UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 FORM
        10-Q
 
 QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE
        SECURITIES EXCHANGE ACTOF 1934
 
 For
                  the fiscal quarter ended:
              Commission
                  file number:September
                  30, 2007
              000-50709
 
 NOWAUTO
        GROUP, INC.
 -------------------
 (Exact
        name of registrant as specified in its charter)
 
 Nevada
              77-0594821(State
                  or other jurisdiction
              (I.R.S.
                  Employerof
                  incorporation)
              Identification
                  No.)
 
 
 2090
        East
        University, Suite 112, Tempe, Arizona 85281
 ---------------------------------------------------------
 (address
        of principal executive offices, including zip code)
 
 (480)
        990-0007
 --------------
 (Registrant's
        telephone number, including area code)
 
 Indicate
        by check mark whether the Registrant (1) has filed all reports 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 whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act). Yes [ ] No [X]
 
 Indicate
        the number of shares outstanding of each of the issuer's classes of common
        stock, as of the latest practicable date.
 
 Title
                  of Each Class
              Outstanding
                  at September 30, 2007Common
                  Stock, par value $0.001 per share
              9,843,046




**NowAuto
                Group, Inc****Consolidated
                Condensed Balance Sheets**Assets




September
                30,
            
            June
                30,2007
            
            2007Unaudited
            
            AuditedCurrent
                AssetsCash
            
            
            29,323
            
            
            37,454Accounts
                Receivable - Net
            
            
            2,337,621
            
            
            2,325,893Inventory
            
            
            653,051
            
            
            530,056Prepaid
                Expenses
            
            
            63,067
            
            
            71,2333,083,061
            
            
            2,964,635Long
                Term Notes Receivable
            
            
            3,091,665
            
            
            3,119,020Equipment
                - Net
            
            
            88,792
            
            
            89,528Goodwill
            
            
            714,179
            
            
            714,1796,977,698
            
            
            6,887,363Liabilities
                and Stockholders' EquityCurrent
                LiabilitiesAccounts
                Payable
            
            
            314,243
            
            
            327,848Taxes
                Payable
            
            
            44,853
            
            
            149,474Line
                of Credit
            
            
            1,897,712
            
            
            1,897,744Accrued
                Payroll
            
            
            35,167
            
            
            49,282Deferred
                Revenue
            
            
            409,898
            
            
            80,593Other
                Loans
            
            
            223,195
            
            
            285,795Total
                Current Liabilities
            
            
            2,925,067
            
            
            2,790,737Long
                Term Notes Payable
            
            
            4,187,457
            
            
            3,740,015Commitment
            
            
            137,859
            
            
            137,859Total
                Liabilities
            
            
            7,250,383
            
            
            6,668,612Stockholders'
                EquityCommon
                Stock, authorized100,000,000
                shares, $0.001 par value;Issued
                and outstandingJune
                30, 2006 - 8,157,661 shares;June
                30, 2007 - 9,843,046 shares;
            
            
            9,843
            
            
            9,843Paid
                in Capital
            
            
            4,565,631
            
            
            4,565,631Retained
                Earnings/(Deficit)
            
            
            (4,848,159
            )
            
            (4,356,721
            )Total
                Stockholder's Equity
            
            
            (272,685
            )
            
            218,7526,977,698
            
            
            6,887,363






2




**NowAuto
                  Group, Inc**Consolidated
                  Condensed Statements of Operations
  Three
                  Months
              
              Three
                    MonthsEnded
              
              EndedSeptember
                  30,
              
              September
                  30,2007
              
              2006Unaudited
              
              UnauditedIncomeVehicle
                  & Finance Income
              
              
              1,086,539
              
              
              1,729,130Cost
                  of Goods Sold
              
              
              583,500
              
              
              945,858Gross
                  Profit/Loss
              
              
              503,039
              
              
              783,271Gross
                  Margin
              
              
              46.3
              %
              
              45.3
              %ExpensesSelling
                  and Financing Costs
              
              
              536,210
              
              
              196,834General
                  and Administrative
              
              
              458,266
              
              
              439,566Write
                  off of ReservesImpairment
                  of Goodwill
              
              
              0
              
              
              0Profit
                  before Income Taxes
              
              
              (491,439
              )
              
              146,871Provision
                  for Income TaxNOL
                  Carry ForwardNet
                  Income (Loss)
              
              
              (491,439
              )
              
              146,871Earnings
                  Per Share
              
              
              (0.05
              )
              
              0.02Shares
                  O/S
              
              
              9,843,046
              
              
              9,789,677






3




NowAuto
                  Group, IncConsolidated
                  Stockholders' Equity
  Paid
                  in
              
              Subscriptions
              
              Accumulated
              
              TotalShares
              
              Amount
              
              Capital
              
              Receivable
              
              Deficit
              
              EquityBalance
                  June 30, 2005
              
              
              8,157,662
              
              
              8,157
              
              
              3,523,116
              
              
              0
              
              
              (1,628,393
              )
              
              1,902,880Stock
                  Scribed
              
              
              
              
              
              
              
              
              
              
              
              1,005,500
              
              
              
              
              
              1,005,500Purchase
                  of Global-E Investments
              
              
              1,550,000
              
              
              1,550
              
              
              (1,550
              )
              
              
              
              
              
              
              
              0Stock
                  for services
              
              
              50,000
              
              
              50
              
              
              24,950
              
              
              
              
              
              
              
              
              25,000Stock
                  for services
              
              
              20,000
              
              
              20
              
              
              5,180
              
              
              
              
              
              
              
              
              5,200Common
                  shares issued for cash
              
              
              26,923
              
              
              
              
              
              3,500
              
              
              
              
              
              
              
              
              3,500Common
                  shares issued for cash
              
              
              38,461
              
              
              
              
              
              5,000
              
              
              
              
              
              
              
              
              5,000Net
                  (Loss)
              
              
              
              
              
              
              
              
              1,005,500
              
              
              (1,005,500
              )
              
              (441,926
              )
              
              (441,926
              )Balance,
                  June 30, 2006
              
              
              9,843,046
              
              
              9,777
              
              
              4,565,696
              
              
              0
              
              
              (2,070,319
              )
              
              2,505,154Net
                  Income (Loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,286,402
              )
              
              (2,286,402
              )Balance
                  June 30, 2007
              
              
              9,843,046
              
              
              9,777
              
              
              4,565,696
              
              
              0
              
              
              (4,356,721
              )
              
              218,752Net
                  Income (Loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (491,438
              )
              
              (491,438
              )Balance
                  September 30, 2007
              
              
              9,843,046
              
              
              9,777
              
              
              4,565,696
              
              
              0
              
              
              (4,848,159
              )
              
              (272,685
              )






4




NowAuto
                  Group, IncConsolidated
                  Statements of Cash Flows
  Three
                    Months
              
              Three
                    MonthsEnded
              
              EndedSeptember
                  30,
              
              September
                  30,2007
              
              2006Unaudited
              
              UnauditedOperating
                  ActivitiesNet
                  Income (Loss)
              
              
              (491,439
              )
              
              146,871Adjustments
                  to reconcile Net Income(Loss) to Net Cashused
                  in Operating ActivitiesSignificant
                  Non-Cash TransactionsDepreciation/Amortization
                  Expense
              
              
              2,681
              
              
              6,627Changes
                  in assets and liabilities(Increase)/Decrease
                  in Receivables
              
              
              (14,827
              )
              
              (579,685
              )(Increase)/Decrease
                  in Inventory
              
              
              (122,465
              )
              
              (222,334
              )(Increase)/Decrease
                  in Other Current Assets
              
              
              8,166
              
              
              (16,017
              )(Decrease)/Increase
                  in Accounts Payable
              
              
              (11,037
              )
              
              (138,942
              )(Decrease)/Increase
                  in Other Liabilities
              
              
              147,936
              
              
              (77,017
              )Net
                  Cash (Used) by Operating Activities
              
              
              (480,985
              )
              
              (880,497
              )Investing
                  Activities(Increase)/Decrease
                  in Purchase of Fixed Assets
              
              
              (1,945
              )
              
              (59,343
              )(Increase)/Decrease
                  in Long Term Notes Receivable
              
              
              27,355
              
              
              (105,483
              )Disposal
                  of Assets
              
              
              
              
              
              93,650(Increase)/Decrease
                  in Impairment of Goodwill25,410
              
              
              (71,176
              )Financing
                  Activities(Decrease)/Increase
                  in Bank loan
              
              
              447,442
              
              
              955,066447,442
              
              
              955,066Net
                  Increase/(Decrease) in Cash
              
              
              (8,132
              )
              
              3,393Cash,
                  Beginning of Period
              
              
              37,454
              
              
              27,43329,322
              
              
              30,826Supplemental
                  Information:Period
                  interest
              
              
              216,071
              
              
              79,445Income
                  Taxes paid
              
              
              0
              
              
              0






5




**Note
        1. ORGANIZATION AND BUSINESS**
 
 NowAuto,
        Inc. (the Company) was organized in the state of Nevada on August 19, 1998
        under
        the name WH Holdings, Inc. On June 8, 2004 the name was changed to Automotive
        Capital Group, Inc and the Company increased its authorized common stock.
        On
        August 31, 2004 the name was changed to NowAuto, Inc.
 
 The
        Company focuses mainly on the "Buy Here/Pay Here" segment of the used car
        market. The Company primarily sells 1999 and newer model year used vehicles.
        Many of the Company's customers have limited financial resources and would
        not
        qualify for conventional financing as a result of limited credit histories
        or
        past credit problems. As of December 31, 2006, the Company had four operating
        lots located in metropolitan Phoenix and Tucson, Arizona. The Company also
        has a
        wholly owned subsidiary, Navicom GPS, Inc., which markets GPS tracking
        units.
 
 On
        July
        21, 2005 the Company was purchased by Global-E Investments, Inc. Since Global-E
        was a non-operating company, this purchase was accounted for as a
        recapitalization stock exchange reverse acquisition. This means that for
        legal
        purposes the continuing entity is Global-E Investments, Inc. and for
        historically accounting purposes the accounting records of Now Auto will
        be
        shown. Global-E Investments has changed its name to NowAuto Group,
        Inc.
 
 **Note
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 *Principles
        of Consolidation*
 
 The
        consolidated financial statements include the accounts of NowAuto Group,
        Inc.
        and its subsidiary. All significant inter-company accounts and transactions
        have
        been eliminated. The Company operates on a June 30 fiscal year.
 
 *Use
        of Estimates*
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amount of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements, and the reported amounts of revenues and expenses
        during the period. Actual results could differ from those
        estimates.
 
 *Concentration
        of Risk*
 
 The
        Company provides financing in connection with the sale of substantially all
        of
        its vehicles. Periodically, the Company maintains cash in financial institutions
        in excess of the amounts insured by the federal government.
 
 *Cash
        Equivalents*
 
 The
        Company considers all highly liquid debt instruments purchased with maturities
        of three months or less to be cash equivalents.
 
 The
        Company originates installment sale contracts from the sale of used vehicles
        at
        its dealerships. Finance receivables are collateralized by vehicles sold
        and
        consist of contractually scheduled payments from installment
        contracts.
 
 *Used
        Car Inventory*
 
 Inventory
        consists of used vehicles and is valued at the lower of cost or market on
        a
        specific identification basis. Vehicle reconditioning costs are capitalized
        as a
        component of inventory. Repossessed vehicles are recorded at fair value,
        which
        approximates wholesale value. The cost of used vehicles sold is determined
        using
        the specific identification method.
  6
 
 *Equipment*
 
 Property
        and equipment are stated at cost. Expenditures for additions, renewals and
        improvements are capitalized. Costs of repairs and maintenance are expensed
        as
        incurred. Leasehold improvements are amortized over the shorter of the estimated
        life of the improvement or the lease period. The lease period includes the
        primary lease term plus any extensions that are reasonably assured. Depreciation
        is computed principally using the straight-line method generally over the
        following estimated useful lives:
 
 Furniture,
                  fixtures and equipment
              3
                  to 7 yearsLeasehold
                  improvements
              5
                  to 15 years
 
 
 Property
        and equipment are reviewed for impairment whenever events or changes in
        circumstances indicate the carrying amount of an asset may not be recoverable.
        Recoverability of assets to be held and used is measured by a comparison
        of the
        carrying amount of an asset to future undiscounted net cash flows expected
        to be
        generated by the asset. If such assets are considered to be impaired, the
        impairment to be recognized is measured by the amount by which the carrying
        values of the impaired assets exceed the fair value of such assets. Assets
        to be
        disposed of are reported at the lower of the carrying amount of fair value
        less
        costs to sell.
 
 *Sales
        Tax*
 
 The
        Company pays sales taxes to local and state governmental agencies on vehicles
        sold and leased. For sales contracts, calculations for sales taxes are made
        on
        an accrual basis. Vehicle repossessions are allowed as a deduction from taxable
        sales in the month of repossession. Customers often make their down payments
        in
        periodic increments over a period of four to six weeks. The Company does
        not
        report the sale for sales tax purposes until the down payments are fully
        paid.
        This is congruent with industry standard and complies with state tax codes.
        For
        lease agreements, sales tax is paid when funds are received from the customer.
        Therefore, leases are reported for sales tax purposes in the period the lease
        is
        signed. There is no allowable deduction for vehicle repossessions. The Company
        is current with its filings of reports. The Company does owe back sales taxes.
        Arrangements have been made with all taxing authorities and the Company is
        in
        full compliance with all of them.
 
 *Income
        Taxes*
 
 Income
        taxes are accounted for under the liability method. Under this method, deferred
        tax assets and liabilities are determined based on differences between financial
        reporting and tax bases of assets and liabilities and are measured using
        the
        enacted tax rates expected to apply in the years in which these temporary
        differences are expected to be recovered or settled.
 
 *Revenue
        Recognition*
 
 Revenues
        from the sale of used vehicles are recognized when the sales contract is
        signed,
        the customer has taken possession of the vehicle and, if applicable, financing
        has been approved.
 
 Revenue
        from GPS units devices is recognized when a unit has been ordered and shipped.
        Revenue from access time purchased is recognized ratably over the term of
        the
        access contracts. Access terms can vary from one month to 36 months. A Deferred
        Revenue account is set up for any access time paid for but not yet
        earned.
 
 *Advertising
        Costs*
 
 Advertising
        costs are expensed as incurred and consist principally of radio, television
        and
        print media marketing costs. Advertising costs amounted to $78,104 and $15,856
        for the quarters ended September 30, 2006 and 2007, respectively.
  7
 
 *Earnings
        per Share*
 
 Basic
        earnings per share are computed by dividing net income by the average number
        of
        common shares outstanding during the period. Diluted earnings per share takes
        into consideration the potentially dilutive effect of common stock equivalents,
        such as outstanding stock options and warrants, which if exercised or converted
        into common stock would then share in the earnings of the Company. In computing
        diluted earnings per share, the Company utilizes the treasury stock method
        and
        anti-dilutive securities are excluded.
 
 *Stock
        Option Plans*
 
 As
        of
        September 30, 2007 the Company had no employee stock ownership
        plan.
 
 *Repossession
        Accrual*
 
 The
        repossession accrual represents the amount of the loss expected to be
        experienced upon repossession of cars adjusted by the actual loss experienced.
        The Company believes that it is more profitable to keep the customer in the
        vehicle. Great effort was made to accomplish this goal. The company is currently
        reviewing these efforts for their effectiveness and revising the approach
        to be
        more proactive rather than reactive.
 
 **Note
        3. FINANCE AND ACCOUNTS RECEIVABLES - NET**
 
 *Financed
        Contract Receivable-net*
 
 The
        Company originates installment sale contracts from the sale of used vehicles
        at
        its lots. These installment sale contracts typically a) include interest
        rates
        of 29.99% per annum, b) are collateralized by the vehicle sold and c) provide
        for payments over a period of 36 months. At June 30, 2005, the Company was
        not
        holding any of its own contracts. As of September 30, 2007 the Company was
        holding financed contracts. These are shown below.
 
 September
                  30,
              
              September
                  30,2006
              
              2007Financed
                  Contracts Receivable
              
              $
              4,153,493
              
              $
              4,560,667Allowance
                  for doubtful accounts
              
              
              (47,213
              )
              
              (33,493
              )Financed
                  Contracts-net
              
              $
              4,106,280
              
              $
              4,427,174
 
 
 During
        the Quarter ending June 30, 2007, the Company began leasing as well as selling
        vehicles. This has two immediate advantages. First, all sales tax on sale
        contracts is due and payable when the down payment is fully satisfied even
        though the cash flow generated from the sale is spread over approximately
        36
        months. Sales tax on leases is due only on monies received spreading the
        obligation evenly with the cash flow. Secondly, the vehicle is titled
        differently making it a little easier should the Company need to retake
        possession of the vehicle.
 
 Accounting
        for leases is different though the results are very similar to sale contracts.
        The principle balance of sales contracts is recorded as Notes Receivable.
        The
        agreed sale price of the vehicle is the revenue recognized. According to
        Generally Accepted Accounting Principles (GAAP) as stated in SFAS No. 13,
        the
        Company recognizes its leases as sales-type capital leases. In this case,
        the
        total remaining payments plus residual value is recorded as Notes Receivable.
        Interest is recorded as Deferred Revenue and recognized as appropriate during
        the lease period. The present value of the annuity due on the monthly payment
        is
        the recognized revenue. This amount tends to be lower than the sales price.
        The
        cost of the vehicle minus the present value of the residual value is recognized
        as the cost of sales. These differences will initially have a negative affect
        on
        gross margin. In the long term, it will increase the amount of interest
        income.
  8
  
 **Note
        4. PROPERTY AND EQUIPMENT**
 
 A
        summary
        of equipment and accumulated depreciation as follows:
 
 September
                  30,
              
              September
                  30,2006
              
              2007Furniture,
                  fixtures and Equipment
              
              $
              39,416
              
              $
              39,713Leasehold
                  improvements
              
              
              55,884
              
              
              56,989Computers
                  & Software
              
              
              12,292
              
              
              17,712Less
                  accumulated depreciation
              
              
              (13,769
              )
              
              (25,620
              )Net
                  Equipment
              
              $
              93,823
              
              $
              88,792
 
  **Note
        5. GOODWILL**
 
 During
        the fiscal year ending June 30, 2005, the Company purchased the rights to
        three
        used car lots and its subsidiary Navicom Corporation. Details of these purchases
        are in a subsequent note. The Company performed an analysis of its booked
        Goodwill compared to the present value of projected future profits for the
        next
        five years. Based on that analysis the recorded Goodwill will hold its value.
        The recorded Goodwill on June 30, 2007 was as follows:
 
 Quarter
                  Ending September 30,
              
              2007
              
              2006$
              714,179
              
              $
              928,497
 
 
 Impairment
 
 In
        the
        quarter ending June 30, 2007, the Company decided to merge the Tucson lot
        with
        the Phoenix operations. This was the result of three things:
 1.
            The
                Company has never been able to secure an adequate source of inventory
                in
                the Tucson area thus creating supply challenges. Inventory had to
                be
                acquired in Phoenix and transported to Tucson. The time, effort,
                and cost
                of doing this became a burden to the
                Company 2.
            Retaining
                qualified staff proved problematic resulting in higher than acceptable
                turnover especially at the management
                level. 3.
            Profits
                were unpredictable. This
        created an impairment of goodwill in the amount of $221,543.
 
 **Note
        6. INCOME TAXES**
 
 The
        provision for income taxes for the fiscal quarters ended December 31, 2006
        and
        2005 were as follows below. A valuation account has been set up in the amount
        of
        the deferred asset.
 
 Quarter
                  ended September 30,
              
              2006
              
              2007Provision
                  for income taxes:Current
                  taxes payable
              
              $
              0
              
              $
              0Change
                  in the deferred tax asset(net
                  of the valuation account)
              
              
              0
              
              
              0Total
              
              $
              0
              
              $
              0
 
 
 9
  **Note
        7. STOCKHOLDERS' EQUITY**
 
 *Common
        Stock*
 
 NowAuto,
        Inc. (the Company) was organized in the state of Nevada on August 19, 1998
        under
        the name WH Holdings, Inc. On June 8, 2004 the name was changed to Automotive
        Capital Group, Inc and the Company increased its authorized common stock
        to
        100,000,000 shares with a par value of $0.001. On August 31, 2004 the name
        was
        changed to NowAuto, Inc.
 
 On
        June
        30, 2004, the Company had 14,984,544 shares outstanding. During the twelve
        months ended June 30, 2005 the Company issued an additional 21,490,995 issued
        for the purchase of new lots and services rendered. 13,333,333 shares were
        cancelled. In the period ending June 30, 2006 1,685,384 shares were issued
        for
        capital purchases and services rendered. No shares have been issued since
        that
        date.
 
 **Note
        8. COMPANY ACQUSITIONS**
 
 *Navicom
        Corporation*
 
 On
        September 3, 2004 The Company issued 536,002 shares valued at $214,401 to
        purchase Navicom Corporation. Listed below is the balance sheet of Navicom
        at
        the date of purchase:
 
 AssetsCash
              
              $
              1,689Accounts
                  Receivable
              
              
              26,223Furniture
                  & Fixtures
              
              
              1,551Total
                  Assets
              
              $
              29,463Liabilities
                  and Stockholders EquityAccounts
                  Payable
              
              $
              11,744Payroll
              
              
              908Sales
                  Tax Payable
              
              
              364Loan
              
              
              15,000Total
                  Liabilities
              
              
              28,016Net
                  Equity
              
              
              1,447Total
                  Liabilities andStockholders
                  Equity
              
              $
              29,463
 
  *NowAuto
        Mesa Car Lot*
 
 On
        October 18, 2004 the Company assumed the lease and lot operations of a used
        car
        lot located in Mesa, Arizona. The Company issued 430,126 shares of common
        stock
        valued at $86,025 and $412,003 accounts receivable in the form of auto financing
        contracts for a total purchase price of $498,028.
 
 *NowAuto
        Tucson Car Lot*
 
 The
        Company assumed the lease of a used car lot located in Tucson, Arizona during
        May 2005. The Company issued $164,318 worth of accounts receivable in the
        form
        of auto financing contracts for the purchase.
  10
 
 *Sunburst
        Lot*
 
 On
        January 17, 2005 the Company agreed to purchase the lot lease and name use
        (Sunburst) from Sunburst Car Company, Inc. The agreement was revised and
        finalized on March 30, 2005 and the Company paid $751,735 cash as described
        below. The Company took possession of the lot on July 7, 2005.
 
 Equipment
                  & fixtures
              
              $
              250,000Leasehold
                  Improvement
              
              
              100,000Non
                  Compete Covenant
              
              
              5,000Goodwill
              
              
              375,000Escrow
                  Costs
              
              
              1,735Total
                  Investment
              
              $
              751,735
 
 Certain
        significant events have since occurred that focused attention on Sunburst
        goodwill.
 
 Sunburst’s
        auction business was the key reason for its acquisition. It was expected
        to be a
        profitable alternative means of disposing of vehicles not eligible for finance
        (BHPH) sales. Since the acquisition of Sunburst, a number of events have
        converged which adversely affected the goodwill for the Sunburst lot, including
        but not limited to the following:
 
 1.  The
        auction proceeds did not achieve the expected results in terms of cash flow
        and
        profitability. While the Company devoted considerable capital and advertising
        to
        expand the auction, the results still failed to achieve the Company’s
        expectation.
 
 2.  The
        Company determined that he Sunburst auction was becoming a drain on capital,
        advertising, and labor, thus inhibiting profitability and growth of its BHPH
        business.
 
 3.  The
        Sunburst staff inherited in the acquisition did not perform to expectations
        [NOTE: none of those employees are still with the Company]
 
 As
        a
        result, the Company elected to change the way it disposes of vehicles not
        eligible for finance sales, focus on it’s core competency of BHPH sales and
        reduce redundant and burdensome cost. Therefore, goodwill for the Sunburst
        lot
        has been reduced by $395,000 bringing its value to $0.
 
 In
        June
        of 2006, the landlord of the Sunburst lot announced that he had an offer
        to sell
        the land. In view of the events discussed above, the Company decided to decline
        to exercise its lease option to stay. Therefore, the under-performing Sunburst
        auction was closed down. Certain fixed assets for $231,518 to impairment
        and a
        reduction of overhead of $338,364 per year. However, the Company believes
        that
        the new location will be as productive in financed sales as the old lot had
        been.
 
 **Note
        9. NAVICOM**
 
 The
        Company has two segments, its cars sales and its GPS unit sales (Navicom).
        Currently, Navicom is in the process of changing its product brand and business
        model. Great effort has been made to seek products with more cost effective
        feature sets that will better serve its customers. At this time, Navicom
        has
        minimal activity only serving NowAuto Group.
 
 **Note
        10. STOCK OPTIONS AND WARRANTS**
 
 Currently
        the Company has no outstanding options or warrants.
  11
 
 **Note
        11. COMMITMENTS AND CONTINGENCIES**
 
 *Facility
        Leases*
 
 The
        Company leases certain car lots and office facilities under various operating
        leases. Lot leases are generally for periods from one to three years and
        may
        contain multiple renewal options. As of September 30, 2007, the aggregate
        rentals due under such leases, including renewal options that are reasonably
        assured, are as follows:
 
 2006
              
              $
              237,6792007
              
              
              257,0102008
              
              
              257,0102009
              
              
              257,0102010
              
              
              257,010
 
 
 **Note
        12. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS**
 
 Below
        is
        a listing of the most recent accounting standards SFAS 150-154 and their
        effect
        on the Company.
 
 Statement
        No. 150 Accounting for Certain Financial Instruments with Characteristics
        of
        both Liabilities and Equity (Issued 5/03)
 
 This
        Statement establishes standards for how an issuer classifies and measures
        certain financial instruments with characteristics of both liabilities and
        equity.
 
 Statement
        No. 151 Inventory Costs-an amendment of ARB No. 43, Chapter 4 (Issued
        11/04)
 
 This
        statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing,
        to
        clarify the accounting for abnormal amounts of idle facility expense, freight,
        handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter
        4, previously stated that "...under some circumstances, items such as idle
        facility expense, excessive spoilage, double freight and re-handling costs
        may
        be so abnormal as to require treatment as current period charges...." This
        Statement requires that those items be recognized as current-period charges
        regardless of whether they meet the criterion of "so abnormal." In addition,
        this Statement requires that allocation of fixed production overheads to
        the
        costs of conversion be based on the normal capacity of the production
        facilities.
 
 Statement
        No. 153 Exchanges of Non-monetary Assets (an amendment of APB Opinion No.
        29)
 
 The
        guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions,
        is
        based on the principle that exchanges of non-monetary assets should be measured
        based on the fair value of the assets exchanged. The guidance in that Opinion,
        however, includes certain exceptions to the principle. This Statement amends
        Opinion 29 to eliminate the exception for non-monetary exchanges of similar
        productive assts and replaces it with a general exception for exchanges of
        non-monetary assets that do not have commercial substance. A non-monetary
        exchange has commercial substance if the future cash flows of the entity
        are
        expected to change significantly as a result of the exchange.
 
 Statement
        No. 154 - Accounting Changes and Error Corrections (a replacement of APB
        Opinion
        No. 20 and FASB Statement No. 3)
 
 This
        Statement replaces APB Opinion No. 20, Accounting Changes, and FASB
 Statement
        No. 3, Reporting Accounting Changes in Interim Financial Statements, and
        changes
        the requirements for the accounting for and reporting of a change in accounting
        principle. This Statement applies to all voluntary changes in accounting
        principle. It also applies to changes required by an accounting pronouncement
        in
        the unusual instance that the pronouncement does not include specific transition
        provisions. When a pronouncement includes specific transition provisions,
        those
        provisions should be followed.
 
 The
        adoption of these new Statements is not expected to have a material effect
        on
        the Company's current financial position, results or operations, or cash
        flows.
 
 SFAS
        No.
        13 - Accounting for Leases is used to determine the method of accounting
        for
        leases. (See Note 3)
  12
 
 **Note
        13. GOING CONCERN**
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. The Company sustained a material loss in
        the
        year ended June 30, 2005. This loss continued through June 30, 2006. This
        raised
        substantial doubt about the Company's ability to continue as a going concern.
        The financial statements do not include any adjustments that might result
        from
        this uncertainty.
 
 Management
        has made efforts to improve the profitability of the Company by increasing
        the
        margins on cars sold. They have also hired new finance and accounting personnel
        to better track the Company's profitability and negotiate selling contracts.
        Investor funds have been solicited to maintain cash flows until the Company
        becomes profitable.
 
 The
        fiscal year ended June 30, 2007 reflects a substantial net loss. The Company
        did
        report a profit for the year ended June 30, 2006, before impairment of Goodwill.
        The Company needs to attract equity investors to continue in existence. No
        assurance can be made that these investors will be forthcoming.
 
 **Note
        14. COMPENSATION OF OFFICERS**
 
 Scott
        Miller, CEO entered into an agreement with the Company on January 20, 2005
        for
        $250,000 as a retention bonus. The Company has been unable to honor the full
        agreement. Currently, Mr. Miller receives a salary of $130,000 per year.
        He
        drives a company-owned vehicle most of the time as does other Company
        management. Theodore Valenzuela serves as the COO. He receives an annual
        salary
        of $140,000. The other officer currently receives salary of less than $100,000.
 
 **Note
        15. CONTRACT FINANCING**
 
 During
        the quarter ended March 31, 2006 the Company initiated relations with a new
        finance company to finance installment contracts from customers. The monies
        advanced are based upon the contract price and vary per car. The individual
        car
        is used as collateral for the advanced funds. Substantially all of the
        installment contracts financed requires the Company's customers to make their
        monthly payments via ACH (automatic account withdrawal). The Company pays
        a
        variable interest rate over the Prime Rate for its financing. The finance
        company receives all of the payments from the customers, removes its portion
        (interest and principal) and then makes the remainder available for the Company
        to pull from when needed. The Company retains ownership of these contracts
        and
        is active in the collection of delinquent accounts from these contracts.
        The
        Company also has contracts, which it administers itself.
 
 **Note
        16. FINANCIAL REPORTS**
 
 The
        Statement of Operations has been changed to report selling and financing
        costs
        as a separate line item. In the past, only the selling costs have been broken
        out. It is believed that this gives the reader better information about the
        operations of the Company. Prior period statements are adjusted to reflect
        the
        change.
 
 **Note
        17. PENDING LITIGATION**
 
 A
        former
        employee has sued NavicomGPS, Inc, NowAuto.com, Inc, and NowAuto, Inc. claiming
        that he was owed a bonus and other compensation with treble damages. NowAuto
        Group, Inc was not named. The employee obtained a summary judgment against
        the
        debtor companies in the amount of $137,858.83. The Company has chosen to
        vigorously fight the judgment and filed an appeal in May 2007. The opening
        brief
        was filed in August of 2007. No response has yet been filed. At this time,
        the
        parties have agreed to an arbitrated settlement and the Company believes
        that
        the settlement will be reached and will be considerably lower than the judgment
        amount. In October of 2007, an out of court settlement of $71,000 with payments
        to begin in November of 2007 was agreed to by both parties.
  13
 **Item
        2. Management's Discussion and Analysis of Financial Condition and Results
        of
        Operations**
 
 The
        following discussion should be read in conjunction with the Company's
        consolidated financial statements and notes thereto appearing elsewhere in
        this
        report.
 
 **Forward-looking
        Information**
 
 The
        Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
        for
        certain forward-looking statements. Certain information included in this
        Quarterly Report on Form 10-QSB contains, and other materials filed or to
        be
 filed
        by
        the Company with the Securities and Exchange Commission (as well as information
        included in oral statements or other written statements made or to be made
        by
        the Company or its management) contain or will contain, forward-looking
        statements within the meaning of Section 21E of the Securities Exchange Act
        of
        1934, as amended, and Section 27A of the Securities Act of 1933, as amended.
        The
        words "believe," "expect," "anticipate," "estimate," project" and similar
        expressions identify forward-looking statements, which speak only as of the
        date
        the statement was made. The Company undertakes no obligation to publicly
        update
        or revise any forward-looking statements. Such forward-looking statements
        are
        based upon management's current plans or expectations and are
 subject
        to a number of uncertainties and risks that could significantly affect current
        plans, anticipated actions and the Company's future financial conditions
        and
        results. As a consequence, actual results may differ materially from
        those
 expressed
        in any forward-looking statements made by or on behalf of the Company as
        a
        result of various factors. Any forward-looking statements are made pursuant
        to
        the Private Securities Litigation Reform Act of 1995 and, as such, speak
        only as
        of the date made.
 
 **Overview**
 
 Since
        2004, NowAuto Group, Inc., a Nevada corporation (the "Company") is a publicly
        held retailer focused on the "Buy Here/Pay Here" segment of the used vehicle
        market. The Company generally sells 1999 and newer model-year used vehicles
        and
        provides financing for substantially all of its customers. Many of the Company's
        customers have limited financial resources and would not qualify for
        conventional financing as a result of limited credit histories or past credit
        problems. As of September 30, 2007 the Company had three stores, all of which
        are located in the State of Arizona.
 
 The
        market for used vehicle sales in the United States is significant. Used vehicle
        retail sales typically occur through franchised new vehicle dealerships that
        sells used vehicles, or independent used vehicle dealerships. The Company operates
        in the "Buy Here/Pay Here" segment of the independent used vehicle sales
        and
        finance market. Buy Here/Pay Here dealers sell and finance used vehicles
        to
        individuals with limited credit histories or past credit problems. Buy Here/Pay
        Here dealers typically offer their customers certain advantages over more
        traditional financing sources, such as broader and more flexible credit terms,
        attractive payment terms, including scheduling payments on a weekly or bi-weekly
        basis to coincide with a customer's payday, and the ability to make payments
        in
        person, an important feature to individuals who may not have checking accounts.
        In turn, interest rates on vehicle loans provided by the Company are generally
        higher than those offered to individuals who purchase from other new or used
        vehicle dealers or who have better credit histories.
 
 The
        Company's primary focus is on sales end collections. The Company is responsible
        for its own collections through its internal contracts department with
        supervisory involvement of the corporate office. For the twelve months ended
        June 30, 2007 estimated credit losses as a percentage of contracts were
        increased substantially over the prior year. In the past none months the
        Company
        implemented new and stricter underwriting criteria at the store level. In
        addition the Company implemented stricter contract criteria which, in the
        short
        term, resulted in higher repossessions and charge-off accounts. While these
        measures contributed to higher credit losses, during/in the June 30, 2007
        fiscal
        year, the Company believes that its loan portfolio will reflect higher quality
        loans that result in lower credit losses in the future. In addition, credit
        losses are also imparted, to some degree, by economic conditions in the markets
        in which the Company serves, In recent months, energy costs have risen at
        a rate
        much faster than the general rate of inflation. While the Company believes
        that
        most significant factor affecting credit losses is the proper execution (or
        lack
        therefore) of its business practices, the Company also believes that higher
        energy and fuel costs have a negative impact on collection results.
  14
 
 Hiring,
        training and retaining qualified personnel are critical to the Company's
        success. The number of trained managers the Company has at its disposal will
        limit the rate at which the Company adds new stores. Excessive turnover,
        particularly at the store manager level, could impact the Company's ability
        to
        add new stores. During the twelve months ended June 30, 2006 the Company
        added
        resources to train and develop personnel. The Company expects to continue
        to
        invest in the development of its workforce.
 
 The
        Company also offers GPS tracking services through its NaviCom GPS, Inc.
        subsidiary that allows users, including vehicle dealers and others, to locate,
        track and monitor motor vehicles and other personal property.
 
 *Three
        Months Ended September 30, 2007 vs. Three Months Ended September 30,
        2006*
 
 Revenue
        for the quarter ended September 30, 2007 was $1,086,539 versus revenue of
        $1,729,130 for the quarter ended September 30, 2006. The decline in revenue
        was
        a result of lower sales volume.
 
 The
        Company's gross profit as a percentage of sales during the quarter ending
        September 30, 2007 was 46.3% vs. 45.3% for the quarter ended September 30,
        2006.
        The increase in gross profit margin was primarily due to the Company’s focus on
        higher margin vehicle finance sales and finance income.
 
 During
        the year ended June 30, 2007, the Company experienced higher than normal
        increase in bad debt expense due to higher than normal repossessions. While
        the
        Company believes that proper execution (or lack thereof) of its business
        practices is the most significant factor affecting credit losses, the Company
        also believes that general economic conditions, including but not limited
        to
        higher energy, fuel costs, and the troubled credit market adversely affected
        collection efforts and resulted in higher than normal vehicle repossessions
        during the year ended June 30, 2007. This trend continued during the quarter
        ended September 30, 2007 and is likely to continue in the foreseeable
        future. General and administrative expenses as a percentage of sales were
        42% for the three months ended September 30, 2007 versus 29.7% for the three
        months ended September 30, 2006. Interest expense increased 63% as a result
        of
        line of credit financing (See Note 15) increasing administrative costs. Bad
        debt
        expense increased 459% over the prior year. Furthermore, because the Company
        now
        retains its own contracts, it created a collections department thereby
        increasing financing expenses. The Company has also become more cost-effective
        in other areas.
 
 Financial
        Condition
 The
        following sets forth the major balance sheet accounts of the Company as of
        the
        dates specified.
 
 September
                  2006
              
              September
                  2007Accounts
                  Receivable (net)
              
              
              4,860,651
              
              
              5,429,286Inventory
              
              
              847,232
              
              
              653,051Equipment
              
              
              93,823
              
              
              88,792Goodwill
              
              
              928,497
              
              
              714,179Accounts
                  Payable
              
              
              267,060
              
              
              314,243Taxes
                  Payable
              
              
              326,964
              
              
              44,853
 
 
 
 As
        of
        June 30, 2005 the Company held no contracts. During the quarter ended September
        30, 2005 management made the decision to begin its own financing. This accounts
        for the increase in accounts receivable. Inventory rose as a result of increased
        sales. The Company had no significant increase in equipment purchase for
        the
        quarter. The increase noted is actually a transfer of assets. The Sunburst
        lot
        was purchased on July 7, 2005. As of that date $350,000 in fixed assets was
        transferred from other assets to equipment and depreciation was initiated.
        The
        increase in accounts payable was a result of increased volume of business
        and
        strained cash flow.
  15
 
 *Liquidity
        and Capital Resources*
 
 During
        the twelve months ended June 30, 2006 the Company had investment equity
        infusions to shore up the lack of cash flow. The Company has not had any
        investments since September 30, 2005. Since the middle of August 2005
        the
 Company
        has also kept most of its contracts as opposed to selling the contracts to
        third
        parties. This has put a severe strain on the cash flow of the Company and
        has
        made it difficult to pay normal overhead expenses on an ongoing basis. During
        the three month period ended March 31, 2006 the Company executed a finance
        agreement with an independent finance company to fund the Company's installment
        contracts. Without a source to finance or purchase the contracts the Company
        has
        only as its cash flow cash sales and monthly payments from its contracts
        receivable portfolio. Currently, this cash flow stream is not adequate to
        meet
        weekly overhead cash needs.
 
 *Critical
        Accounting Policies*
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires the Company to
        make
        estimates and assumptions in determining the reported amounts of assets and
        liabilities and disclosures of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from the Company's
        estimates. The Company believes the most significant estimate made in the
        preparation of the accompanying consolidated financial statements relates
        to the
        determination of is allowance for doubtful accounts, which is discussed
        below.
 
 The
        Company maintains an allowance for doubtful accounts on an aggregate basis
        at a
        level it considers sufficient to cover estimated losses in the collection
        of its
        finance receivables. The allowance for doubtful accounts is based primarily
        upon
        recent historical credit loss experience, with consideration given to trends
        in
        the industry, delinquency levels, collateral values, and economic conditions
        and
        collections practices. The allowance for doubtful accounts is periodically
        reviewed by management with any changes reflected in current operations.
        Although it is at least reasonably possible that events or circumstances
        could
        occur in the future that are not presently foreseen which could cause actual
        credit losses to be materially different from the recorded allowance for
        credit
        losses, the Company believes that it has given appropriate consideration
        to all
        factors and has made reasonable assumptions in determining the allowance
        for
        doubtful accounts.
 
 *Recent
        Accounting Pronouncements*
 
 In
        December 2004, The Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards 123R, "Share-Based Payment" (SFAS
        123R), which is a revision of SFAS 123. SFAS 123R supersedes APB Opinion
        No. 25.
        Generally, the approach in SFAS 123R is similar to the approach described
        in
        SFAS 123, except that SFAS 123R requires all share-based payments to employees,
        including grants of employee stock options, to be recognized in the income
        statements based on fair values. Pro forma disclosure is no longer an
        alternative under SFAS 123R. SFAS 123R was originally issued with the
        implementation required for interim and annual periods beginning after June
        15,
        2005. One April 15, 2005 the Securities and Exchange Commission delayed the
        required effective date of SFAS 123R to the beginning of the first fiscal
        year
        that begins after June 15, 2005.
 
 The
        Company has a policy of immediate compliance with all new accounting standards.
        It has complied with these new requirements since the beginning of its prior
        fiscal year, July 1, 2004.
 
 *Seasonality*
 
 The
        Company's vehicle sales and finance business is seasonal in nature. The period
        October through December is historically the slowest period for vehicle sales.
        Many of the Company's operating expenses such as administrative
 personnel,
        rent and insurance are fixed and cannot be reduced during period of decreased
        sales. Conversely, the period January through May is historically the busiest
        time for vehicle sales as many of the Company's customers use income tax
        refunds
        as down payment on the purchase of a vehicle.
  16
 
 **Item
        3. Quantitative And Qualitative Disclosures about Market
        Risk**
 
 As
        of
        March 31, 2006 the Company had obtained long term institutional financing
        in the
        form of collateral debt, and as such the Company’s earnings are impacted by
        interest paid. Interest rates charged by the Company on the vehicles financed
        by
        the Company are fixed and are within lending rate regulations in the State
        of
        Arizona.
 
 The
        Company generally finances vehicles on behalf of high risk borrowers with
        poor
        credit histories. A portion of these loans become delinquent and require
        repossession of the vehicles. Charges in the company’s delinquency expense
        caused by changes in economic conditions or other factors could increase
        the
        Company’s bad debt charge-offs and provision for losses which would adversely
        affect profitability. Moreover, increased credit losses could substantially
        reduce the Company’s working capital and limit operations.
 
 **Item
        4. Controls and Procedures**
 
 The
        Company's management has evaluated the effectiveness of the design and operation
        of its financial and operating controls and procedures as of the end of the
        period covered by this annual report on Form 10-K, and, based on their
        evaluation have concluded that these controls and procedures, while improved
        over last year, are not effective in part due to a weakness in the information
        technology ("IT") controls.
 
 During
        the twelve months ended June 30, 2006 the Company made a number of improvements
        in the IT area including (i) hiring a seasoned chief accountant; (ii) installing
        new software programs specific to the Company's business; and (iii) improving
        operational reporting procedures and controls. During the three months ended
        September 30, 2007 the Company has continued to enhance and improve its business
        systems. While the Company's management believes improvements have been made,
        there is still work to be done to improve integration and control of data
        flow.
  17
 PART
        II


Other
        Information
 
 Item
                  1.
              Legal
                  ProceedingsNoneItem
                  6.
              Exhibits31.1
              Rule
                  13a-14(a) certification31.2
              Rule
                  13a-14(a) certification32.1
              Rule
                  Section 1350 certification
 
  Exhibit
        Index
 
 31.1.
        Rule 13a-14(a) certification
 31.2.
        Rule 13a-14(a) certification
 32.1.
        Rule Section 1350 certification




18