  the  5  trading  days prior to the redemption date. The
Preferred  Stock is not redeemable at the option of the holder and has no stated
maturity.

     If  dividends  on  the  Preferred  Stock  are  in arrears for two quarterly
dividend  periods,  holders  of the Preferred Stock will have the right to elect
two  additional  directors  to  serve on the Company's Board until such dividend
arrearage  is  eliminated.  In  addition,  certain changes that could materially
affect  the  holders of Preferred Stock, such as a merger of the Company, cannot
be  made without the affirmative vote of the holders of two-thirds of the shares
of Preferred Stock, voting as a separate class. The Preferred Stock ranks senior
to  the  Common  Stock with respect to the payment of dividends and amounts upon
liquidation,  dissolution  or  winding  up.  As of  December 31, 1998, Preferred
Stock  dividends  were current, but the dividend will not be paid  for the first
quarter  of  1999.

     On  May  20,  1998,  the  Company  and  Promethean Investment Group, L.L.C.
("Promethean") entered into a common stock investment agreement (the "Investment
Agreement")  and related registration rights agreement whereby Promethean agreed
to  purchase from the Company, on the terms and conditions outlined below, up to
$20  million  (subject  to increase up to $25 million at Promethean's option) of
the Company's common stock. The Company must deliver a preliminary notice of its
intention  to  require Promethean to purchase its common shares at least ten but
not  more  than thirty days prior to the Company's delivery of its final notice.
The  Company  may  only  deliver  such  final  notice  if (i) the dollar volume-

                                    -- 39 --
<PAGE>
weighted  price  of  its common stock reported on the business day of such final
notice  is  at  least  $3.25  per  share,  (ii)  at  all times during the period
beginning  on  the  date of delivery of the preliminary notice and ending on and
including  the  closing date (a) a registration statement covering the resale of
no  less  than  150% of the shares to be sold to Promethean under the Investment
Agreement  has  been  declared  and  remains  effective  and  (b)  shares of the
Company's  common  stock  are at such time listed on a major national securities
exchange,  and  (iii)  the  Company  has  not  delivered another final notice to
Promethean  during the preceding twenty-five business days preceding delivery of
such  final  notice.  Following receipt of a final notice, Promethean's purchase
obligation  will  equal  the  lowest  of: (i) the amount indicated in such final
notice,  (ii)  $5,000,000  and  (iii)  20% of the aggregate of the daily trading
dollar  volume on the twenty consecutive business days following delivery of the
put  notice.  Promethean  may,  in  its  sole  discretion,  increase  the amount
purchasable  in  the  preceding  sentence  by 125%. Promethean must conclude all
required  purchases of common shares within twenty-five business days of receipt
of  the  final notice. The purchase price for the Company's shares will be equal
to  95%  of the lowest daily dollar volume-weighted average price during the six
consecutive  trading  days  ending  on  and including the date of determination.
Promethean's  obligation to purchase shares under the Investment Agreement shall
end  either  upon  the  mutual  consent of the parties or automatically upon the
earliest  of  the  date  (a)  on  which  total purchases by Promethean under the
Investment  Agreement  total  $20,000,000,  (b)  which  is  two  years after the
effective  date  of  the  registration  statement  relating  to the common stock
covered  by  the  Investment Agreement, or (c) which is twenty-seven months from
the  date  of  the  Investment  Agreement.  In  consideration  of  Promethean's
obligations under the Investment Agreement, the Company paid $527,915 in cash on
August 19, 1998, which was treated as an investment in a common stock agreement.

     The statements contained in this document that are not historical facts are
forward  looking  statements.  Actual results may differ from those projected in
the  forward  looking statements. These forward looking statements involve risks
and  uncertainties,  including  but  not  limited  to  the  following  risks and
uncertainties:  changes  in  the  performance  of  the financial markets, in the
demand  for and market acceptance of the Company's loan products, and in general
economic  conditions,  including  interest  rates,  presence of competitors with
greater  financial resources and the impact of competitive products and pricing;
the  effect  of  the  Company's  policies; and the continued availability to the
Company  of adequate funding sources. Investors are also directed to other risks
discussed  in  documents  filed  by the Company with the Securities and Exchange
Commission.


Impact  of  Inflation  and  Changing  Prices

     Although  the  Company  does  not  believe  that  inflation  directly has a
material  adverse  effect  on  its financial condition or results of operations,
increases in the inflation rate generally are associated with increased interest
rates.  Because  the  Company  borrows funds on a floating rate basis during the
period  leading  up  to  a  securitization,  and in many cases purchases finance
contracts  bearing  a fixed rate nearly equal but less than the maximum interest
rate  permitted  by law, increased costs of borrowed funds could have a material
adverse  impact  on  the  Company's  profitability. Inflation also can adversely
affect  the  Company's  operating  expenses.


Impact  of  New  Accounting  Pronouncements

     In  June  1998,  FASB  issued  SFAS  No.  133,  "Accounting  for Derivative
Instruments  and  Hedging  Activities"  ("SFAS No. 133").  SFAS No. 133 requires
than  an entity recognize all derivatives as either assets or liabilities in its
balance  sheet  and  that  it  measure  those  instruments  at  fair value.  The
accounting  for  changes  in  the fair value of a derivative (that is, gains and
losses)  is  dependent upon the intended use of the derivative and the resulting
designation.  SFAS No. 133 generally provides for matching the timing of gain or
loss  recognition  on  the  hedging  instrument  with the recognition of (1) the
changes in the fair value of the hedged asset or liability that are attributable
to  the  hedged  risk  or  (2)  the  earnings  effect  of  the  hedged  forecast
transaction.  SFAS  No. 133 is effective for all fiscal quarters of fiscal years
beginning  after June 15, 1999, although earlier application is encouraged.  The
Company plans to comply with the provisions of SFAS No. 133 upon its initial use
of  derivative  instruments.  As  of December 31, 1998, no such instruments were
being  utilized  by  the  Company.
                                    -- 40 --
<PAGE>

     The Company does not believe the implementation of SFAS No. 133 will have a
material  effect  on  its  consolidated  financial  statements.



YEAR  2000  COMPLIANCE

     The  Year 2000 issue is the result of computer programs being written using
two  digits  rather  than  four to define the applicable year. Computer programs
containing  date-sensitive  code  could  recognize a date ending with the digits
"00"  as  the year 1900 instead of the year 2000.  This could result in a system
failure  or  in  miscalculations  causing  disruptions of operations, including,
among  other  things,  a  temporary  inability  to  process  transactions,  send
invoices,  or  engage  in  similar  normal  activities.

     As  a specialty consumer finance company, the Company substantially depends
on  its  computer systems and proprietary software applications in underwriting,
acquiring,  servicing  and  securitizing  finance  contracts.  As  a  result  of
initiatives  undertaken  in the development of its proprietary software systems,
all  of the Company's systems and software applications have been formatted with
a full, four-digit date code in the database management and cash flow evaluation
software.  The  efficacy  of  certain  of  the  Company's  systems  and software
applications  in  handling  Year 2000 issues has been demonstrated repeatedly in
the  system's  ability  to  calculate  payments  streams  accurately  on finance
contracts  with  maturity  dates that extend beyond December 31, 1999.  Based on
its  review  of  the likely impact of the Year 2000 on its business, the Company
believes  that  it  is  working  constructively  toward  making its critical and
operational  applications  Year  2000  compliant.

     Nevertheless,  the  Company  may  be exposed to the risk that other service
providers may not be in compliance.  While the Company does not foresee that the
Year  2000  will  pose  significant  operational  problems,  the  failure of its
vendors, customers or financial institutions to become Year 2000 compliant could
have  a  material  adverse effect on the Company's business, financial condition
and  results  of  operations.  To  date,  the  Company  has  not  formulated any
contingency  plans  to  address  such  consequences.



ITEM  7A.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK


     Market  risk generally represents the risk of loss that may result from the
potential  change  in  the  value  of  a  financial  instrument  as  a result of
fluctuations in interest and currency exchange rates and in equity and commodity
prices.  Market risk is inherent to both derivative and non-derivative financial
instruments.  The Company's market risk management procedures include all market
risk  sensitive  financial instruments.  The Company has no derivative financial
instruments,  exposure  to  currency exchange rates nor commodity risk exposure.

     The  Company's  debt  is all fixed rate and the Company's earnings and cash
flows from retained interests in securitization and finance contracts, which are
at  fixed  rates,  are  not  impacted  by  changes in market interest rates. The
Company  manages  market  risk  by  striving  to  balance  its  finance contract
origination activities with its ability to sell such contracts in a short period
of time. Changes in market value of its finance contracts and retained interests
may  increase or decrease due to pre-payments and defaults influenced by changes
in  market  conditions  and  the  borrowers'  financial  condition.



ITEM  8.          FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA


     Financial  statements  are  set forth in this report beginning at page F-1.



                                    -- 41 --
<PAGE>

ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL  DISCLOSURE


     Please  refer to the discussion contained in the Company's quarterly report
on  Form  10-Q  for  the  quarter  ended  June  30,  1998.

                                    -- 42 --
<PAGE>

                                    --------
                                    PART III
                                    --------


ITEM  10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT


     This  information  will  be  contained  in  the  Company's definitive Proxy
Statement  with  respect  to the Company's Annual meeting of Shareholders, to be
filed  with the Securities and Exchange Commission within 120 days following the
end  of  the  Company's  fiscal year, and is hereby incorporated above reference
thereto.

     No  person who, at any time during the fiscal year ended December 31, 1998,
was  a director, officer, beneficial owner of more than ten percent of any class
of  equity  securities  of  the Company registered pursuant to Section 12 of the
Exchange Act, or any other person subject to Section 16 of the Exchange Act with
respect  to  the  Company  because  of  the  requirements  of  Section 30 of the
Investment  Company Act ("reporting person") has failed to file or is delinquent
in  filing  the  forms and reports required by Section 16(a) of the Exchange Act
during  the  fiscal  year  ended  December  31,  1998  or  prior  fiscal  years.



ITEM  11.     EXECUTIVE  COMPENSATION


     This  information  will  be  contained  in  the  Company's definitive Proxy
Statement  with  respect  to the Company's Annual Meeting of Shareholders, to be
filed  with the Securities and Exchange Commission within 120 days following the
end  of  the  Company's  fiscal  year,  and  is hereby incorporated by reference
thereto.



ITEM  12.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT


     This  information  will  be  contained  in  the  Company's definitive Proxy
Statement  with  respect  to the Company's Annual Meeting of Shareholders, to be
filed  with the Securities and Exchange Commission within 120 days following the
end  of  the  Company's  fiscal  year,  and  is hereby incorporated by reference
thereto.



ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS


     This  information  will  be  contained  in  the  Company's definitive Proxy
Statement  with  respect  to the Company's Annual Meeting of Shareholders, to be
filed  with the Securities and Exchange Commission within 120 days following the
end  of  the  Company's  fiscal  year,  and  is hereby incorporated by reference
thereto.

                                    -- 43 --
<PAGE>
                                     -------
                                     PART IV
                                     -------



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


     The  following  documents  are  filed  as  part  of  this  Form  10-K:

1.     Financial  Statements

          Report  of  Independent  Accountants  -  Deloitte  &  Touche  LLP

          Report  of  Independent  Accountants  -  Coopers  &  Lybrand,  LLP

          Financial  Statements
               Consolidated  Balance  Sheets

               Consolidated  Statements  of  Operations and Comprehensive Income

               Consolidated  Statements  of  Shareholders'  Equity

               Consolidated  Statements  of  Cash  Flows

               Notes  to  the  Consolidated  Financial  Statements



                                    -- 44 --
<PAGE>

<TABLE>
<CAPTION>

2.     Exhibits


<S>           <C>
EXHIBIT NO..  DESCRIPTION OF EXHIBIT
------------  ------------------------------------------------------------------------------------------
3.1 (1). . .  Restated Articles of Incorporation of the Company
3.2 (1). . .  Amended and restated Bylaws of the Company
4.1 (1). . .  Specimen Common Stock Certificate
10.1 (1) . .  Amended and Restated Loan Origination, Sale and Contribution Agreement dated as of
              December 15, 1995 by and between the Company and AutoBond Funding Corporation I
10.2 (1) . .  Security Agreement dated as of May 21, 1996 among AutoBond Funding Corporation II,
              the Company and Norwest Bank Minnesota, National Association
10.3 (1) . .  Credit Agreement and Side Agreement, dated as of May 21, 1996 among AutoBond
              Funding Corporation II, the Company and Peoples Life Insurance Company
10.4 (1) . .  Servicing  Agreement dated as of May 21, 1996 among AutoBond Funding Corporation II,
              CSC Logic/MSA L.L.P., doing business  as "Loan  Servicing  Enterprise", the Company
              and Norwest Bank Minnesota, National Association
10.5 (1) . .  Loan Acquisition Sale and Contribution Agreement dated as of May 21, 1996 by and
              between the Company and AutoBond Funding Corporation II
10.6 (1) . .  Second Amended and Restated Secured Revolving Credit Agreement dated as of July 31,
              1995 between Sentry Financial Corporation and the Company
10.7 (1) . .  Management Administration and Services Agreement dated as of January 1, 1996 between
              the Company and AutoBond, Inc.
10.8 (1) . .  Employment Agreement dated November 15, 1995 between Adrian Katz and the Company
10.9 (1) . .  Employment Agreement effective as of May 1, 1996 between William O. Winsauer and the
              Company
10.10 (1). .  Vender's Comprehensive Single Interest Insurance Policy and Endorsements, issued by
              Interstate Fire & Casualty Company
10.11 (1). .  Warrant to Purchase Common Stock of the Company dated March 12, 1996
10.12 (1). .  Employee Stock Option Plan
10.13 (1). .  Dealer Agreement dated November 9, 1994, between the Company and Charlie Thomas
              Ford, Inc.
10.14 (1). .  Automobile Loan Sale Agreement, dated as of September 30, 1996, among the Company,
              First Fidelity Acceptance Corp., and Greenwich Capital Financial Products, Inc.
10.15 (2). .  Servicing Agreement, dated as of January 29, 1997, between CSC LOGIC/MSA L.P.P.,
              doing business as "Loan Servicing Enterprise" and the Company
10.16 (2). .  Credit Agreement, dated as of February 1, 1997, among AutoBond Funding Corporation II,
              the Company and Daiwa Finance Corporation
10.17 (2). .  Security Agreement, dated as of February 1, 1997, by and among AutoBond Funding
              Corporation II, the Company and Norwest Bank Minnesota, National Association
10.18 (2). .  Automobile Loan Sale Agreement, dated as of March 19, 1997, by and between Credit
              Suisse First Boston Mortgage Capital L.L.C., a Delaware limited liability company, and the
              Company
10.19 (3). .  Automobile Loan Sale Agreement, dated as of March 26, 1997, by and between Credit
              Suisse First Boston Mortgage Capital L.L.C., a Delaware limited liability company, and the
              Company
10.20 (4). .  Credit Agreement, dated as of June 30, 1997, by and among AutoBond Master Funding
              Corporation, the Company and Daiwa Finance Corporation
10.21 (4). .  Amended and Restated Trust Indenture, dated as of June 30, 1997, among AutoBond
              Master Funding Corporation, AutoBond Acceptance Corporation and Norwest Bank
              Minnesota, National Association.
10.22 (4). .  Securities Purchase Agreement, dated as of June 30, 1997, by and among the Company,
              Lion Capital Partners, L.P. and Infinity Emerging Opportunities Limited.
10.23 (6). .  Credit Agreement, dated as of December 31, 1997, by and among AutoBond Master
              Funding Corporation II, the Company and Credit Suisse First Boston Mortgage Capital
              L.L.C
10.24 (6). .  Trust Indenture, dated as of December 31, 1997, among AutoBond Master Funding
              Corporation II, the Company and Manufacturers & Traders Trust Company
10.25 (6). .  Receivables Purchase Agreement, dated as of December 31, 1997, between Credit Suisse
              First Boston Mortgage Capital L.L.C and the Company
10.26 (6). .  Servicing Agreement, dated as of December 31, 1997, among the Company, AutoBond
              Master Funding Corporation II and Manufacturers & Traders Trust Company
10.27 (6). .  Indenture and Note, dated January 30, 1998, between the Company and Bank Boston, N.A.
10.28 (6). .  Warrant, dated January 30, 1998, issued to BancBoston Investments, Inc.
10.29 (6). .  Purchase Agreement, dated January 30, 1998, between the Company and BancBoston
              Investments, Inc.
10.30 (5). .  Warrant, dated February 2, 1998, issued to Dresner Investments Services, Inc.
10.31 (5). .  Warrant Agreement, dated February 2, 1998, issued to Tejas Securities Group, Inc.
10.32 (5). .  Consulting and Employment Agreement, dated as of January 1, 1998 between Manuel A.
              Gonzalez and the Company
10.33 (5). .  Severance Agreement, dated as of February 1, 1998 between Manuel A. Gonzalez and the
              Company
10.34 (7). .  1998 Stock Option Plan
10.35 (7). .  Third Amendment to the Secured Revolving Credit Agreement dated May 5, 1998 between
              Sentry Financial Corporation and the Company
10.36 (7). .  Warrant, dated March 31, 1998, issued to Infinity Investors Limited
10.37 (7). .  Credit Agreement, dated as of June 9, 1998, by and among AutoBond Master Funding
              Corporation V, the Company, and Dynex Capital, Inc.
10.38 (8). .  Servicing Agreement, dated as of June 9, 1998, by and among AutoBond Master Funding
              Corporation V, the Company, and Dynex Capital, Inc.
10.39 (8). .  Trust Indenture, dated as of June 9, 1998, by and among AutoBond Master Funding
              Corporation V, the Company and Dynex Capital, Inc.
10.40 (9). .  Letter Agreement, dated June 30, 1998 by and between the Company and Dynex Capital,
              Inc.
10.41 (9). .  Letter Agreement dated October 20, 1998 by and between the Company and Dynex Capital,
              Inc.
10.42 (9). .  Letter Agreement dated October 28, 1998 by and between the Company, Dynex Holding,
              Inc., and Dynex Capital, Inc.
21.1 (4) . .  Subsidiaries of the Company
21.2 (6) . .  Additional Subsidiaries of the Company
21.3 . . . .  Additional Subsidiaries of the Company
27.1 . . . .  Financial Data Schedule
------------                                                                                            
<FN>

1  Incorporated  by  reference  from  the Company's Registration Statement on Form S-1 (Registration No.
333-05359).
2 Incorporated by reference to the Company's 1996 annual report on Form 10-K for the year ended December
31,  1996.
3  Incorporated  by reference to the Company's quarterly report on Form 10-Q for the quarter ended March
31,  1997.
4  Incorporated  by  reference to the Company's quarterly report on Form 10-Q for the quarter ended June
30,  1997.
5 Incorporated by reference to the Company's 1997 annual report on Form 10-K for the year ended December
31,  1997
6  Incorporated  by  reference  from  the Company's Registration Statement on Form S-1 (Registration No.
333-41257).
7  Incorporated  by reference to the Company's quarterly report on Form 10-Q for the quarter ended March
31,  1998
8  Incorporated  by  reference  to  the  Company's  report  on  Form  8-K  filed  on  June  24,  1998
9  Incorporated  by  reference  to  the  Company's  quarterly  report on form 10-Q for the quarter ended
September  30,  1998
--------------------------------------------------------------------------------------------------------
</TABLE>



                                    -- 45 --
<PAGE>


(b)     Reports  of  Form  8-K

     The  Company filed no reports on Form 8-K during the quarter ended December
31,  1998.

                                    -- 46 --
<PAGE>

                                   SIGNATURES
                                   ----------


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

                                                 AUTOBOND ACCEPTANCE CORPORATION
                                                  By:    /s/ William O. Winsauer
                                                    ----------------------------
                                      William O. Winsauer, Chairman of the Board
                                                     and Chief Executive Officer



Date:  April  15,  1999

     Pursuant to the requirements of the Securities Act of 1934, this report has
been  signed  below  by the following persons on behalf of the registrant in the
capacities  and  on  the  dates  indicated.


<TABLE>
<CAPTION>


<S>                      <C>                              <C>
/s/ William O. Winsauer  Chairman of the Board and        April 15, 1999
                         Chief Executive Officer
William O. Winsauer
-----------------------                                                 
/s/ Adrian Katz          Vice Chairman of the Board and   April 15, 1999
                         Chief Operating Officer and
Adrian Katz              Chief Financial Officer
-----------------------                                                 
/s/ John S. Winsauer     Secretary and Director           April 15, 1999

John S. Winsauer
-----------------------                                                 
/s/ Thomas Blinten       Director                         April 15, 1999

Thomas Blinten
-----------------------                                                 
/s/Brian O'Neil          Vice President                   April 15, 1999
                         (Principal Accounting Officer)
Brian O'Neil
-----------------------                                                 
</TABLE>



                                    -- 47 --
<PAGE>

<TABLE>
<CAPTION>

                         AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                                             Page
                                                                                             ----
<S>                                                                                          <C>
Reports of Independent Accountants                                                           F-2

Consolidated Balance Sheets as of December 31, 1997 and 1998                                 F-4

Consolidated Statements of Operations and Comprehensive Income  (loss)for the Years Ended    F-5
December 31, 1996, 1997 and 1998

Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1996, 1997  F-6
and 1998

Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998   F-8

Notes to Consolidated Financial Statements                                                   F-9
</TABLE>



     All  schedules are omitted as the required information is not applicable or
the  information  is presented in the consolidated financial statements, related
notes,  or  other  schedules.

                                    -- F-1 --
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

Board  of  Directors  and  Shareholders
AutoBond  Acceptance  Corporation  and  Subsidiaries

     We  have  audited  the accompanying consolidated balance sheets of AutoBond
Acceptance  Corporation and Subsidiaries as of December 31, 1998 and the related
consolidated  statements  of  operations  and  comprehensive  income  (loss),
shareholders' equity and cash flows for the year ended December 31, 1998. These
financial  statements  are  the  responsibility of the Company's management. Our
responsibility  is  to express an opinion on these financial statements based on
our  audit.

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

     In  our opinion, the financial statements referred to above present fairly,
in  all  material  respects,  the  consolidated  financial  position of AutoBond
Acceptance  Corporation and Subsidiaries as of December 31, 1998 and the results
of  their  operations and their cash flows for the year then ended in conformity
with  generally  accepted  accounting  principles.

     The  accompanying  consolidated  financial  statements  for  the year ended
December  31, 1998 have been prepared assuming that the Company will continue as
a  going  concern.  As  discussed  in  Note  1  to  the  consolidated  financial
statements,  the  termination of the Company's primary source of funding for its
acquisition  of  finance contracts, the ability of a lender to accelerate a debt
obligation, the possibility of certain trustees removing the company as servicer
on  certain  transactions,  and  litigation  brought  against  the  company by a
preferred  stock holder raise substantial doubt about its ability to continue as
a going concern.  Management's plans concerning these matters are also described
in  Note  1.  The financial statements do not include any adjustments that might
result  from  the  outcome  of  this  uncertainty.



Deloitte  &  Touche  LLP

Dallas,  Texas
March  30, 1999 (Except for Note 1 and the last paragraph of Note 14 as to which
the  date  is  April  7,  1999)



                                    -- F-2 --
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS

Board  of  Directors  and  Shareholders
AutoBond  Acceptance  Corporation  and  Subsidiaries


     We  have  audited  the accompanying consolidated balance sheets of AutoBond
Acceptance Corporation and Subsidiaries as of December 31, 1996 and 1997 and the
related  consolidated  statements  of  income  and  comprehensive  income,
shareholders'  equity  and  cash flows for the years ended December 31, 1996 and
1997.  These  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  based  on  our  audits.

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

     The Company's most significant warehouse and securitization facility, which
expires  March  31,  1998,  has  been extended to April 30, 1998. The Company is
currently  in  negotiations  with  other  parties  for  additional warehouse and
securitzation  facilities.

     In  our opinion, the financial statements referred to above present fairly,
in  all  material  respects,  the  consolidated  financial  position of AutoBond
Acceptance  Corporation  and  Subsidiaries as of December 31, 1996 and 1997, and
the  consolidated  results  of their operations and their cash flows for each of
the  years  ended December 31, 1995, 1996 and 1997, in conformity with generally
accepted  accounting  principles.

     As  described  in  Note  2,  the Company implemented Statement of Financial
Accounting Standards ("SFAS") No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" as of January 1, 1997.  The
Company  implemented  SFAS  No.  130,  "Reporting Comprehensive Income," for the
period  ended  December  31,  1997.



Coopers  &  Lybrand,  L.L.P.

Austin,  Texas
March  30,  1998

                                    -- F-3 --
<PAGE>

<TABLE>
<CAPTION>


                       AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS

                                                                   December 31,
                                                                  --------------        
                                                                       1997           1998
                                                                  --------------  ------------
<S>                                                               <C>             <C>
ASSETS
------                                                                                        
Cash and cash equivalents                                         $     159,293   $ 5,170,969 
Restricted funds                                                      6,904,264             - 
Receivable from Dynex                                                         -     6,573,107 
Finance contracts held for sale, net                                  1,366,114       867,070 
Collateral acquired, net                                                150,908        70,957 
Retained interest in securitizations - Trading                        7,878,306     4,586,908 
Retained interest in securitizations - Available for sale            24,138,343     9,286,443 
Debt issuance costs                                                     605,847       729,206 
Due from affiliates                                                     176,963       396,015 
Property, plant, and equipment, net                                   1,148,559     1,187,421 
Other assets                                                            681,851     1,463,046 
                                                                  --------------  ------------
Total assets                                                      $  43,210,448   $30,331,142 
                                                                  ==============  ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------                                                          
Liabilities:
Notes payable                                                     $   2,057,824   $10,166,969 
Non-recourse debt                                                     7,783,219     3,185,050 
Revolving credit facilities                                           7,639,201             - 
Payables and accrued liabilities                                      3,386,685     1,324,951 
Bank overdraft                                                        2,936,883             - 
Payable to affiliates                                                   554,233             - 
Deferred income taxes                                                 3,504,249       101,800 
                                                                  --------------  ------------
Total liabilities                                                 $  27,862,294   $14,778,770 
                                                                  --------------  ------------
Commitments and contingencies (Notes 1 and 14 )
Shareholders' equity:
Preferred stock, no par value; 5,000,000 shares authorized;       $           -   $10,856,000 
     1,125,000 shares of 15% Series A cumulative preferred
     stock, $10 liquidation preference, issued and outstanding,
     at December 31, 1998
Common stock, no par value; 25,000,000 shares authorized,                 1,000         1,000 
     6,531,311 shares issued and outstanding
Capital in excess of stated capital                                   8,781,669     8,291,481 
Due from shareholders                                                   (10,592)      (10,592)
Accumulated other comprehensive income                                1,049,256             - 
Retained earnings (accumulated deficit)                               5,526,821    (3,057,602)
Investment in common stock agreement                                          -      (527,915)
                                                                  --------------  ------------
Total shareholders' equity                                           15,348,154    15,552,372 
                                                                  --------------  ------------
Total liabilities and shareholders' equity                        $  43,210,448   $30,331,142 
                                                                  ==============  ============

<FN>

     The accompanying notes are an integral part of the consolidated financial statements
</TABLE>



                                    -- F-4 --
<PAGE>


<TABLE>
<CAPTION>


                             AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

                                                                                  Years Ended December 31,
                                                                                  ------------------------

                                                                    1996          1997           1998
                                                                ------------  ------------  --------------
<S>                                                             <C>           <C>           <C>
Revenues:
     Interest income . . . . . . . . . . . . . . . . . . . . .  $ 2,519,612   $ 4,118,795   $   1,498,985 
     Gain on sale of finance contracts . . . . . . . . . . . .   12,820,700    18,666,570      17,985,045 
     Servicing income. . . . . . . . . . . . . . . . . . . . .      657,950     1,131,142       3,222,669 
     Other income (loss) . . . . . . . . . . . . . . . . . . .      388,278      (173,146)        347,779 
                                                                ------------  ------------  --------------
               Total revenues. . . . . . . . . . . . . . . . .   16,386,540    23,743,361      23,054,478 
                                                                ------------  ------------  --------------

Expenses:
     Provision for credit loss . . . . . . . . . . . . . . . .      412,387       612,715         100,000 
     Interest expense. . . . . . . . . . . . . . . . . . . . .    2,382,818     3,879,543       3,117,211 
     Salaries and benefits . . . . . . . . . . . . . . . . . .    4,529,006     7,357,284      10,471,615 
     General and administrative. . . . . . . . . . . . . . . .    2,331,246     6,075,125       6,782,015 
     Impairment of retained interest in securitizations. . . .            -     1,312,234       9,932,169 
     Other operating expenses. . . . . . . . . . . . . . . . .    1,119,644     2,005,237       3,422,260 
                                                                ------------  ------------  --------------
               Total expenses. . . . . . . . . . . . . . . . .   10,775,101    21,242,138      33,825,270 
                                                                ------------  ------------  --------------
Income (loss) before income taxes. . . . . . . . . . . . . . .    5,611,439     2,501,223     (10,770,792)
Provision (benefit) for income taxes . . . . . . . . . . . . .    1,926,553       888,170      (3,626,369)
                                                                ------------  ------------  --------------
Income (loss) before extraordinary loss. . . . . . . . . . . .    3,684,886     1,613,053    (  7,144,423)
Extraordinary loss, net of tax . . . . . . . . . . . . . . . .     (100,000)            -               - 
                                                                ------------  ------------  --------------
                       Net income. . . . . . . . . . . . . . .    3,584,886     1,613,053    (  7,144,423)
                       Preferred Stock Dividend. . . . . . . .            -             -      (1,440,000)
                                                                ------------  ------------  --------------
Net income (loss) available to common shareholders. . . . . . . $ 3,584,886   $ 1,613,053     ($8,584,423)
                                                                ============  ============  ==============

Weighted average number of common shares:
               Basic . . . . . . . . . . . . . . . . . . . . .    5,791,189     6,516,056       6,531,311 
               Diluted . . . . . . . . . . . . . . . . . . . .    5,809,157     6,965,877       6,531,311 
Earnings (loss) per common share:
               Basic . . . . . . . . . . . . . . . . . . . . .  $      0.62   $      0.25          ($1.31)
               Diluted . . . . . . . . . . . . . . . . . . . .  $      0.62   $      0.25          ($1.31)

Net income (loss). . . . . . . . . . . . . . . . . . . . . . .  $ 3,584,886   $ 1,613,053     ($7,144,423)
Other comprehensive income, net of tax:
               Unrealized gain (loss) on retained interest in
               securitizations . . . . . . . . . . . . . . . .            -     1,049,256      (1,049,256)
                                                                ------------  ------------  --------------
Other comprehensive income (loss). . . . . . . . . . . . . . .            -     1,049,256      (1,049,256)
                                                                ------------  ------------  --------------
Comprehensive income (loss). . . . . . . . . . . . . . . . . .  $ 3,584,886   $ 2,662,309     ($8,193,679)
                                                                ============  ============  ==============

<FN>

         The  accompanying  notes  are  an  integral  part  of  the  consolidated  financial  statements.
</TABLE>


                                    -- F-5 --
<PAGE>

<TABLE>
<CAPTION>

                       AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                                      Year Ended December 31,

                                                         1996         1997          1998
                                                      -----------  -----------  -------------
<S>                                                   <C>          <C>          <C>
Preferred stock (Shares):
----------------------------------------------------                                         
  Beginning balance. . . . . . . . . . . . . . . . .           -            -              - 
  Issuance of preferred stock in public offering . .           -            -      1,250,000 
                                                      -----------  -----------  -------------
  Ending balance . . . . . . . . . . . . . . . . . .           -            -      1,250,000 
----------------------------------------------------  -----------  -----------  -------------
Common stock (Shares):
----------------------------------------------------                                         
  Beginning balance. . . . . . . . . . . . . . . . .   5,118,753    6,512,500      6,531,311 
  Stock issued pursuant to employee contract . . . .     568,747            -              - 
   Issuance of common stock in public offering . . .     825,000            -              - 
  Exercise of common stock warrants. . . . . . . . .           -       18,811              - 
                                                      -----------  -----------  -------------
  Ending balance . . . . . . . . . . . . . . . . . .   6,512,500    6,531,311      6,531,311 
----------------------------------------------------  -----------  -----------  -------------
Preferred stock:
----------------------------------------------------                                         
  Beginning balance. . . . . . . . . . . . . . . . .           -            -              - 
  Issuance of preferred stock in public offering . .           -            -     10,856,000 
                                                      -----------  -----------  -------------
   Ending balance. . . . . . . . . . . . . . . . . .           -            -   $ 10,856,000 
----------------------------------------------------  -----------  -----------  -------------
Common stock (stated capital):
----------------------------------------------------                                         
  Beginning balance. . . . . . . . . . . . . . . . .       1,000        1,000          1,000 
                                                      -----------  -----------  -------------
  Ending balance . . . . . . . . . . . . . . . . . .  $    1,000   $    1,000   $      1,000 
----------------------------------------------------  -----------  -----------  -------------
Capital in excess of stated capital:
----------------------------------------------------                                         
  Beginning balance. . . . . . . . . . . . . . . . .   2,912,603    8,617,466      8,781,669 
  Issuance cost of preferred stock . . . . . . . . .           -            -     (1,201,451)
  Issuance of common stock in public offering. . . .   5,704,863            -              - 
  Issuance of common stock warrants. . . . . . . . .           -      164,203        711,263 
                                                      -----------  -----------  -------------
  Ending balance . . . . . . . . . . . . . . . . . .  $8,617,466   $8,781,669   $  8,291,481 
----------------------------------------------------  -----------  -----------  -------------
Deferred compensation:
----------------------------------------------------                                         
Beginning balance. . . . . . . . . . . . . . . . . .     (62,758)     (11,422)             - 
Amortization of deferred compensation. . . . . . . .      51,336       11,422              - 
                                                      -----------  -----------  -------------
Ending Balance . . . . . . . . . . . . . . . . . . .  $  (11,422)           -              - 
----------------------------------------------------  -----------  -----------  -------------
Due from shareholders:
----------------------------------------------------                                         
Beginning balance. . . . . . . . . . . . . . . . . .    (153,359)    (378,618)       (10,592)
Payments from(to) shareholders . . . . . . . . . . .    (225,259)     368,026              - 
                                                      -----------  -----------  -------------
Ending balance . . . . . . . . . . . . . . . . . . .   ($378,618)    ($10,592)      ($10,592)
----------------------------------------------------  -----------  -----------  -------------
Accumulated other comprehensive income, net of tax:
----------------------------------------------------                                         
Beginning balance. . . . . . . . . . . . . . . . . .           -            -      1,049,256 
   Other comprehensive income (loss) . . . . . . . .           -    1,049,256     (1,049,256)
                                                      -----------  -----------  -------------
Ending balance . . . . . . . . . . . . . . . . . . .           -    1,049,256              - 
----------------------------------------------------  -----------  -----------  -------------
Accumulated deficit:
----------------------------------------------------                                         
   Beginning balance . . . . . . . . . . . . . . . .     328,882    3,913,768      5,526,821 
Dividends. . . . . . . . . . . . . . . . . . . . . .           -            -     (1,440,000)
Net income(loss) . . . . . . . . . . . . . . . . . .   3,584,886    1,613,053     (7,144,423)
                                                      -----------  -----------  -------------
Ending balance . . . . . . . . . . . . . . . . . . .  $3,913,768   $5,526,821    ($3,057,602)
----------------------------------------------------  -----------  -----------  -------------
</TABLE>

                                    -- F-6 --
<PAGE>




<TABLE>
<CAPTION>


                AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                   (CONTINUED)

<S>                                    <C>          <C>          <C>
Investment in common stock agreement:
-------------------------------------                                        
Beginning balance . . . . . . . . . .            -            -            - 
Investment in common stock agreement.            -            -     (527,915)
                                       -----------  -----------  ------------
Ending balance. . . . . . . . . . . .            -            -     (527,915)
                                       -----------  -----------  ------------
Total shareholders' equity. . . . . .  $12,142,194  $15,348,154  $15,552,372 
                                       ===========  ===========  ============

<FN>

               The  accompanying  notes are an integral part of the consolidated
financial  statements.
</TABLE>



                                    -- F-7 --
<PAGE>

<TABLE>
<CAPTION>



                                AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                     YEAR ENDED
                                                                    -------------                       
                                                                        1996           1997           1998
                                                                    -------------  -------------  -------------
<S>                                                                 <C>            <C>            <C>
OPERATING ACTIVITIES:
Net Income (Loss). . . . . . . . . . . . . . . . . . . . . . . . .  $  3,584,886   $  1,613,053   $ (7,144,423)
Reconcile net income (loss) to net cash from operating activities
  Amortization of finance contract acquisition discount and. . . .      (358,949)       (11,472)      (126,215)
  insurance
  Amortization of debt issuance costs and discounts. . . . . . . .       497,496        818,481        794,840 
  Accretion of retained interest in securitization . . . . . . . .      (154,029)      (546,507)      (127,980)
  Provision for credit loss. . . . . . . . . . . . . . . . . . . .       412,387        612,715        100,000 
  Depreciation and amortization. . . . . . . . . . . . . . . . . .        51,336        300,300        484,237 
  Impairment of retained interests in securitizations. . . . . . .             -      1,312,234      9,932,169 
  Gain on sale of finance contracts. . . . . . . . . . . . . . . .   (12,820,700)   (18,666,570)   (17,985,045)
  Deferred income taxes. . . . . . . . . . . . . . . . . . . . . .     1,876,552        888,171     (2,861,923)
  Restricted funds . . . . . . . . . . . . . . . . . . . . . . . .    (1,298,613)    (3,922,814)     6,904,264 
  Finance contracts held for sale, net . . . . . . . . . . . . . .    16,127,169     16,607,446     18,510,304 
  Retained interest in securitizations . . . . . . . . . . . . . .   (12,981,441)   (14,250,024)     6,749,327 
  Receivable from Dynex. . . . . . . . . . . . . . . . . . . . . .             -              -     (6,573,107)
  Due from affiliates. . . . . . . . . . . . . . . . . . . . . . .        14,899         25,300       (219,052)
  Other assets . . . . . . . . . . . . . . . . . . . . . . . . . .      (329,747)    (1,435,334)    (1,100,794)
  Payables and accrued liabilities . . . . . . . . . . . . . . . .      (361,495)     1,912,098     (2,061,734)
  Payable to affiliates. . . . . . . . . . . . . . . . . . . . . .        10,401        288,235       (554,233)
                                                                    -------------  -------------  -------------
CASH PROVIDED (USED) BY OPERATIONS . . . . . . . . . . . . . . . .    (5,729,848)   (14,454,688)     4,720,635 
                                                                    -------------  -------------  -------------
INVESTING ACTIVITIES:
  Proceeds from disposal of collateral . . . . . . . . . . . . . .       646,600        321,870         79,951 
  Decrease (increase) in due from shareholder. . . . . . . . . . .      (225,259)       191,062              - 
                                                                    -------------  -------------  -------------
CASH PROVIDED BY INVESTING . . . . . . . . . . . . . . . . . . . .       421,341        512,932         79,951 
                                                                    -------------  -------------  -------------
FINANCING ACTIVITIES:
  Net (payments) on revolving credit facilities. . . . . . . . . .    (1,150,421)     7,639,201     (7,639,201)
  Payments for debt issue costs. . . . . . . . . . . . . . . . . .      (794,834)      (426,990)      (608,170)
  Proceeds from notes payable. . . . . . . . . . . . . . . . . . .    12,575,248      2,015,150     10,500,000 
  Payments on notes payable. . . . . . . . . . . . . . . . . . . .    (5,075,212)    (2,348,740)    (7,162,148)
  Repurchase agreements. . . . . . . . . . . . . . . . . . . . . .    (1,061,392)             -              - 
  Decrease in bank overdraft . . . . . . . . . . . . . . . . . . .      (861,063)     2,936,883     (2,936,883)
  Proceeds from public offering of preferred stock, net. . . . . .     5,704,863              -      9,631,407 
  Dividends paid on preferred stock. . . . . . . . . . . . . . . .             -              -     (1,440,000)
  Proceeds from issuance of common stock warrants. . . . . . . . .             -        164,203        394,000 
  Investment in common stock agreement . . . . . . . . . . . . . .             -              -       (527,915)
                                                                    -------------  -------------  -------------
 CASH PROVIDED BY (USED IN) FINANCING. . . . . . . . . . . . . . .     9,337,189      9,979,707        211,090 
                                                                    -------------  -------------  -------------
INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . .     4,028,682     (3,962,049)     5,011,676 
BEGINNING CASH BALANCE . . . . . . . . . . . . . . . . . . . . . .        92,660      4,121,342        159,293 
                                                                    -------------  -------------  -------------
ENDING CASH BALANCE. . . . . . . . . . . . . . . . . . . . . . . .  $  4,121,342   $    159,293   $  5,170,969 
                                                                    =============  =============  =============
<FN>

             The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
                                    -- F-8 --
<PAGE>







                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.     Termination  of  Dynex  Funding  Agreement

     AutoBond  Acceptance  Corporation  (the "Company") was incorporated in June
1993  and  commenced operations August 1, 1994. The Company and its wholly-owned
subsidiaries,  AutoBond Funding Corp I ("ABF I"), AutoBond Funding Corp II ("ABF
II"),  and  AutoBond Funding Corp III ("ABF III") (collectively, the "Company"),
engage  primarily  in  the  business  of  acquiring, selling or securitizing and
servicing automobile installment sale contracts ("finance contracts") originated
by  franchised  automobile  dealers.  The  Company  specializes  in contracts to
consumers  who  generally  have limited access to traditional financing, such as
that  provided  by  commercial  banks or captive finance companies of automobile
manufacturers.  The Company purchases contracts directly from automobile dealers
or  from  other  originators,  with  the  intent  to  resell  them.

     The  accompanying consolidated financial statements have been prepared on a
going  concern  basis,  which  contemplates  the  realization  of assets and the
satisfaction  of  liabilities  in  the  normal course of business.  As discussed
herein,  the  Company's primary source of funding for its acquisition of finance
contracts terminated funding in February 1999.  In addition, the Company did not
meet  certain of its financial covenants, which may give a lender the ability to
accelerate  a  debt obligation (see Note 7).  Also, as further discussed in Note
14,  trustees  on  certain  of  the  Company's securitizations have notified the
Company  of  alleged  events which may constitute events of servicer termination
under  certain  securitization  transactions.  The  trustees  have threatened to
remove  the  Company  as  servicer  on certain transactions and, at December 31,
1998,  have withheld certain servicing fees due the Company.  Also, as discussed
in Note 14, the Company has filed litigation against a former deficiency balance
insurer  concerning  unpaid  claims  for reimbursement of losses incurred by the
Company  on  securitized  finance  contracts  and  the Company has been named in
litigation  brought  by  a 15% Series A Cumulative Preferred stockholder.  These
factors among others may indicate that the Company will be unable to continue as
a  going  concern  for  a  reasonable  period  of  time.

     The  financial  statements  do  not include any adjustments relating to the
recoverability  of  recorded  asset  amounts  or the amounts of liabilities that
might  be necessary should the Company be unable to continue as a going concern.
The  Company's  continuation as a going concern is dependent upon its ability to
generate  sufficient  cash  flow  to  meet its obligations on a timely basis, to
comply  with  the  terms  and  covenants  of its financing agreements, to obtain
additional financing or refinancing as may be required, and ultimately to attain
successful  operations.  Management  is  continuing  its  efforts  to  obtain
additional  funds  so  that  the  Company can sustain such operations as further
described  below.

     The  Company's primary source for funding its finance contracts during 1998
was  Dynex  Capital, Inc. ("Dynex"). The Company, at Dynex' request, amended the
original financing agreements to accommodate certain of Dynex' liquidity issues.
The  terms were last modified on October 28, 1998. With respect to new financing
requests,  since the fourth quarter of 1998 a number of these requests have been
funded  slower  than  the  prescribed  timeframe  (2  days)  in  the  financing
agreements.  The last filled financing request was January 29, 1999. In February
1999,  Dynex  informed  the Company that no further fundings would be made. As a
result  of  Dynex'  failure to fund the Company's finance contracts, the Company
filed suit in District Court of Travis County demanding performance.  Dynex also
has  purported  to accelerate the $3 million Senior Note payable by the Company.
The  Company  disputes  the  validity  of  such  acceleration.

     Since  early February 1999, the Company's management has been attempting to
procure  alternative  sources  of  funding  and other strategic alternatives, in
order  to  mitigate  the  situation  with  Dynex.  The  Company  is currently in
discussions  with  several  investment bankers and direct sources regarding such
alternatives  which  may  include  joint  ventures, or changes in control of the
Company.  While  management  hopes  that  an  alternative  opportunity  will  be
consummated,  the  Company  has  suspended  acquisitions  and 
                                    -- F-9 --
<PAGE>
dispositions  of  finance  contracts  until  alternative  funding  sources  are
obtained, however, there can be no assurance that such funding will be obtained.
As  a consequence, the Company expects to report a loss for the first quarter of
1999  and  will  not pay the quarterly dividend on its preferred stock otherwise
payable  on March 31, 1999. Unless financing or other strategic alternatives are
found  the  Company may not continue its business of originating loans and would
take  steps  to reduce its personnel and operating expenses associated with such
activities.  Also,  parties to the Company's various securitization transactions
could request that the Company surrender servicing, although management does not
believe  such parties have the right to terminate servicing under the respective
agreements.  The  Company  expects  to  continue  its  servicing  operations.

     Management  believes  the  Company  has  sufficient  liquidity  to meet its
obligations  and  continue  its  servicing activities for a reasonable period of
time.



2.     Summary  of  Significant  Accounting  Policies


Principals  of  Consolidation

     The  consolidated  financial statements include the accounts of the Company
and  its  wholly-owned  subsidiaries.  All significant intercompany balances and
transactions  have  been  eliminated  in  consolidation.


Pervasiveness  of  Estimates

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

     The  Company  records  the  present value of estimated future cash flows in
connection with its determination of the carrying value of its retained interest
in  securitizations. Such estimation considers significant assumptions about the
future  performance  of finance contracts, including prepayments, default rates,
collections  on  repossessions  of automobiles, delinquencies and timing of cash
receipts.  Since  such  assumptions may not predict actual performance, it is at
least  reasonably  possible  that the carrying value of the retained interest in
securitizations  will  be  adjusted  in  the  near  term and the change could be
material  to  the  results  of  operations.


Risks  and  Uncertainties

     The  Company  requires access to significant sources and amounts of cash to
fund  its  operations  and  to acquire and sell or securitize finance contracts.
The Company's primary operating cash requirements include the funding of (i) the
acquisition  of  finance  contracts,  (ii)  the initial cash deposits to reserve
accounts  in connection with the warehousing and securitization  of contracts in
order  to  obtain such sources of financing, (iii) fees and expenses incurred in
connection with the warehousing and securitization of contracts and (iv) ongoing
administrative  and  other  operating  expenses.  The  Company has traditionally
obtained  these  funds  in  three  ways:  (a)  loans  and  warehouse  financing
arrangements, pursuant to which acquisition of finance contracts are funded on a
temporary  basis; (b) securitizations or sales of finance contracts, pursuant to
which finance contracts are funded on a permanent basis; and (c) general working
capital,  which  if  not  obtained  from operations, may be obtained through the
issuance  of  debt or equity.  Failure to procure funding from all or any one of
these  sources  could  have  a  material  adverse  effect  on  the  Company.
                                   -- F-10 --
<PAGE>
Cash  and  Cash  Equivalents

     The  Company  considers  highly liquid investments with maturities of three
months  or  less  when  purchased  to  be  cash  equivalents.


Restricted  Cash

     In  accordance  with  certain of the Company's revolving credit facilities,
proceeds  advanced  by  the  lender for purchase of finance contracts were to be
held  by  a  trustee until the Company delivers qualifying collateral to release
the  funds,  normally  in  a  matter  of  days. The Company was also required to
maintain  a  cash reserve up to 10% of the proceeds received from the lender for
the  origination  of the finance contracts. Access to these funds was restricted
by  the  lender.  The  Company  is  not  currently  using  its  revolving credit
facilities,  and  therefore  has  no  restricted  cash  at  December  31,  1998.


Finance  Contracts  Held  for  Sale

     Finance  contracts  held for sale are stated at the lower of amortized cost
or  market value. Market value is determined based on the estimated value of the
finance  contracts  as  if  securitized and sold. The Company generally acquires
finance contracts at a discount, and (except for loans sold to Dynex)  purchased
loss default and vender single interest physical damage insurance on the finance
contracts.  The  purchase discount and insurance were amortized as an adjustment
to  the  related  finance  contract's yield and operating expense, respectively,
utilizing the same basis as that used to record income on the finance contracts,
over the contractual life of the related finance contracts. At the time of sale,
any  remaining  unamortized  amounts  are  netted against the finance contract's
principal  amounts  outstanding to determine the resultant gain or loss on sale.

     Allowance  for  credit  losses  on  the  finance  contracts is based on the
Company's  historical  default  rate,  the  liquidation  value of the underlying
collateral  in  the  existing  portfolio,  estimates  of  repossession costs and
probable  recoveries  from  insurance  proceeds.  The  allowance is increased by
provisions  for estimated future credit losses which are charged against income.
The  allowance  account  is  reduced  for  direct charge-offs using the specific
identification method, and for estimated losses upon repossession of automobiles
which  is  netted  against  the  related  finance  contracts  and transferred to
collateral  acquired.


Collateral  Acquired

     Automobiles  repossessed  and  held  for sale are initially recorded at the
carrying  value  of in the finance contracts on the date of repossession less an
allowance.  This  value approximates the expected cash proceeds from the sale of
the  assets and applicable insurance payments, net of all disposition costs. Due
to  the  relatively  short  time  period between acquisition and disposal of the
assets, discounting of the expected net cash proceeds to determine fair value is
not  utilized.

     Subsequent  impairment  reviews  are performed quarterly on a disaggregated
basis.  A  valuation  allowance is established if the carrying amount is greater
than the underlying fair value of the assets. Subsequent increases and decreases
in  fair  value  result  in  an  adjustment  of the valuation allowance which is
recorded in earnings during the period of adjustment. Adjustments for subsequent
increases  in fair value are limited to the existing valuation allowance amount,
if  any.
                                   -- F-11 --
<PAGE>



Retained  interest  in  securitizations

     The  Company  adopted  Statement of Financial Accounting Standards No. 125,
"Accounting  for  Transfers and Servicing of Financial Assets and Extinguishment
of  Liabilities"  ("SFAS  No.  125"),  as  amended.  SFAS  No.  125  applies  a
control-oriented,  financial-components  approach  to  financial-asset-transfer
transactions  whereby  the  Company  (1)  recognizes the financial and servicing
assets  it  controls  and  the  liabilities  it  has  incurred, (2) derecognizes
financial  assets  when  control  has  been  surrendered,  and  (3) derecognizes
liabilities  once  they  are  extinguished.  Under  SFAS  No.  125,  control  is
considered  to  have  been  surrendered only if: (i) the transferred assets have
been isolated from the transferor and its creditors, even in bankruptcy or other
receivership  (ii)  the  transferee  has  the  right  to  pledge or exchange the
transferred  assets, or, is a qualifying special-purpose entity (as defined) and
the  holders  of beneficial interests in that entity have the right to pledge or
exchange  those  interests; and (iii) the transferor does not maintain effective
control over the transferred assets through an agreement which both entitles and
obligates  it to repurchase or redeem those assets prior to maturity, or through
an  agreement which both entitles and obligates it to repurchase or redeem those
assets if they were not readily obtainable elsewhere. If any of these conditions
are  not  met,  the  Company  accounts  for the transfer as a secured borrowing.

     Pursuant  to  certain  securitization transactions, the related trusts have
issued  Class B certificates to the Company which are subordinate to the Class A
Certificates and senior to the retained interest in securitizations with respect
to  cash  distributions  from  the  trust.  The Company accounts for the Class B
certificates  as trading securities with any unrealized gain or loss recorded in
the  statements  of  operations  in  the  period  of  the  change in fair value.

     All  other  retained  interests  in  securitizations  are  accounted for as
investment  securities  classified  as  "available  for  sale". Accordingly, any
unrealized  gain  or  loss  in  the  fair value is included in accumulated other
income,  a  component  of  equity,  net of the income tax effect. Any impairment
deemed  permanent  is  recorded  as  a  charge  against  earnings.

     The  fair value of retained interest in securitizations is calculated based
upon  the present value of the estimated future cash flows after considering the
effects  or estimated prepayments, defaults and delinquencies. The discount rate
utilized  is  based  upon  assumptions  that  market  participants would use for
similar financial instruments subject to prepayments, defaults, collateral value
and  interest  rate  risks.

Bank  Overdraft
     Bank  overdrafts  result  from  checks prepared but not sent to the related
creditor.

Debt  Issuance  Costs
     The  costs  related  to  the issuance of debt are capitalized and amortized
into  interest  expense  over the lives of the related debt. Debt issuance costs
related  to  warehouse  credit  facilities are amortized using the straight-line
method  over  the  term  of  commitment.

Property,  Plant  and  Equipment,  Net
     Property,  plant  and  equipment  are  stated  at  cost  less  accumulated
depreciation.  Expenditures for additions and improvements are capitalized while
minor  replacements,  maintenance and repairs which do not improve or extend the
life of such assets are charged to expense. Gains or losses on disposal of fixed
assets  are  reflected  in  operations.  Depreciation  is  computed  using  the
straight-line  method over the estimated useful lives of the depreciable assets,
ranging  from 3 to 5 years. Leasehold improvements are depreciated over the term
of  the  lease.

     In  the  event  that  facts  and  circumstances  indicate  that the cost of
long-lived  assets  may  be  impaired,  an evaluation of recoverability would be
performed.  If  an  evaluation  of  impairment is required, the estimated future
undiscounted  cash  flows  associated  with  the  asset would be compared to the
asset's  carrying  amount  to  determine  if  a  write-down  to  market value or
discounted cash flow value is required. No such write-downs were recorded during
the  years  ended  December  31,  1996,  1997  and  1998.
                                   -- F-12 --
<PAGE>

Advertising
     Advertising  costs  are  expensed  as  incurred.

Income  Taxes
     The Company uses the liability method in accounting for income taxes. Under
this  method,  deferred tax assets and liabilities are recognized for the future
tax  consequences  attributable  to  differences between the financial statement
carrying  amounts  of  existing  assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to  apply  to  taxable  income  in  the years in which those temporary
differences  are  expected  to be recovered or settled. Valuation allowances are
established,  when  necessary,  to  reduce  deferred  tax  assets  to the amount
expected  to  be  realized.  The  provision  for income taxes represents the tax
payable for the period and the change during the year in deferred tax assets and
liabilities.  The  Company  files  a  consolidated  federal  income  tax return.

Earnings  per  Share
     Basic  earnings  per  share  excludes  dilution and is computed by dividing
income available to common shareholders by the weighted-average number of common
shares  outstanding  for  the  period.  Diluted  earnings per share reflects the
potential  dilution  that  could occur if securities or other contracts to issue
common  stock  were  exercised or converted into common stock or resulted in the
issuance  of  common  stock  that  then  shared  in the earnings of the Company.

Interest  Income
     The Company generally uses the simple interest method to determine interest
income  on  finance contracts acquired. The Company discontinued the  accrual of
interest  on  finance  contracts  in  1998  as  loans  are  sold  shortly  after
origination.

Concentration  of  Credit  Risk
     The  Company  generally  acquires  finance  contracts  from  a  network  of
automobile  dealers  located  in  40  states.  Finance  contracts  acquired with
borrowers in Texas totaled 38% and 50% of the portfolio at December 31, 1997 and
1998, respectively. The Company had no dealer concentrations which accounted for
more  than  10%  of  the  portfolio  at  December  31,  1997  and  1998.

Reclassifications
     Certain  reclassifications  have  been  made  to  prior  years'  financial
statements  to  conform  with  the  current  year's  presentation.



3.  Recent  Accounting  Pronouncements

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS  No. 133 requires than an entity recognize all derivatives as either assets
or  liabilities  in  its  balance sheet and that it measure those instruments at
fair  value.  The accounting for changes in the fair value of a derivative (that
is,  gains  and losses) is dependent upon the intended use of the derivative and
the  resulting  designation.  SFAS  No.  133 generally provides for matching the
timing  of  gain  or  loss  recognition  on  the  hedging  instrument  with  the
recognition  of  (1)  the  changes  in  the  fair  value  of the hedged asset or
liability that are attributable to the hedged risk or (2) the earnings effect of
the  hedged  forecast  transaction.  SFAS  No.  133  is effective for all fiscal
quarters  of  fiscal  years  beginning  after  June  15,  1999, although earlier
application  is  encouraged.  The Company plans to comply with the provisions of
SFAS No. 133 upon its initial use of derivative instruments.  As of December 31,
1998,  no  such  instruments  were  being  utilized  by  the  Company.
                                   -- F-13 --
<PAGE>



4.  Finance  Contracts  Held  for  Sale



<TABLE>
<CAPTION>


     The  following  amounts  are included in finance contracts held for sale as
of:

                                 December 31,
                                     1996          1997        1998
                                --------------  -----------  ---------
<S>                             <C>             <C>          <C>
Unpaid principal balance . . .  $     266,450   $1,946,135   $944,830 
Prepaid insurance. . . . . . .         18,733            -          - 
Contract acquisition discounts        (31,554)    (129,899)   (64,067)
Allowance for credit losses. .        (25,200)    (450,122)   (13,693)
                                --------------  -----------  ---------
                                $     228,429   $1,366,114   $867,070 
                                ==============  ===========  =========
</TABLE>



<TABLE>
<CAPTION>

The  activity in the allowance for credit losses for the years ended December 31
is  summarized  as  follows:


                                     December 31,

                               1996        1997        1998
                             ---------  ----------  ----------
<S>                          <C>        <C>         <C>
Beginning Balance . . . . .    93,702   $  25,200   $ 450,122 
Provision for Credit Losses   412,387     612,715     100,000 
Net Charge Offs . . . . . .  (480,889)   (187,793)   (536,429)
                             ---------  ----------  ----------
Ending Balance. . . . . . .    25,200     450,122      13,693 
                             =========  ==========  ==========
</TABLE>




5.  Retained  interest  in  securitizations


     The  changes  in  retained  interest  in  securitizations  follow:

<TABLE>
<CAPTION>

                                                         Year Ended December 31,

                                                        1997          1998
                                                    ------------  -------------
<S>                                                 <C>           <C>
Beginning balance. . . . . . . . . . . . . . . . .  $16,942,571   $ 32,016,649 
Unrealized gain (loss) . . . . . . . . . . . . . .    1,589,782     (1,589,782)
Changes from securitization and sale transactions.   14,250,024      8,621,373 
Proceeds from retained interests                                   (15,370,700)
Accretion of discount. . . . . . . . . . . . . . .      546,506        127,980 
Impairment charge. . . . . . . . . . . . . . . . .   (1,312,234)    (9,932,169)
                                                    ------------  -------------
Ending balance . . . . . . . . . . . . . . . . . .  $32,016,649   $ 13,873,351 
                                                    ============  =============
Consisting of:
         Trading . . . . . . . . . . . . . . . . .  $ 7,878,306   $  4,586,908 
         Available for sale. . . . . . . . . . . .   24,138,343      9,286,443 
                                                    ------------  -------------
                                                    $32,016,649   $ 13,873,351 
                                                    ============  =============
</TABLE>
                                   -- F-14 --
<PAGE>


     The Company periodically reviews the fair value of the retained interest in
securitizations.  The  difference  in the fair value of securities available for
sale  and  the  historical  carrying  value  on a disaggregated basis, where any
reduction  in  value  does  not  result  in  an  impairment  that  is other than
temporary,  is  recognized  as  an adjustment to accumulated other comprehensive
income,  a  separate  component  of shareholder's equity. The Company recorded a
charge  against  earnings  for  permanent  impairment  of  retained  interest in
securitizations,  determined  on  a  disaggregated  basis,  of  $1,312,234  and
$9,932,169  for  the  years  ended  December  31,  1997  and  1998 respectively.

     The  Company's  retained interests in securitizations represent the present
value  of  expected  future  cash  flows  to  the  Company from sales of finance
contracts.  The  amount  of  these  retained  interests  may  be  increased  by
additional  sales or securitizations.  The amount of these retained interests of
finance  contracts  may decrease due to the Company's receipt of cash flows from
their  investment.  Retained  interests in securitizations will also decrease in
the  case  of  impairments  caused  by  a  revaluation of the future cash flows.

     The  Company  utilizes  a  financial model to project the cash flows from a
pool  of  finance  contracts.  This  model  projects  cash flows for contractual
parties  including  investors,  trustees and servicers, as well as the Company's
retained  interests.  As  is  the  case  with  most  financial  models,  its
effectiveness  is primarily driven by the performance over time of key financial
model  assumptions,  including:  default  rates;  delinquency  rates; prepayment
rates;  discount  rates; initial, ongoing and minimum cash reserve requirements;
the  interest  rate earned on cash reserves; recovery amounts for repossessions;
repossession  recovery  lags;  insurance  claims  recovery  amounts,  insurance
recovery  lags; and on-going servicing/trustee fees. Periodically, the Company's
financial models and related assumptions have been updated to reflect the actual
performance  characteristics  of  the  finance  contracts.  All  valuations  are
conducted  on  a  disaggregated  basis.

     The  Company's  term  securitizations have involved the placement of excess
spread  backed-notes,  sometimes  referred  to  as "B Pieces" with institutional
investors.  All  assumptions  used  to  size  and  sell  these  "B  Pieces" were
identical  to  the  initial  gain-on-sale  assumptions  the Company applied with
respect to retained interests. The discount rates applied for retained interests
ranged  from  15% to 17%.  The non-vector equivalent of annualized default rates
typically  ranged  from  10%  to 12%. The default rate assumptions are estimated
based  on the historical static pool results. Repossession recovery ratios, with
deficiency  insurance  proceeds  reflected,  typically  ranged  from 80% to 90%.

     There  were  two  primary  causes  of  the  impairment  charges to retained
interest in securitizations during the year ended December 31, 1998. The Company
has  been  engaged  in  litigation  with  Progressive Northern Insurance Company
("Progressive")  regarding  the interpretation of default insurance coverage the
Company  acquired  to  enhance  recoveries.  During  the  earlier  stages of the
dispute,  Progressive  continued  to  pay  claims.  However,  in  April  1998
Progressive  stopped  paying  claims.  The  immediate impact of the loss of cash
flow  from Progressive was the necessity to draw funds from the applicable trust
cash  reserves  to  pay  senior  security  holders.  The Company is the ultimate
beneficiary  of the cash reserves, and such reserves will need to be replenished
before  cash flows may resume to the other certificate holders and ultimately to
the  Company.  The  depletion  and expected delay in receiving any ultimate cash
flows reduced the value of the retained interests.  The Company has continued to
include  the  expected  cash  flows from Progressive Insurance in its cash flows
models.  Even  though  the Company and its legal counsel are optimistic that the
Company  will  prevail  in  its  litigation,  at  this time, Progressive has not
resumed  payment  of  claims.  Should the Company's interpretation be incorrect,
the  Company would need to reassess the carrying value of its retained interest
in  securitizations  under  new  assumptions  and the result of this revaluation
could  be  material.

     The second additional factor was the transfer of servicing functions to the
Company  from a third party service provider, Loan Servicing Enterprise ("LSE").
In  March  1998,  the  Company  commenced  litigation against LSE, pertaining to
breaches  of its servicing obligations.  As the Company assumed all servicing it
accelerated  the  recording  of  charge-offs  as  compared  with  prior periods.
Accelerated  charge-offs  result  in any available cash flow going to the senior
investors  that otherwise would go to subordinate investors or to the benefit of
the  Company.  In  attempting  to  resolve certain of these issues with Moody's 
                                   -- F-15 --
<PAGE>
Investors  Service  ("Moody's"),  the  agency  rating the senior securities, the
Company committed to Moody's in May 1998 that it would not release monies to the
"B  Piece" investors until all charge-offs have been reflected in the cash flows
attributable  to the senior investors. The delay of payments to the subordinated
investors causes accretion of the principal amount of their high interest-rate B
Pieces  and  a corresponding impairment of the Company's retained interest.  The
accelerated  charge-offs  and  the  Company's  decision in May 1998 to commit to
Moody's to withhold monies from the B Pieces, resulted in a direct impact on the
valuation  of  the  retained  interests.  A  total of eight securitizations were
impacted  by  this  action.

     The Company has engaged counsel to perform the deal-by-deal analysis of the
structural  and  legal  integrity of these transactions and resolve the concerns
raised  by  Moody's.  In  the  meantime,  the  Company  has been notified by the
trustees  on  certain  of the securitizations that the action of Moody's and the
alleged  causes  constituted  events  of  servicer  termination  under  such
transactions.  The trustees have threatened to remove the Company as servicer on
certain  transactions,  and  have  withheld  administrator  fees and expenses of
approximately  $900,000  as of December 31, 1998, due to the Company.  Since the
Company is of the view that no events of servicing termination have occurred and
that the transactions documents did not intend for servicing compensation to the
Company  to  be  cut  off  where  the cause of an event of default is due to the
actions  of Progressive and LSE (the former servicer), the Company is seeking to
resolve  those  issues  to  the  satisfaction  of  all  parties.



     Significant  assumptions  utilized  in  the estimation of future cash flows
include:
<TABLE>
<CAPTION>


<S>                                               <C>
Variable . . . . . . . . . . . . . . . . . . . .  Assumptions
------------------------------------------------  ----------------------------------------------------
Discount rate. . . . . . . . . . . . . . . . . .                                             15% - 17%
Default rates. . . . . . . . . . . . . . . . . .  Variable curve based upon historical experience,
                                                  varies from 5% to 17% annually
Lag in sale of collateral and insurance receipts  5 months and 7 months, respectively
Collections on defaulted loans . . . . . . . . .  Based upon historical percentages of collections or
                                                  wholesale prices of collateral plus insurance
                                                  collections reduced over time to give effect to
                                                  estimated changes in such wholesale used
                                                  automobile prices
Prepayment rates . . . . . . . . . . . . . . . .  1% in first month, reducing to 0.4% per month over
                                                  the loan term
------------------------------------------------  ----------------------------------------------------
</TABLE>


                                   -- F-16 --
<PAGE>



     At  the  close  of  a  rated  securitization,  the  Company  is required to
establish  a  cash  reserve  within  the  trust  for  future  credit  losses.
Additionally,  depending  on  each  securitization  structure,  a portion of the
Company's  future  cash  flow is required to be deposited as additional reserves
for  credit  losses.  The  initial  cash  reserve  deposits  for  the  Company's
securitizations  totaled  $1.6  million  and  $7.4  million  for the years ended
December  31,  1996  and  1997, respectively. These amounts represented 2.0% and
3.9%  of  the  senior  investor  certificates  issued  by  the trusts during the
respective  periods.  Cash  reserve  deposits  are  not  required  for  the 1998
transactions  with  Dynex.  The trust reserves are increased monthly from excess
cash  flows  until  such  time  as  they attain a level of 6% of the outstanding
principal  balance.



6.  Revolving  Credit  Facilities

     On  June  10,  1998, the Company and Dynex Capital, Inc., ("Dynex") entered
into  an  arrangement  whereby  the  Company obtained a commitment from Dynex to
purchase  all  currently  warehoused  and  future  automobile  finance  contract
acquisitions through at least May 31, 1999 (the "Funding Agreement").  The terms
of  the  Funding Agreement were modified on June 30, October 20, and October 28,
1998.  Under  the  prior terms of the Funding Agreement, the Company transferred
finance  contracts  to  AutoBond  Master Funding Corporations V ("Master Funding
V"),  a  qualified unconsolidated special purpose subsidiary, and Dynex provided
credit  facilities in an amount equal to 104% of the unpaid principal balance of
the  finance contracts (the "Advance Rate"), the proceeds of such facilities are
received by the Company.  Under the modified terms of the Funding Agreement, the
Advance  Rate  was  reduced  from  104%  to  88%  for  an 
                                   -- F-17 --
<PAGE>
interim  period  (the "Interim Period") ending December 31, 1998.  At the end of
the  Interim Period, the Advance Rate  reverted to 104% and Dynex was to advance
to  Master  Funding  V an additional amount equal to 16% of the unpaid principal
balance  of finance contracts financed by Dynex during the Interim Period.  This
additional amount receivable from Dynex of $6.5 million at December 31, 1998 was
collected in January and February 1999. Advances under the Funding Agreement are
limited  to  $25  million  per  month  after  June  1998  until  the  commitment
termination  date.  Under  the  modified  terms  of  the  Funding Agreement, the
commitment  terminates  on  July  31, 1999 (provided that 90 days' prior written
notice  from Dynex is given), or if such notice is not given, July 31, 2000.  At
the  Company's  option  the  commitment  termination  date  can  be  extended an
additional  four  months  to  November  30,  1999  (provided that 90 days' prior
written  notice to Dynex is given), or if such notice is not given, November 30,
2000.  Advances under the Funding Agreement are evidenced by Class A and Class B
Notes  (collectively,  the  "Notes")  issued  by Master Funding V to Dynex.  The
Class  A  Notes  are  issued  in a principal amount equal to 94.0% of the unpaid
principal balance of the finance contracts (88.0% for advances funded during the
Interim  Period)  and bear interest at a rate equal to 190 basis points over the
corporate  bond  equivalent  yield n the three-year Treasury note on the closing
date  for  each  such  advance  (equal to an average of 7.02% as of December 31,
1998);  provided  however,  that during the Interim Period, the interest rate on
the  Company's  Class  A  Notes equaled One-Month LIBOR plus 1.50%.  The Class B
Notes  are  issued  in a principal amount equal to 10.0% of the unpaid principal
balance  of  the  finance contracts (0.0% for advances funded during the Interim
Period) and bear interest at a rate equal to 16% per annum.  The Company retains
a  subordinated  interest in the pooled finance contracts.  Transfers of finance
contracts  to the qualified special purpose entity have been recognized as sales
under  SFAS  No. 125.  At December 31, 1998, advances by Dynex under the Funding
Agreement  totaled  $155 million. See Notes 1 and 14 for the status of the Dynex
Funding  Agreement.

     Effective  August  1,  1994,  the  Company entered into a secured revolving
credit  agreement with Sentry Financial Corporation ("Sentry") which was amended
and  restated  on  July  31, 1995. The amended agreement (the "Sentry Facility")
provides  for a $10.0 million warehouse line of credit which terminates December
31,  2000,  unless  terminated earlier by the Company or Sentry. The proceeds of
the  Sentry  Facility are to be used to originate and acquire finance contracts,
to  pay  for  loss  default  insurance  premiums,  to make deposits to a reserve
account  with  Sentry,  and  to  pay for fees associated with the origination of
finance  contracts.  The  Sentry  Facility  is  collateralized  by  the  finance
contracts  acquired with the outstanding borrowings. Interest is payable monthly
and  accrues at a rate of prime plus 1.75%. The Sentry Facility contains certain
restrictive  covenants  that  only  apply  when there is an outstanding balance,
including  requirements  to  maintain  a certain minimum net worth, and cash and
cash equivalent balances.   Under the Sentry Facility, the Company paid interest
of  $220,674,  $420,674 and $189,985 for the years ended December 31, 1996, 1997
and  1998,  respectively.  Pursuant  to  the  Sentry  Facility,  the Company was
required  to  pay  a $700,000 warehouse facility fee payable upon the successful
securitization of finance contracts. The $700,000 was payable in varying amounts
after  each of the first three securitizations. The Company accrued the $700,000
debt  issuance cost upon the first securitization in December 1995, the date the
Company determined the liability to be probable. The $700,000 debt issuance cost
is  being  amortized  as  interest  expense  through  December  31,  2000,  the
termination  date  of the Sentry Facility. The Company pays a utilization fee of
up to 0.21% per month on the average outstanding balance of the Sentry Facility.
The  Sentry Facility also requires the Company to pay up to 0.62% per quarter on
the  average  unused balance. The Sentry Facility was amended in May 1998 to add
additional  representations,  covenants,  a  general  release  of  Sentry,  the
guarantee  of  William  O.  Winsauer,  and  the right of Sentry to refuse future
advances  at its sole discretion. At December 31, 1998, as there were no amounts
outstanding  at  that  date.

     The  Company  and its wholly owned subsidiary, AutoBond Funding Corporation
II,  entered  into  a  $50  million  revolving  warehouse  facility  (the "Daiwa
Facility")  with Daiwa Finance Corporation ("Daiwa") effective as of February 1,
1997.  Advances  under  the  Daiwa  Facility  matured on the earlier of 120 days
following  the  date  of  the  advance  or March 31, 1998. The proceeds from the
borrowings  under  the Daiwa Facility were used to acquire finance contracts and
to make deposits to a reserve account. Interest was payable upon maturity of the
advances and accrued at the lesser of (x) 30 day LIBOR plus 1.15% or (y) 11% per
annum.  The  Company  also  paid  a non-utilization fee of .25% per annum on the
unused amount of the line of credit. Pursuant to the Daiwa Facility, the Company
paid  a  $243,750 commitment fee which is recorded as debt issue costs. The debt
issuance  cost  was  amortized  as  interest 
                                   -- F-18 --
<PAGE>
expense  through  March 1998. The Daiwa Facility contained certain covenants and
representations  similar  to  those  in  the  agreements governing the Company's
existing  securitizations  including,  among  other  things,  delinquency  and
repossession  triggers.  At December 31, 1997, advances under the Daiwa Facility
totaled  $7,639,201.  The Company paid off the Daiwa facility in June 1998 after
closing the Dynex Funding Agreement. The Company incurred interest expense under
the  Daiwa  Facility  of  approximately $1,118,883 and $ 333,085 the years ended
December  31,  1997  and  1998,  respectively.



7.  Notes  Payable  and  Non-Recourse  Debt

     Notes  payable:

<TABLE>
<CAPTION>

     The  following  amounts  are  included  in  notes  payable  as  of:

                                     December 31,
                                          1997         1998
                                       ----------  ------------
<S>                                    <C>         <C>
Convertible Senior Note . . . . . . .  $        -  $ 3,000,000 
Convertible notes payable . . . . . .   2,000,000    7,500,000 
Other notes payable . . . . . . . . .      57,824       23,342 
Discount on convertible notes payable           -     (356,373)
                                       ----------  ------------
                                       $2,057,824  $10,166,969 
                                       ==========  ============
</TABLE>


     On  June  10,  1998,  the  Company  sold  to Dynex at par $3 million of the
Company's  12% Convertible Senior Notes due 2003 (the "Senior Notes").  Interest
on  the  Senior Notes is payable quarterly in arrears, with the principal amount
due on June 9, 2003. The Senior Notes may be converted at the option of Dynex on
or before May 31, 1999 into shares of the Company's common stock at a conversion
price  of  $6.00  per  share.  Demand  and  "piggyback" registration rights with
respect  to the underlying shares of common stock were granted.  The Company has
made  all  payments due on the Senior Notes and expects to continue to meet such
obligations.  See  Note 1 regarding Dynex' claim that note has been accelerated.

     In  January 1998, the Company privately placed with BancBoston Investments,
Inc.  ("BankBoston")  $7,500,000 in aggregate principal amount of its 15% senior
subordinated  convertible  notes  (the  "Subordinated  Notes").  Interest on the
Subordinated  Notes is payable quarterly until maturity on February 1, 2001. The
Subordinated Notes are convertible at the option of the holder for up to 368,462
shares of common stock of the Company, at a conversion price of $3.30 per share,
subject  to adjustment under standard anti-dilution provisions. The Company also
granted BancBoston a warrant to purchase company stock exercisable to the extent
the  debt  is  not  converted (See Note 9).  In the event of a change of control
transaction,  the  holder  of  the Subordinated Notes may require the Company to
repurchase  the  Subordinated Notes at 100% of the principal amount plus accrued
interest.  The Subordinated Notes are redeemable at the option of the Company on
or  after  July  1,  1999 at redemption prices starting at 105% of the principal
amount,  with  such  premium reducing to par on and after November 1, 2000, plus
accrued  interest.  The Subordinated Notes were issued pursuant to an Indenture,
dated  as  of  January  30,  1998  (the  "Indenture")  between  the  Company and
BankBoston, N.A., as agent. The Indenture contains certain restrictive covenants
including  (i)  a  consolidated  leveraged ratio not to exceed 2 to 1 (excluding
non-recourse  warehouse  debt  and  securitization  debt),  (ii)  limitations on
restricted  payments  such  as  dividends (but excluding, so long as no event of
default  has  occurred  under  the  Indenture, dividends or distributions on the
preferred stock of the Company), (iii) limitations on sales of assets other than
in  the  ordinary  course  of  business  and  (iv)  certain financial covenants,
including  a  minimum  consolidated net worth of $12 million (plus proceeds from
equity  offerings),  a  minimum  ratio  of EBITDA to interest of 1.5 to 1, and a
maximum  cumulative  repossession  ratio  of  27%.  Events  of default under the
Indenture  include failure to pay, breach of covenants, cross-defaults in excess
of  $1  million  or  material  breach  of representations or covenants under the
purchase  agreement with BancBoston. The Company capitalized debt issuance costs
of 
                                   -- F-19 --
<PAGE>
$594,688, and recorded a discount of $507,763 on the debt representing the value
of  the  warrants issued. The debt issuance cost and discount is being amortized
as  interest  expense  on the interest method through February 2001. At December
31,  1998  the  Company  did  not  meet certain of its financial covenants which
constitutes  an event of default on the Subordinated Notes. The Company has made
all  payments due on its Subordinated Notes and expects to continue to meet such
obligations.  The  Subordinated  Notes  have  not  been  formally accelerated by
BankBoston;  however,  if  such acceleration were made, BankBoston could declare
such  amounts  immediately  due.

     Pursuant  to the an agreement (the "Securities Purchase Agreement") entered
into  on  June  30,  1997, the Company issued by private placement $2,000,000 in
aggregate  principal  amount  of  senior secured convertible notes ("convertible
notes"). Interest is payable quarterly at a rate of 18% per annum until maturity
on June 30, 2000. The convertible notes, collateralized by the retained interest
in  securitizations  from  the  Company's  first  four  securitizations,  were
convertible  into  shares  of common stock of the Company.  Also pursuant to the
Securities  Purchase  Agreement, the Company issued warrants which upon exercise
allow the holders to purchase up to 200,000 shares of common stock at $4.225 per
share.   The  Company  also  issued a warrant to purchase up to 30,000 shares of
Common  Stock at $4.225 per share to an individual assisting in the placement of
such  debt.  The  warrants  are  exercisable  to  the extent the holders thereof
purchase up to $10,000,000 of the Company's subordinated asset-backed securities
before  June  30,  1998.  The  holders  purchased  $5,800,000  of  subordinated
asset-backed  securities.  The  total  value  assigned  to  these  warrants  was
approximately  $154,000,  which  was  included  in  the  cost  of  sale  of  the
asset-backed  securities.  The Company paid off this debt in February 1998 which
terminated  the  conversion  rights.


     Non-Recourse  Debt:

     Prior  to  the  adoption  of  SFAS  No.  125, the Company securitized loans
through special purpose entities, however, the structure resulted in the Company
retaining  Class  B certificates that were then financed directly by the Company
rather  than through related trusts. The Company obtained non-recourse financing
from several finance companies with terms substantially identical to the Class B
certificates,  which  are  pledged  to  the  debt.  The  effect was to grant the
non-recourse  note-holder, the economic benefit of the Class B certificates. The
Company  recorded the Class B certificates and the non-recourse financing on its
balance  sheet.  The  non-recourse loans bear interest at 15% per annum and have
stated  terms  of  six  years.  Principal  and interest payments are paid by the
related  securitization  trustee directly to the financing company consisting of
all  funds  available  to  be  paid  to  the  Class  B  certificate  holders.
     During  1998  the  Class B certificates were deemed to be impaired and were
marked  to market. As the non-recourse debt holders are only entitled to receive
amounts  attributable  to  the  Class  B  certificates, their value and ultimate
settlement  is  based on such Class B certificate and are also marked-to-market.
                                   -- F-20 --
<PAGE>

<TABLE>
<CAPTION>

     The  following  summarizes  the non-recourse debt outstanding at December 31, 1997 and
1998

                                 Stated                                                    
Origination Date                  Terms    Rate   Original Amount      1997         1998
-------------------------------  -----    -----  ----------------  ----------  ------------
<S>                              <C>      <C>    <C>               <C>         <C>

April 8, 1996 . . . . . . . . .  6 years    15%  $      2,585,757  $1,142,517  $ 1,120,300 
March 28, 1996. . . . . . . . .  6 years    15%         2,059,214   1,230,464    1,205,733 
June 27, 1996 . . . . . . . . .  6 years    15%         2,066,410   1,491,786    1,480,957 
September 30, 1996. . . . . . .  6 years    15%         2,403,027   1,672,318    1,660,140 
December 27, 1996 . . . . . . .  6 years    15%         2,802,891   2,246,134    2,221,356 
Valuation Adjustment                                                      -0-   (4,503,436)
                                                                   ----------  ------------
Carrying Value at end of period                                    $7,783,219  $ 3,185,050 
                                                                   ==========  ============
</TABLE>




8.  Initial  Public  Offering


     On November 14, 1996, the Company and selling shareholders sold 750,000 and
250,000,  respectively,  of shares of common stock in an initial public offering
at  a  price  of  $10  per share. The net proceeds from the issuance and sale of
common  stock  amounted  to approximately $5,000,000 after deducting underwriter
discounts  and  issuer  expenses.  Portions of the net proceeds were used (i) to
prepay  outstanding  subordinated  debt  of  approximately $300,000 plus accrued
interest, (ii) to repay advances under revolving credit facilities and (iii) for
general  corporate  and  working  capital  purposes.

     The  underwriters  of  the  Company's  initial public offering purchased an
additional  75,000  shares  of  the  Company's  common stock at $10 per share by
exercising  half  of  their  over-allotment  option.  The  net proceeds from the
issuance  and  sale  of  these  shares  amounted to approximately $700,000 after
deducting  underwriter's  discounts.



9.  Income  Taxes


     The  provision for income taxes for the years ended December 31, 1996, 1997
and  1998  consisted  of  a  provision for deferred taxes and the Company had no
current tax liability. The reconciliation between the provision for income taxes
and the amounts that would result from applying the Federal statutory rate is as
follows:
<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                                  1996       1997        1998
                                               ----------  --------  ------------
<S>                                            <C>         <C>       <C>
Federal tax (benefit)at statutory rate of 34%  $1,907,889  $850,415  $(3,662,069)
Nondeductible expenses. . . . . . . . . . . .      18,664    37,755       35,700 
Change in valuation allowance . . . . . . . .           -         -            - 
                                               ----------  --------  ------------
Provision for income taxes. . . . . . . . . .  $1,926,553  $888,170  $(3,626,369)
                                               ==========  ========  ============
</TABLE>
                                   -- F-21 --
<PAGE>


     Deferred  income  tax  assets  and  liabilities  reflect  the tax effect of
temporary differences between the carrying amounts of assets and liabilities for
financial  reporting  purposes and income tax purposes Significant components of
the  Company's  net  deferred  tax  liability  are  as  follows:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                     1997          1998
                                                                 -------------  -----------
<S>                                                              <C>            <C>
Deferred tax assets:
Allowance for credit losses . . . . . . . . . . . . . . . . . .  $     244,489  $   136,259
Cost related to securitizations . . . . . . . . . . . . . . . .        727,443    3,659,080
Income on prior securitizations . . . . . . . . . . . . . . . .              -    4,474,621
Impairment of retained interest . . . . . . . . . . . . . . . .              -    3,324,065
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         61,769       87,040
Net operating loss carryforwards. . . . . . . . . . . . . . . .      8,098,975    7,676,996
                                                                 -------------  -----------
Gross deferred tax assets . . . . . . . . . . . . . . . . . . .      9,132,676   19,358,061
                                                                 -------------  -----------
Deferred tax liabilities:
Gain on securitizations . . . . . . . . . . . . . . . . . . . .     11,755,155   19,015,754
Unrealized appreciation on retained interest in securitizations        540,525            -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        341,245      444,107
Gross deferred tax liabilities. . . . . . . . . . . . . . . . .     12,636,925   19,459,861
                                                                 -------------  -----------
Net deferred tax liabilities. . . . . . . . . . . . . . . . . .  $   3,504,249      101,800
                                                                 =============  ===========
</TABLE>




     At  December 31, 1998, the Company had tax net operating loss carryforwards
of  approximately  $22.5  million  expiring  in  fiscal years 2009 through 2012.



10.  Shareholders'  Equity


Stock  Based  Compensation  Plan
     The Company grants stock options under a stock-based incentive compensation
plan  (the  "Option  Plan").  The  Company  applies  Accounting Principles Board
Opinion No. 25 and related interpretations in accounting for the Option Plan. In
1995,  SFAS  No.  123 "Accounting for Stock-Based Compensation" ("SFAS 123") was
issued,  which,  if  fully  adopted by the Company, would change the methods the
Company applies in recognizing the cost of the Option Plan. Adoption of the cost
recognition  provisions  of SFAS 123 is optional and the Company has elected not
to  adopt these provisions of SFAS 123. However, pro forma disclosures as if the
Company  adopted  the expense recognition provisions of SFAS 123 are required by
SFAS  123  and  are  presented  below.

     Under  the Option Plan, the Company is authorized to issue shares of Common
Stock  pursuant  to "Awards" granted in various forms, including incentive stock
options  (intended  to qualify under Section 422 of the Internal Revenue Code of
1986,  as  amended),  non-qualified stock options, and other similar stock-based
Awards.  The Company granted stock options in 1996 through 1998 under the Option
Plan  in  the  form  of  non-qualified  stock  options.

Stock  Options
     The Company has granted stock options to employees and directors. The stock
options  granted  have contractual terms of 10 years. All options granted to the
employees  and  directors  have  an exercise price not less than the fair market
value of the stock at the grant date. The options granted vest, 33.33% per year,
beginning  on the first anniversary of the date of grant. In accordance with APB
25,  the  Company has not recognized any compensation cost for the stock options
granted.
                                   -- F-22 --
<PAGE>

     A  summary of the status of the Company's stock options for the years ended
December  31,  1996  through  1998  is  presented  below:

<TABLE>
<CAPTION>


                                           Shares of       Weighted Average
                                      Underlying Options    Exercise Price
                                      -------------------  -----------------
<S>                                   <C>                  <C>
Outstanding at January 1, 1996 . . .                   -                   -
  Granted. . . . . . . . . . . . . .             297,500   $           10.11
                                      -------------------  -----------------
Outstanding at December 31, 1996 . .             297,500               10.11
  Granted. . . . . . . . . . . . . .              93,000                5.67
  Exercised. . . . . . . . . . . . .                   -                   -
  Forfeited. . . . . . . . . . . . .            (119,500)               9.50
                                      -------------------  -----------------
Outstanding at December 31, 1997 . .             271,000   $            8.85
  Granted. . . . . . . . . . . . . .             330,000   $            5.85
  Exercised. . . . . . . . . . . . .                   -                   -
  Forfeited. . . . . . . . . . . . .              52,668   $            7.44
                                      -------------------  -----------------
Outstanding at December 31, 1998 . .             548,332   $            7.18
Options exercisable at end of period             139,660   $            9.52
                                      ===================  =================
</TABLE>



<TABLE>
<CAPTION>




                               Shares of       Weighted Average  Weighted Average
Range of Exercise Prices   Underlying Options   Remaining Life    Exercise Price
-------------------------  ------------------  ----------------  ----------------
<S>                        <C>                 <C>               <C>
2.00 to $2.99. . . . . .              10,000               8.4  $            2.49
3.00 to $3.99. . . . . .             114,000               9.0               3.72
4.00 to $4.99. . . . . .              41,000               8.9               4.40
5.00 to $5.99. . . . . .              20,000               9.7               5.50
6.00 to $6.99. . . . . .              10,000               9.1               6.13
7.00 to $7.99. . . . . .             150,000               9.3               7.32
8.00 to $8.99. . . . . .              13,000               9.2               8.20
9.00 to $9.99. . . . . .              92,332               8.0               9.81
10.00 to $10.99. . . . .             100,000               7.9              10.48
                          ------------------  ----------------  -----------------
Total . . . . . . . . .              548,332               8.5  $            7.18
                          ==================  ================  =================
</TABLE>



     The  fair  value  of  each stock option granted is estimated on the date of
grant  using  the  Black-Scholes  option-pricing  model  with  the  following
weighted-average  assumptions: dividend yield of 0%; risk-free interest rates of
5.5%,  the  expected  lives of options of 5 years; and a volatility of 40.0% for
all  grants  in  1996  and  1997  and  45%  for  all  grants  in  1998.
                                   -- F-23 --
<PAGE>


Pro  Forma  Net  Income  and  Net  Income  Per  Common  Share

     Had  the  compensation  cost  for the Company's Option Plan been determined
consistent  with  SFAS  123,  the Company's net income and net income per common
share  for  1996,  1997  and 1998 would approximate the pro forma amounts below:

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                           1996        1997        1998
                                                        ----------  ----------  -----------
<S>                                                     <C>         <C>         <C>
Net income attributable to common shareholders (loss):
As reported. . . . . . . . . . . . . . . . . . . . . .   3,584,886   1,613,053  (8,584,423)
Pro Forma. . . . . . . . . . . . . . . . . . . . . . .   3,562,991   1,370,422  (8,811,364)
Net income (loss) per common share (basic):
As reported. . . . . . . . . . . . . . . . . . . . . .  $     .062  $     0.25      ($1.31)
Pro Forma. . . . . . . . . . . . . . . . . . . . . . .        0.62        0.21       (1.35)
Net income (loss)per common share (diluted):
As reported. . . . . . . . . . . . . . . . . . . . . .  $     0.62  $     0.25      ($1.31)
Pro Forma. . . . . . . . . . . . . . . . . . . . . . .        0.61        0.20       (1.35)
</TABLE>



     The  effects  of  applying  SFAS  123  in this pro forma disclosure are not
indicative  of  future  amounts.


Warrants
     In  connection  with  the  issuance of preferred stock, the Company sold to
Tejas  Securities  Group,  Inc.  ("Tejas"),  for  $100,  a  warrant  (the "Tejas
Warrant")  to  purchase up to 100,000 shares of the Company's common stock at an
exercise  price equal to $7.75 per share. The Tejas Warrant is exercisable for a
period of four years commencing February 17, 1999.  The Tejas Warrant includes a
net  exercise  provision  permitting the holder, upon consent of the Company, to
pay  the exercise price by cancellation of a number of shares with a fair market
value  equal  to  the  exercise  price  of  such Tejas Warrant. The value of the
warrant  of  $394,000  was  considered additional issuance cost of the preferred
stock.

     In  June  1997, the Company issued $2,000,000 in aggregate principal amount
of  its  18% senior secured convertible notes (which have been redeemed in full)
and  Common  Stock Purchase Warrants, dated June 30, 1997, to Infinity Investors
Limited.  The  warrants  entitle  the  holders  of  such warrants, upon exercise
thereof,  to  purchase  from  the  Company 200,000 shares of its common stock at
$4.225 per share. The Company also issued a warrant to purchase 30,000 shares of
its common stock at $4.225 per share to an individual assisting in the placement
of  such  debt.

     In  connection  with  the  issuance  of the Company's Subordinated Notes in
January 1998, the Company issued to BancBoston a warrant (the "Subordinated Note
Warrant").  The  Subordinated Note Warrant entities the holder, upon exercise of
the Warrant, to purchase from the Company that number of shares of the Company's
common stock, up to 368,462, which were available for conversion at the maturity
of the Subordinated Notes on February 1, 2001. The holder may either convert the
debt  or  exercise  the  warrant  but  not  both.  The Subordinated Note Warrant
contains  customary  anti-dilution  provisions,  as  well  as certain demand and
"piggyback" registration rights.  In addition, if certain major corporate events
(such  as  a  change  in  control or major stock offering) do not occur prior to
February  1, 2001, then the holder will have the right to put the Warrant to the
Company  at  the  difference  between  the  current market price and the warrant
exercise  price. Based on the market price at December 31, 1998, no amount would
be  payable  at such date. The Company has the option to redeem the Subordinated
Note Warrant under certain circumstances.  The Subordinated Note Warrant expires
on  January 31, 2005. The warrant was valued at $375,831 which was recorded as a
discount  on  the  debt.

                                   -- F-24 --
<PAGE>
     In  connection  with  the  placement  of  the  Subordinated  Notes  and the
Subordinated  Note  Warrant,  the  Company,  William  O.  Winsauer  and  John S.
Winsauer, as principals (the "Principals") entered into a Shareholders Agreement
with  BancBoston  pursuant to which the Principals granted to BancBoston certain
"tag-along  rights"  in connection with sales of common stock by the Principals.
Also,  the  Company  paid  a  placement fee of 5% of the principal amount of the
Subordinated  Notes  to  Dresner  Investment  Services,  Inc.  and issued to the
placement  agent  a  warrant  to  purchase  65,313 shares of common stock of the
Company,  at  an  exercise  price  of  $6.30  per  share.

     The  Company's  remaining  outstanding  warrants  are  a  warrant (expiring
January  12,  2000) held by an individual exercisable for 7,500 shares of common
stock  of  the  Company  at a price of $4.00 per share, and  a warrant (expiring
March  31,  2002)  held  by  Infinity  Investors Limited exercisable for 100,000
shares  of  common  stock  of  the  Company  at  a  price  of  $8.73 per share .


Preferred  Stock
     Pursuant to the Company's amended articles of incorporation, the Company is
authorized to issue from time to time up to 5,000,000 shares of preferred stock,
in  one or more series. The Board of Directors is authorized to fix the dividend
rights,  dividend  rates, any conversion rights or right of exchange, any voting
right,  any  rights and terms of redemption (including sinking fund provisions),
the  redemption  rights  or  prices,  the  liquidation preferences and any other
rights,  preferences,  privileges  and  restrictions  of any series of preferred
stock  and  the  number  of  shares constituting such series and the designation
thereof.  There  were  no  shares  of  preferred  stock issued or outstanding at
December  31,  1997.

     In February 1998, the Company completed the underwritten public offering of
1,125,000  shares of its 15% Series A Cumulative Preferred Stock (the "Preferred
Stock"), with a liquidation preference of $10 per share. The price to the public
was $10 per share, with net proceeds to the Company of approximately $9,631,000.
Such net proceeds have been utilized for working capital purposes, including the
funding  of  finance  contracts. Dividends on the Preferred Stock are cumulative
and  payable quarterly on the last day of March, June, September and December of
each  year,  commencing  on  June  30, 1998, at the rate of 15% per annum. After
three  years  from  the date of issuance, the Company may, at its option, redeem
one-sixth of the Preferred Stock each year, in cash at the liquidation price per
share  (plus  accrued and unpaid dividends), or, if in common stock, that number
of  shares  equal to $10 per share of Preferred Stock to be redeemed, divided by
85%  of  the average closing sale price per share for the common stock for the 5
trading  days  prior  to  the  redemption  date.  The  Preferred  Stock  is  not
redeemable  at  the  option  of the holder and has no stated maturity. Preferred
Stock dividends of $596,250 , $421,875, and $421,875 were paid on June 30, 1998,
September  30,  1998,  and  December  31,  1998  respectively.

     Because  the  Company  is  not  in compliance with certain of the financial
covenants  of  its  subordinated  notes,  the Company will not pay the quarterly
dividend  on  its  Preferred  Stock,  otherwise  payable  on  March 31, 1999. If
dividends  on  the  Preferred  Stock  are  in arrears for two quarterly dividend
periods,  holders  of  the  Preferred  Stock  will have the right to elect three
additional  directors  to  serve  on  the  Company's  Board  until such dividend
arrearage  is  eliminated.  In  addition,  certain changes that could materially
affect  the  holders of Preferred Stock, such as a merger of the Company, cannot
be  made without the affirmative vote of the holders of two-thirds of the shares
of Preferred Stock, voting as a separate class. The Preferred Stock ranks senior
to  the  common  stock with respect to the payment of dividends and amounts upon
liquidation,  dissolution  or  winding  up.

Common  Stock  Investment  Agreement
     On  May  20,  1998,  the  Company  and  Promethean Investment Group, L.L.C.
("Promethean") entered into a common stock investment agreement (the "Investment
Agreement")  and related registration rights agreement whereby Promethean agreed
to  purchase from the Company, on the terms and conditions outlined below, up to
$20  million  (subject  to increase up to $25 million at Promethean's option) of
the Company's common stock. The Company must deliver a preliminary notice of its
intention  to  require Promethean to purchase its common shares at least ten but
not  more  than thirty days prior to the Company's delivery of its final notice.
The  Company  may  only  deliver  such  final  notice  if (i) the dollar volume-
                                   -- F-25 --
<PAGE>
weighted  price  of  its common stock reported on the business day of such final
notice  is  at  least  $3.25  per  share,  (ii)  at  all times during the period
beginning  on  the  date of delivery of the preliminary notice and ending on and
including  the  closing date (a) a registration statement covering the resale of
no  less  than  150% of the shares to be sold to Promethean under the Investment
Agreement  has  been  declared  and  remains  effective  and  (b)  shares of the
Company's  common  stock  are at such time listed on a major national securities
exchange,  and  (iii)  the  Company  has  not  delivered another final notice to
Promethean  during the preceding twenty-five business days preceding delivery of
such  final  notice.  Following receipt of a final notice, Promethean's purchase
obligation  will  equal  the  lowest  of: (i) the amount indicated in such final
notice,  (ii)  $5,000,000  and  (iii)  20% of the aggregate of the daily trading
dollar  volume on the twenty consecutive business days following delivery of the
put  notice.  Promethean  may,  in  its  sole  discretion,  increase  the amount
purchasable  in  the  preceding  sentence  by 125%. Promethean must conclude all
required  purchases of common shares within twenty-five business days of receipt
of  the  final notice. The purchase price for the Company's shares will be equal
to  95%  of the lowest daily dollar volume-weighted average price during the six
consecutive  trading  days  ending  on  and including the date of determination.
Promethean's  obligation to purchase shares under the Investment Agreement shall
end  either  upon  the  mutual  consent of the parties or automatically upon the
earliest  of  the  date  (a)  on  which  total purchases by Promethean under the
Investment  Agreement  total  $20,000,000,  (b)  which  is  two  years after the
effective  date  of  the  registration  statement  relating  to the common stock
covered  by  the  Investment Agreement, or (c) which is twenty-seven months from
the  date  of  the  Investment  Agreement.  In  consideration  of  Promethean's
obligations under the Investment Agreement, the Company paid $527,915 in cash on
August 19, 1998, which was treated as an investment in a common stock agreement.



Earnings  Per  Share
     Basic  earnings  per  share  were  computed  by  dividing net income by the
weighted average number of shares of common stock outstanding during the period.
Diluted  earnings  per  share  differs  from basic earnings per share due to the
assumed conversions of dilutive options, warrants and convertible debt that were
outstanding  during  the  period.

<TABLE>
<CAPTION>

     Earnings  per  share  is  calculated  as  follows:

                                                  1996        1997         1998
                                               ----------  ----------  ------------
<S>                                            <C>         <C>         <C>
Net income (loss) (basic) . . . . . . . . . .  $3,584,886  $1,613,053  $(7,144,423)
Effect of convertible debt, net of taxes. . .           -     119,460            - 
                                               ----------  ----------  ------------
Net income (loss) (diluted) . . . . . . . . .  $3,584,886  $1,732,513  $(7,144,423)
                                               ==========  ==========  ============

Weighted average shares outstanding (basic) .   5,791,189   6,516,056    6,531,311 
Assuming conversion of convertible debt . . .           -     428,237            - 
Warrants. . . . . . . . . . . . . . . . . . .      16,470      16,590            - 
Dilutive stock options. . . . . . . . . . . .       1,498       4,994            - 
                                               ----------  ----------  ------------
Weighted average shares outstanding (diluted)   5,809,157   6,965,877    6,531,311 
                                               ==========  ==========  ============
</TABLE>



     As  the Company posted a net loss for the year ended December 31, 1998, the
effects  of  stock  options  and contingently issuable shares for the year ended
December  31,  1998  are  anti-dilutive  and  not included in the computation of
diluted  loss  per  share.

     Effective  May  30,  1996,  the  Board of Directors of the Company voted to
effect  a  767.8125-for-1  stock  split.  All share information and earnings per
share calculations for the periods presented in the financial statements herein,
and  the  notes  hereto,  have been retroactively restated for such stock split.
                                   -- F-26 --
<PAGE>


11.  Related  Party  Transactions

     The Company and AutoBond, Inc. ("ABI"), which was founded and is 100% owned
by  the Chief Executive Officer ("CEO") of the Company entered into a management
agreement  dated  as  of  January 1, 1996 (the "ABI Management Agreement") which
requires  ABI  to  pay  an  annual  fee  of  $50,000 to the Company for services
rendered  by  it  or  the  Company's  employees on behalf of ABI as follows: (i)
monitoring the performance of certain partnership interests owned by ABI and its
sole shareholder, (ii) certain cash management services, including the advancing
of  funds  to pay ABI's ordinary business expenses and (iii) providing advice as
to  regulatory  compliance.  The ABI Management Agreement also provides that the
Company will perform certain accounting functions on behalf of ABI including (i)
maintenance  of  financial books and records, (ii) monitoring of cash management
functions,  (iii)  preparation  of financial statements and tax returns and (iv)
providing  advice  in  connection with retention of independent accountants. The
ABI Management Agreement further provides for the reimbursement of advances made
by  the  Company for out-of-pocket costs and expenses incurred on behalf of ABI.
Amounts  due  to  the  Company  under  the  ABI Management Agreement amounted to
$176,963 and $204,325 at December 31, 1997 and 1998, respectively. As of July 1,
1998,  the  Company  no  longer  provides  management  services,  administrative
services  or  accounting  services  for  ABI.

     Since  July  1994,  ABI  provided  certain  administrative  services  to
Intercontinental  Brokerage  Inc. ("Intercontinental"), an independent insurance
broker  in  connection  with  Intercontinental's obligations as administrator of
pools  of  finance  contracts  subject to an insurance policy. ABI received fees
from  Intercontinental  totaling approximately $752,000 for the period from July
1994  to  March  1997, with respect to finance contracts as to which the Company
has  paid administrative fees to Intercontinental. Since March 1997, the Company
has  elected not to insure finance contracts under such insurance policy and ABI
will  not  receive  any  future  fees from Intercontinental with respect to such
finance  contracts.

     Certain  executive  officers  received  (repaid)  advances from the Company
totaling  $225,259 and ($368,026) during the years ended December 31,  1996, and
1997. The outstanding advances, provided on a non-interest-bearing basis without
repayment  terms,  are  shown  as  a  reduction  of  shareholders'  equity.



12.  Employment  Agreements

     The  Company  and  its  Chief  Operating  Officer  ("COO")  entered into an
employment  agreement  dated November 15, 1995 and subsequently amended on March
31, 1998. Under the terms of this Agreement, the COO has agreed to serve as Vice
Chairman,  Chief  Financial  Officer, and Chief Operating Officer of the Company
through the period ending November 15, 2000 and, during such time, to devote his
full  business  time and attention to the business of the Company. The Agreement
grants  the  COO a base salary of $200,000 ( effective April 1, 1998) per annum,
which  amount  may  be increased from time to time at the sole discretion of the
Board.  The  Agreement terminates upon the death of the COO. In the event of any
disability  of the COO which continues for a period of six months, the agreement
may be terminated by the Company at the expiration of such six-month period. The
Agreement  automatically terminates upon the discharge of the COO for cause. The
Agreement  contains  standard  non-competition  covenants,  among  other  terms.

     Pursuant  to the terms of the Agreement, the COO received 568,750 shares of
the  Company's  Common  Stock  on January 1, 1996, equal to 10% of the Company's
outstanding  shares of Common Stock following the issuance of such shares to the
COO.  Pursuant to the amendment to the agreement, the COO received 145,000 share
options (at a strike price of $7 5/16 per share) under the Company's Option Plan
and  will  receive an additional 35,000 share options under the Company's Option
Plan.

     The  Company  and  its chief executive officer ("CEO") also entered into an
employment  agreement  dated May 31, 1996, and effective from such date for five
years.  The agreement provides for compensation at a base salary of $240,000 per
annum, which may be increased and may be decreased to an amount of not less than
$240,000,  at  the  discretion of the Board of Directors. The agreement entitles
the  CEO  to  receive  the benefits of any cash incentive compensation as may be
granted  by the Board to employees, and to participate in any executive bonus or
incentive  plan  established  by  the  Board  of  Directors.  The  agreement 
                                   -- F-27 --
<PAGE>
also  provides  the  CEO  with  certain  additional  benefits.  The  agreement
automatically  terminates  upon (i) the death of the CEO, (ii) disability of the
CEO  for six continuous months together with the likelihood that the CEO will be
unable  to  perform  his  duties  for  the  following  continuous six months, as
determined  by  the Board of Directors, (iii) termination of the CEO "for cause"
(which  termination  requires  the  vote of a majority of the Board) or (iv) the
occurrence of the five-year expiration date provided, however, the agreement may
be  extended  for  successive  one-year  intervals unless either party elects to
terminate  the  agreement  in  a  prior  written  notice.

     The  CEO  may  terminate his employment for "good reason" as defined in the
agreement.  In  the  event  of  the  CEO's  termination for cause, the agreement
provides  that the Company shall pay the CEO his base salary through the date of
termination  and  the vested portion of any incentive compensation plan to which
the  CEO  may  be  entitled.  Other  than  following a change in control, if the
Company  terminates the CEO in breach of the agreement, or if the CEO terminates
his  employment  for  good  reason,  the  Company must pay the CEO: (i) his base
salary  through  the  date of termination; (ii) a severance payment equal to the
base salary multiplied by the number of years remaining under the agreement; and
(iii)  in  the case of breach by the Company of the agreement, all other damages
to  which  the  CEO  may  be entitled as a result of such breach, including lost
benefits  under  retirement  and  incentive  plans.  In  the  event of the CEO's
termination  following  a  change in control, the Company is required to pay the
CEO  an  amount  equal  to  three times the sum of (i) his base salary, (ii) his
annual  management  incentive compensation and (iii) his planned level of annual
perquisites.  The agreement also provides for indemnification of the CEO for any
costs  or  liabilities  incurred  by  the CEO in connection with his employment.

     The  Company  entered  into an employment agreement, dated as of January 1,
1998,  with  a  former  outside director to serve as a consultant to the Company
until  February  1, 1998, whereupon he agreed to become President of the Company
for  a  period of three years. The agreement provides for compensation at a base
salary  of  $200,000  per  annum,  with a one time signing bonus of $100,000 and
additional  performance bonuses of up to $25,000 per quarter, as approved by the
CEO  and the Compensation Committee. In addition, the President received options
under  the Option Plan to purchase 100,000 shares of the Company's common stock,
along  with  an  agreement to grant additional options to purchase 50,000 of the
Company's  common  stock  on  December  1,  1998.  The  agreement  automatically
terminates  upon  (i)  the  death  of  the President, (ii) the disability of the
President,  which  continues for a period of six months, (iii) "for cause," (iv)
at  the  President's  option,  or  (v)  at  the  Company's  option.  Upon  such
termination,  the Company is obligated to pay the President his accrued base pay
through  the  date of such termination, unless terminated by the Company without
cause,  whereupon  he would be entitled to his base pay for the remainder of the
year  in  which  such  termination  occurred.  Pursuant  to a separate Severance
Agreement,  dated  as  of  February 1, 1998, upon the occurrence of a "change in
control"  the Company must pay the President a lump sum payment equal to the sum
of  the  base  pay  plus  any incentive pay for that year, plus the Company will
arrange  to  provide,  for  a  period of twelve months following the termination
date,  such  employee benefits as are substantially similar to those that he was
receiving  or  entitled  to  receive immediately prior to such termination date.
                                   -- F-28 --
<PAGE>


13.  Leases


<TABLE>
<CAPTION>

     The  Company  leases  property  under  capital  leases  as  follows:

                             1997        1998
                           ---------  ----------
<S>                        <C>        <C>
Furniture . . . . . . . .  $ 49,606   $  49,606 
Equipment . . . . . . . .   515,891     515,891 
Accumulated depreciation:   (92,941)   (233,951)
                           ---------  ----------
Net . . . . . . . . . . .  $472,556   $ 331,546 
                           =========  ==========
</TABLE>




<TABLE>
<CAPTION>

     Future  minimum  lease  payments  under  capital  leases  together with the
present  value  of  the  future  minimum  lease payments as of December 31, 1998
follow:
Year  ending  December  31,
---------------------------

<S>                                             <C>
1999 . . . . . . . . . . . . . . . . . . . . .   217,329 
2000 . . . . . . . . . . . . . . . . . . . . .   152,088 
                                                ---------
Total minimum lease payments . . . . . . . . .   369,417 
Less: amounts representing interest. . . . . .   (31,493)
                                                ---------
Present value of future minimum lease payments  $337,924 
                                                =========
</TABLE>



     Future  minimum lease payments under operating leases (which reflect leases
having  noncancelable lease terms in excess of one year) as of December 31, 1998
follow:
<TABLE>
<CAPTION>

Year  ending  December  31,
---------------------------

<S>          <C>
1999. . . .     861,404
2000. . . .     813,509
2001. . . .     680,818
2002. . . .     562,356
2003. . . .     562,356
Later years     749,807
             ----------
Total . . .  $4,230,250
             ==========
</TABLE>




14.  Commitments  and  Contingencies

     On  February 8, 1999, the Company, AutoBond Master Funding Corporation V, a
wholly-owned  subsidiary of the Company ("Master Funding"), William O. Winsauer,
the  Chairman  and  Chief  Executive Officer of the Company, John S. Winsauer, a
Director  and  the Secretary of the Company, and Adrian Katz, the Vice-Chairman,
Chief  Financial  Officer  and  Chief  Operating  Officer  of  the  Company
(collectively,  the  "Plaintiffs")  commenced an action in the District Court of
Travis  County,  Texas  (250th  Judicial District) against Dynex and James Dolph
(collectively,  the "Defendants"). This action is hereinafter referred to as the
"Texas  Action". The Company and the other Plaintiffs assert in the Texas Action
that Dynex breached the terms of the Credit Agreement (the "Credit  Agreement"),
dated  June  9,  1998,  by and among the Company, Master Funding and Dynex. Such
breaches  include chronic delays and shortfalls in funding the advances required
under  the  Credit  Agreement  and  ultimately  the refusal by Dynex to fund any
further  advances  under the Credit Agreement. Plaintiffs also allege that Dynex
and Mr. Dolph conspired to misrepresent and mischaracterize the Company's credit
underwriting  criteria  and its compliance with such criteria with the intention
of  interfering  with  and  causing  actual  damage  to the Company's business, 
                                   -- F-29 --
<PAGE>
prospective  business  and  contracts. The Plaintiffs assert that Dynex' funding
delays  and  ultimate  breach of the Credit Agreement were intended to force the
Plaintiffs  to  renegotiate the terms of their various agreements with Dynex and
related  entities.  Specifically,  the  Plaintiffs assert that Dynex intended to
force  the  Company to accept something less than Dynex' full performance of its
obligations  under  the  Credit  Agreement. Further, Dynex intended to force the
controlling  shareholders  of  the  Company  to agree to sell their stock in the
Company  to  Dynex or an affiliate at a share price substantially lower than the
$6.00  per share price specified in the Stock Option Agreement, dated as of June
9,  1998,  by and among Messrs. William O. Winsauer, John S. Winsauer and Adrian
Katz  (collectively,  the  "Shareholders") and Dynex Holding, Inc. Plaintiffs in
the  Texas  Action request declaratory judgement that (a) Dynex has breached and
is  in  breach  of its various agreements and contracts with the Plaintiffs, (b)
Plaintiffs  have  not  and  are  not  in  breach of their various agreements and
contracts  with  Defendants,  (c)  neither  the  Company  nor Master Funding has
substantially  or materially violated or breached any representation or warranty
made to Dynex, including but not limited to the representation and warranty that
all  or  substantially  all  finance  contracts  funded or to be funded by Dynex
comply  in  full with, and have been acquired by the Company in accordance with,
the Company's customary underwriting guidelines and procedures; and (d) Dynex is
obligated  to  fund the Company in a prompt and timely manner as required by the
parties'  various  agreements.  In  addition  to  actual, punitive and exemplary
damages,  the  Plaintiffs  also  seek injunctive relief compelling Dynex to fund
immediately  all  advances  due  to  the  Company  under  the  Credit Agreement.

     On  February  9, 1999, Dynex commenced an action against the Company in the
United  States  District  Court  for  the Eastern District of Virginia (Richmond
District)  (the  "Virginia Action") seeking declaratory relief that Dynex is (a)
not  obligated  to  advance  funds  to Master Funding under the Credit Agreement
because  the  conditions  to  funding set forth in the Credit Agreement have not
been  met,  and (b) entitled to access to all books, records and other documents
of  Master  Funding,  including  all finance contract files. Specifically, Dynex
alleges  that  as  a  result of a partial inspection of certain finance contract
files  by  Mr.  Dolph  and  Virgil  Baker  &  Associates  in January 1999, Dynex
concluded  that  a  significant  number  of  such  contracts  contained material
deviations  from  the  applicable  credit  criteria  and procedures, an apparent
breach of the Credit Agreement. Dynex also alleges that on February 8, 1999, the
Company refused to permit Mr. Dolph and representatives from Dynex access to the
books,  records  and finance contract files of the Company. Dynex concludes that
as  a  result  of such alleged breaches, it is not obligated to provide advances
under  the  Credit  Agreement. The Company, Messrs. William O. Winsauer, John S.
Winsauer  and  Adrian  Katz  filed  a responsive pleading on March 25, 1999. The
Company intends to seek dismissal of the Virginia Action on the basis that these
matters  are  being  litigated  in  the  previously  filed  Texas  Action.

     On  February  22,  1999,  the same day that Dynex notified the Company of a
purported  servicing termination, Dynex filed another action against the Company
in  the  United States District Court for the Southern District of New York (the
"New  York  Action"),  seeking  damages  and injunctive relief for the Company's
alleged  breaches  under  the  servicing  agreement among the Company, Dynex and
Master  Funding. The Company was not notified of the New York Action until March
1,  1999,  when  Dynex sought a temporary restraining order against the Company.
After  hearing  argument  from counsel for both sides, the temporary restraining
order  was denied. On March 23, 1999, the court issued an order transferring the
action  to  the federal district court in the Eastern District of Virginia.  The
Company remains the servicer, is performing in its capacity as servicer, and has
not  hit any triggering event thresholds, which include a repossession ratio and
a  delinquency  ratio,  as  defined  in  the  servicing  agreement.

     On March 1, 1999, the Company and the other Plaintiffs filed an application
in  the  Texas  Action  for  a  temporary  injunction  enjoining  Dynex (a) from
continuing  to suspend or withhold funding pursuant to the Credit Agreement, (b)
from  removing  or  attempting  to  remove the Company as servicer, and (c) from
making  any  further  false  or  defamatory  public  statements  regarding  the
Plaintiffs.  A  hearing  is  scheduled  for  mid-April  1999,  to  consider this
application. Dynex has yet to file any responsive pleadings in the Texas Action.

     By  letter  dated  March  24,  1999,  Dynex has purportedly accelerated all
amounts  due  under the Senior Note Agreement dated June 9, 1998, by and between
Dynex  and  the  Company (See Note 7).  Dynex alleges that any default under the
Stock  Option  Agreement  dated  June  9,  1998,  by  and  between  Dynex 
                                   -- F-30 --
<PAGE>
Holding,  Inc.,  the  Company, William O. Winsauer, John S. Winsauer, and Adrian
Katz  is  an  "Event  of  Default"  under  the  Senior  Note  Agreement.  Dynex
specifically  alleges  that  the  Company has breached the negative covenant set
forth  in  Section  3.2(j)  of  the  Stock Option Agreement, wherein the Company
covenants  that  it will not "change its underwriting or servicing practices and
guidelines  in  any material respect without the prior written consent of [Dynex
Holding,  Inc.]"  Management  adamantly  denies that the Company has at any time
since  June  9,  1998,  changed  its  underwriting  or  servicing  practices and
guidelines  in any material respect.  Therefore, Dynex' assertion that there has
been  an  "Event  of Default" under the Senior Note Agreement is in management's
judgment  wholly without merit.  It is anticipated that this dispute will become
part  of  the  litigation  with  Dynex  that  is  described  above.

     The  Company  is  required  to  represent  and warrant certain matters with
respect  to  the finance contracts sold to the Trusts, which generally duplicate
the  substance  of  the  representations  and  warranties made by the dealers in
connection with the Company's purchase of the finance contracts. In the event of
a  breach  by  the  Company  of  any  representation or warranty, the Company is
obligated to repurchase the finance contracts from the Trust at a price equal to
the  remaining  principal plus accrued interest. The Company repurchased finance
contracts  totaling  $619,520  from  a Trust during 1997. Of the total amount of
these  finance  contracts,  $190,320 was purchased from one dealer. Although the
Company has requested that this dealer repurchase such contracts, the dealer has
refused.  After  such  dealer's  refusal to repurchase, the Company commenced an
action  in  the  157th  Judicial District Court for Harris County, Texas against
Charlie  Thomas  Ford,  Inc.  to compel such repurchase. On favorable terms, the
Company  has  reached  a settlement agreement with Charlie Thomas Ford, Inc. The
Company has received funds related to such settlement sufficient to reimburse it
for  the  repurchased  finance  contracts.

     In  connection  with  the 1997-B and 1997-C securitization, $5.8 million in
Class  B  Notes are exchangeable (at a rate of 117.5% of the principal amount of
Class  B  Notes  exchanged) for the Company's 17% Convertible Notes, solely upon
the occurrence of a delinquency ratio trigger relating to the securitized pools.

     In  March  1998,  after  Progressive  Northern  Insurance  ("Progressive")
purported  to cancel the VSI and deficiency balance insurance policies issued in
favor  of  the  Company,  the  Company  sued  Progressive,  its affiliate United
Financial  Casualty  Co.  and their agent in Texas, Technical Risks, Inc. in the
district  court  of  Harris  County,  Texas. The action seeks declaratory relief
confirming  the  Company's  interpretation of the policies as well as claims for
damages  based  upon  breach  of  contract, bad faith and fraud. The Company has
received the defendants' answers, denying the Company's claims, and discovery is
proceeding. Progressive stopped paying claims during the second quarter of 1998.
As  a  result  of  the  attempt by Progressive to cancel its obligations and its
refusal  to honor claims after March 1998, the Company has suffered a variety of
damages,  including  impairment of its retained interest in securitizations. The
Company is vigorously contesting the legitimacy of Progressive's actions through
litigation.  Although  a  favorable  outcome  cannot  be assured, success in the
litigation  could  restore at least some of the value of the Company's interests
in  such securitizations.  Conversely, if the court were to uphold Progressive's
position,  further  impairment of the Company's interests could occur, resulting
in  an  adverse  effect  on  the  Company's  results  of  operations.

     Also  in  March  1998,  the  Company  commenced an action in Travis County,
Texas,  against  Loan  Servicing  Enterprise ("LSE"), alleging LSE's contractual
breach  of its servicing obligations on a continuing basis. LSE has commenced an
action  against  The  Company  in  Texas  State  court seeking recovery from the
Company  of  putative  termination fees in connection with termination of LSE as
servicer. The Company expects the two actions to be consolidated. If the Company
prevails  against  LSE,  some  of  the  value  of  the  Company's  interest  in
securitizations  could  be  restored.

     The  Company's carrier for the credit deficiency insurance obtained through
1996,  Interstate  Fire & Casualty Co. ("Interstate") determined in late 1996 to
no  longer  offer  such  coverage  to  the  auto finance industry, including the
Company.  In  connection  with  Interstate's  attempt  to no longer offer credit
deficiency  coverage  for  contracts originated after December 1996, the Company
commenced an action in the United States District Court for the Western District
of  Texas,  Austin Division, seeking a declaratory judgment that (a) the Company
was  entitled  to  180 days' prior notice of cancellation and (b) Interstate was
not 
                                   -- F-31 --
<PAGE>
entitled  to raise premiums on finance contracts for which coverage was obtained
prior  to the effectiveness of such cancellation, as well as seeking damages for
Interstate's  alleged  deficiencies  in  paying  claims.  Prior to receiving the
Company's  complaint  in the Texas action, Interstate commenced a similar action
for  declaratory  relief in the United States Court for the Northern District of
Illinois.  Both  suits  have  been voluntarily dismissed, and Interstate and the
Company  have  to date acted on the basis of a cancellation date of May 12, 1997
(i.e.,  no  finance  contracts  presented  after  that date will be eligible for
credit  deficiency  coverage  by Interstate, although all existing contracts for
which  coverage  was  obtained  will  continue  to  have  the  benefits  of such
coverage),  no  additional  premiums  have  been  demanded  or  paid,  and  the
claims-paying process has been streamlined. In particular, in order to speed the
claims-paying  process,  Interstate  has  paid  lump  sums  to the Company as an
estimate  of  claims  payable  prior  to  completion  of processing. Pending the
Company's determination of the appropriate beneficiary for such claims payments,
the  Company  has  deposited  and  will  continue  to  deposit such funds into a
segregated  account.

     The  Company is the plaintiff or the defendant in several legal proceedings
that  its  management  considers  to  be the normal kinds of actions to which an
enterprise  of  its  size and nature might be subject, and not to be material to
the  Company's overall business or financial condition, results of operations or
cash  flows.

     The  Company  is  taking actions to provide that their computer systems are
capable  of  processing  for  the periods in the year 2000 and beyond. The costs
associated  with  this  are  not expected to significantly affect operating cash
flow;  however, the nature of their business requires that they rely on external
vendors  and services who may not be year 2000 compliant. Therefore, there is no
assurance  that  the  Company's  actions  in  this  regard  will  be successful.

     On  April  6,  1999,  the  Company  and the controlling shareholders of the
Company,  as  defendants  (the  "Defendants"), were served with notice of a suit
filed  on  March  31,  1999  in the United States District Court for the Western
District  of Texas (Austin Division) by Bruce Willis (the "Plaintiff"), a holder
of  the  Company's  15%  Series A Cumulative Preferred Stock.  The suit alleges,
among other things, that the Defendants violated Section 10(b) of the Securities
and  Exchange  Act of 1934 (and Rule 10b-5 promulgated thereunder) in failing to
disclose  adequately  and  in  causing  misstatements  concerning the nature and
condition  of  the Company's financing sources.  The suit also alleges that such
actions  constituted  statutory  fraud under the Texas Business Corporation Act,
common  law  fraud  and  negligent misrepresentation.  The Plaintiff seeks class
action  certification.  The  Plaintiff  also  seeks, among other things, actual,
special,  consequential, and exemplary damages in an unspecified sum, as well as
costs  and  expenses incurred in connection with pursuing the action against the
Company.  While  the  Company has yet to file a responsive pleading, the Company
nevertheless  believes  that  it  has  consistently  and accurately informed the
public  of  its  business and operations, including the viability of its funding
sources, and, as a consequence believes the suit to be without merit and intends
to  vigorously  defend  against  this  action.



15.  Fair  Value  of  Financial  Instruments

     The estimated fair value amounts have been determined by the Company, using
available  market  information and appropriate valuation methodologies. However,
considerable  judgment  is  necessarily  required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are  not necessarily indicative of the amounts that the Company would realize in
a  current  market  exchange.  The  use  of  different market assumptions and/or
estimation  methodologies may have a material effect on the estimated fair value
amounts.  The  following  methods and assumptions were used to estimate the fair
value  of  each  class  of  financial instruments for which it is practicable to
estimate  that  value.

Cash  and  Cash  Equivalents  and  Restricted  Cash
     The  carrying  amount approximates fair value because of the short maturity
of  those  investments.
                                   -- F-32 --
<PAGE>

Finance  Contracts  Held  for  Sale
     The fair value of finance contracts held for sale is based on the estimated
proceeds  expected  on  sale or securitization of the finance contracts held for
sale.

Retained  interest  in  securitizations
     The  fair value on retained interest in securitizations is determined based
on  discounted  future  net  cash  flows  utilizing  a discount rate that market
participants  would  use  for  financial  instruments  with  similar  risks.

Revolving  Credit  Borrowings,  Notes  Payable  and  Non-recourse  debt
     The fair value of the Company's debt is based upon the quoted market prices
for  the  same  or similar issues or on the current rates offered to the Company
for  debt  of  the  same remaining maturities and characteristics. The revolving
credit  lines  are  variable  rate  loans,  resulting  in  a  fair  value  that
approximates  carrying  value.


<TABLE>
<CAPTION>

     The  estimated fair values of the Company's financial instruments at December 31, 1997 and 1998 are as
follows:

                                                           December 31, 1997          December 31, 1998

                                                          Carrying       Fair       Carrying       Fair
                                                           Amount        Value       Amount        Value
                                                         -----------  -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>          <C>
Cash and cash equivalents . . . . . . . . . . . . . . .  $   159,293  $   159,293  $ 5,170,969  $ 5,170,969
Restricted Funds. . . . . . . . . . . . . . . . . . . .    6,904,264    6,904,264            -            -
Finance contracts held for sale . . . . . . . . . . . .    1,366,114    1,366,114      867,070      867,070
Retained interest in securitizations-trading. . . . . .    7,878,306    7,878,306    4,586,908    4,586,908
Retained interest in securitizations-available for sale   32,016,649   32,016,649    9,286,443    9,286,443
Revolving credit facilities . . . . . . . . . . . . . .    7,639,201    7,639,201            -            -
Notes payable & non-recourse debt . . . . . . . . . . .    9,841,043    9,841,043   13,352,019   13,352,019
</TABLE>





16.  Supplemental  Cash  Flow  Disclosures


<TABLE>
<CAPTION>

     Supplemental cash flow information with respect to payments of interest and
warrants  issued  for  services  is  as  follows:


                               Year Ended December 31,

                                 1996        1997        1998
                              ----------  ----------  ----------
<S>                           <C>         <C>         <C>
Interest paid. . . . . . . .  $1,885,322  $3,771,566  $2,212,748
Warrants issued for services           -      25,000     335,432


</TABLE>


     No  income  taxes  were  paid  during  fiscal  1996,  1997  or  1998.

                                   -- F-33 --
<PAGE>


17.  Quarterly  Information  (unaudited)

<TABLE>
<CAPTION>

     The  following  financial  data  summarizes quarterly results for the Company for the years ended December 31,
1997  and  December  31,  1998:


                                                         Three Months Ended
Fiscal 1997                                                   March 31          June 30      September 30    December 31
                                                        --------------------  ------------  --------------  -------------
<S>                                                     <C>                   <C>           <C>             <C>
     Total revenues. . . . . . . . . . . . . . . . .    $         4,288,664   $ 6,110,826   $   6,370,219   $  5,661,419 
     Net income. . . . . . . . . . . . . . . . . . .                179,028       966,869         511,814        (44,658)
     Earnings per common share basic and diluted . .                   0.03          0.15            0.08          (0.01)


                                                        Three Months Ended
                                                        March 31              June 30       September 30    December 31
                                                        --------------------  ------------  --------------  -------------
Fiscal 1998
     Total revenues. . . . . . . . . . . . . . . . . .  $         5,351,158   $ 3,901,647   $   4,723,397   $  9,078,276 
     Net income (loss) . . . . . . . . . . . . . . . .             (121,138)   (5,233,788)     (2,051,476)       261,979 
     Net income (loss) available to common shareholders            (295,513)   (5,655,663)     (2,473,351)      (159,896)
     Earnings per common share basic and diluted . . .                (0.05)        (0.86)          (0.38)         (0.02)
</TABLE>



                                   -- F-34 --
<PAGE>