UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
      SECURITIES EXCHANGE ACTOF 1934





For
                the fiscal quarter ended:
            Commission
                file number:December
                31, 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 o





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act). Yes oNo
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 December 31, 2007Common
                Stock, par value $0.001 per share
            
            9,843,046









**NowAuto
        Group, Inc**
 **Consolidated
        Condensed Balance Sheets**
 
 December
                  31,
              
              September
                  30,2007
              
              2007(unaudited)
              
              (unaudited)AssetsCurrent
                  AssetsCash
              
              
              13,394
              
              
              29,323Accounts
                  Receivable - Net
              
              
              2,400,038
              
              
              2,337,621Inventory
              
              
              775,030
              
              
              653,051Prepaid
                  Expenses
              
              
              61,178
              
              
              63,0673,249,639
              
              
              3,083,061Long
                  Term Notes Receivable
              
              
              3,096,578
              
              
              3,091,665Equipment
                  - Net
              
              
              87,843
              
              
              88,792Goodwill
              
              
              716,179
              
              
              714,1797,150,239
              
              
              6,977,698Liabilities
                  and Stockholders' EquityCurrent
                  LiabilitiesAccounts
                  Payable
              
              
              378,493
              
              
              314,243Taxes
                  Payable
              
              
              21,588
              
              
              44,853Line
                  of Credit
              
              
              1,920,407
              
              
              1,897,712Accrued
                  Payroll
              
              
              21,112
              
              
              35,167Deferred
                  Revenue
              
              
              646,742
              
              
              409,898Other
                  Loans
              
              
              187,786
              
              
              223,195Total
                  Current Liabilities
              
              
              3,176,127
              
              
              2,925,067Long
                  Term Notes Payable
              
              
              4,507,225
              
              
              4,187,457Commitment
              
              
              51,000
              
              
              137,859Total
                  Liabilities
              
              
              7,734,353
              
              
              7,250,383Stockholders'
                  EquityCommon
                  Stock, authorized 100,000,000 shares, $0.001 par value; Issued
                  and
                  outstanding June 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)
              
              
              (5,159,588
              )
              
              (4,848,159
              )Total
                  Stockholder's Equity
              
              
              (584,114
              )
              
              (272,685
              )7,150,239
              
              
              6,977,698
 
 The
        accompanying notes are an integral part of these financial
        statements
  
 
 **NowAuto
        Group, Inc**
 
 Consolidated
        Condensed Statements of Operations
 
 3
                  months
              
              6
                  months
              
              3
                  months
              
              6
                  monthsEnded
              
              Ended
              
              Ended
              
              EndedDecember 31,
              
              December 31,
              
              December 31,
              
              December 31,2007
              
              2007
              
              2006
              
              2006(unaudited)
              
              (unaudited)
              
              (unaudited)
              
              (unaudited)IncomeVehicle
                  & Finance Income
              
              
              1,063,650
              
              
              2,150,189
              
              
              2,230,859
              
              
              3,950,629Cost
                  of Goods Sold
              
              
              487,529
              
              
              1,071,029
              
              
              1,568,409
              
              
              2,467,369Gross
                  Profit/Loss
              
              
              576,121
              
              
              1,079,160
              
              
              662,450
              
              
              1,483,259Gross
                  Margin
              
              
              54.2
              %
              
              50.2
              %
              
              29.7
              %
              
              37.5
              %ExpensesSelling
                  and Financing Costs
              
              
              412,734
              
              
              948,945
              
              
              698,769
              
              
              862,556General
                  and Administrative
              
              
              474,815
              
              
              933,081
              
              
              597,465
              
              
              1,008,115Write
                  off of ReservesImpairment
                  of Goodwill
              
              
              0
              
              
              0Profit
                  before Income Taxes
              
              
              (311,429
              )
              
              (802,867
              )
              
              (633,785
              )
              
              (387,411
              )Provision
                  for Income TaxNOL
                  Carry ForwardNet
                  Income (Loss)
              
              
              (311,429
              )
              
              (802,867
              )
              
              (633,785
              )
              
              (387,411
              )Earnings
                  Per Share
              
              
              (0.03
              )
              
              (0.08
              )
              
              (0.06
              )
              
              (0.04
              )Shares
                  O/S
              
              
              9,843,046
              
              
              9,843,046
              
              
              9,843,046
              
              
              9,843,046Weighted
                  Shares O/S
              
              
              9,843,046
              
              
              9,843,046
              
              
              9,831,717
              
              
              9,831,717
 
 The
        accompanying notes are an integral part of these financial
        statements
  
 
 NowAuto
        Group, Inc
 Consolidated
        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)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (802,866
              )
              
              (802,866
              )Balance
                  September 30, 2007
              
              
              9,843,046
              
              
              9,777
              
              
              4,565,696
              
              
              0
              
              
              (5,159,588
              )
              
              (584,114
              )
 
 The
        accompanying notes are an integral part of these financial
        statements
  
  NowAuto
        Group, Inc
 Consolidated
        Statements of Cash Flows
 
 Year
              
              YearEnded
              
              EndedDecember
                  31,
              
              December
                  31,2007
              
              2006Unaudited
              
              UnauditedOperating
                  ActivitiesNet
                  Income (Loss)
              
              
              (312,928
              )
              
              (633,785
              )Adjustments
                  to reconcile Net Income(Loss) to Net Cash used in Operating
                  ActivitiesSignificant
                  Non-Cash TransactionsDepreciation/Amortization
                  Expense
              
              
              2,681
              
              
              2,681Changes
                  in assets and liabilities(Increase)/Decrease
                  in Receivables
              
              
              (59,890
              )
              
              94,392(Increase)/Decrease
                  in Inventory
              
              
              (109,908
              )
              
              212,045(Increase)/Decrease
                  in Other Current Assets
              
              
              713
              
              
              30,358(Decrease)/Increase
                  in Accounts Payable
              
              
              39,233
              
              
              154,214(Decrease)/Increase
                  in Other Liabilities
              
              
              200,896
              
              
              8,412Net
                  Cash (Used) by Operating Activities
              
              
              (239,203
              )
              
              (131,683
              )Investing
                  Activities(Increase)/Decrease
                  in Purchase of Fixed Assets
              
              
              (1,732
              )
              
              (1,103
              )(Increase)/Decrease
                  in Long Term Notes Receivable
              
              
              (8,913
              )
              
              (922,318
              )Disposal
                  of Assets(Increase)/Decrease
                  in Impairment of Goodwill(10,645
              )
              
              (923,421
              )Financing
                  Activities(Decrease)/Increase
                  in Bank loan
              
              
              319,768
              
              
              1,070,255(Decrease)/Increase
                  in Commitment
              
              
              (86,859
              )232,909
              
              
              1,070,255Net
                  Increase/(Decrease) in Cash
              
              
              (16,939
              )
              
              15,151Cash,
                  Beginning of Period
              
              
              29,332
              
              
              30,82612,394
              
              
              45,977Supplemental
                  Information:Period
                  interest
              
              
              229,068
              
              
              173,123Income
                  Taxes paid
              
              
              0
              
              
              0
 
 The
        accompanying notes are an integral part of these financial
        statements




**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.





*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.





*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
      December 31, 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 39 months. As of December 31, 2007 the Company
      was
      holding financed contracts. These are shown below.





December
                31,
            
            December
                31,2006
            
            2007Financed
                Contracts Receivable
            
            $
            4,927,273
            
            $
            4,669,937Allowance
                for doubtful accounts
            
            
            (30,985
            )
            
            (33,491
            )Financed
                Contracts-net
            
            $
            4,896,288
            
            $
            4,636,446





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.





**Note
      4. PROPERTY AND EQUIPMENT**





A
      summary
      of equipment and accumulated depreciation as follows:





December
                31,
            
            December
                31,2006
            
            2007Furniture,
                fixtures and Equipment
            
            $
            39,416
            
            $
            40,197Leasehold
                improvements
            
            
            56,987
            
            
            58,235Computers
                & Software
            
            
            12,292
            
            
            17,712Less
                accumulated depreciation
            
            
            (16,450
            )
            
            (28,301
            )Net
                Equipment
            
            $
            92,244
            
            $
            87,843





**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 December 31,
            
            
            2007
            
            
            2006$
            716,179
            
            $
            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, 2007
      and
      2006 were as follows below. A valuation account has been set up in the amount
      of
      the deferred asset.





Quarter
                ended December 31,
            
            2006
            
            2007Provision
                for income taxes:Current
                taxes payable
            
            $
            0
            
            $
            0Change
                in the deferred tax asset(net
                of the valuation account)
            
            
            0
            
            
            0Total
            
            $
            0
            
            $
            0





**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. 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
      9. STOCK OPTIONS AND WARRANTS**





Currently
      the Company has no outstanding options or warrants.





**Note
      10. 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 December 31, 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
      11. 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
      12. 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
      13. 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
      14. NAVICOM COMMITMENT**





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. In October of 2007, an out of
      court settlement of $68,000 with payments to begin in November of 2007 was
      agreed to by both parties.





**Note
      15. 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)





**Note
      16. 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.





**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 December 31, 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 collection 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.








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.





*Six
      Months Ended December 31, 2007 vs. Six Months Ended December 31,
      2006*





Revenue
      for the quarter ended December 31, 2007 was $1,063,650 versus revenue of
      $2,230,859 for the quarter ended December 31, 2006. The decline in revenue
      was a
      result of significantly lower contract purchases during the quarter caused
      by a
      high volume of credit applications that did not meet the Company’s
      standards.





The
      Company's gross profit as a percentage of sales during the quarter ending
      December 31, 2007 was 50.2% vs. 37.5% for the quarter ended December 31, 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. While the quarter ended December 31, 2007
      showed an improvement in bad debt expense, the Company expects that current
      economic conditions will continue for the foreseeable future and higher than
      normal repossessions may be experienced.





General
      and administrative expenses as a percentage of sales were 43.4% for the six
      months ended December 31, 2007 versus 25.5% for the six months ended December
      31, 2006. Interest expense has increased substantially as a result of line
      of
      credit financing (See Note 15) increasing administrative costs. 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.





December 2006
            
            December 2007Accounts
                Receivable (net)
            
            
            5,688,575
            
            
            5,496,616Inventory
            
            
            635,187
            
            
            775,030Equipment
            
            
            92,244
            
            
            87,843Goodwill
            
            
            928,747
            
            
            716,179Accounts
                Payable
            
            
            422,695
            
            
            378,493Taxes
                Payable
            
            
            279,921
            
            
            21,588Deferred
                Referred
            
            
            0
            
            
            646,742





The
      Company experienced substantial loses in fiscal year ending June 30, 2007.
      This
      is reflected in the decrease in Accounts Receivable. Inventory increases are
      due
      to improved supply lines and Goodwill decrease after the Tucson lot was merged
      into the Phoenix operations. (See 10k for Year Ending June 30, 2007, Note 5)
      The
      decrease in Accounts Payable and Taxes Payable are due to improved controls
      on
      cash.








*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.





**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
      December 31, 2007 the Company has continued to enhance and improve its business
      systems. While the Company's management believes improvements have been made,
      additional IT investment will be required to improve integration and control
      of
      data flow.





**PART
        II**
 **Other
        Information**
 
 **Item
        1. Legal Proceedings**
 None
 
 **Item
        6. Exhibits**
 
 31.1
              Rule
                  13a-14(a) certification31.2
              Rule
                  13a-14(a) certification32.1
              Rule
                  Section 1350 certification
  
 SIGNATURES
  Pursuant
          to the requirements of the Securities Exchange Act of 1934, the registrant
          has
          duly caused this report to be signed on is behalf by the undersigned thereunto
          duly authorized.
  NOWAUTO
                    GROUP, INC.Date: February
                  13, 2008
                By:
                /s/
                  Faith ForbisFaith
                    ForbisChief
                    Financial Officer
 Date: February
                    13, 2008
                  By:
                  /s/
                    Scott MillerScott
                      MillerChief
                        Executive Officer
 
  **Exhibit
        Index**
 
 31.1.
              Rule
                  13a-14(a) certification31.2.
              Rule
                  13a-14(a) certification32.1.
              Rule
                  Section 1350 certification