UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q/A
 
 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, 2008
              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 o 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, 2008Common
      Stock, par value $0.001 per share
              9,843,046
  
  NowAuto Group,
      IncConsolidated Balance
      SheetsAssetsSeptember
    30,
                
                
                June 30,2008
                
                
                2008UnauditedRestatedCurrent
    AssetsCash
                
                $
                28,675
                
                
                $
                32,508Accounts Receivable -
      Net
                
                
                3,113,578
                
                
                
                3,117,490Inventory
                
                
                247,676
                
                
                
                414,515Prepaid
      Expenses
                
                
                25,159
                
                
                
                63,887Equipment -
    Net
                
                
                106,938
                
                
                
                84,293Total
Assets
                
                $
                3,522,026
                
                
                $
                3,712,693Liabilities and Stockholders'
      Equity (Deficit)Current
      LiabilitiesAccounts
      Payable
                
                $
                197,559
                
                
                $
                341,612Taxes
    Payable
                
                
                5,146
                
                
                
                4,679Line of
    Credit
                
                
                8,051,865
                
                
                
                7,458,412Accrued
    Payroll
                
                
                28,874
                
                
                
                50,604Other Loans
                
                
                101,462
                
                
                
                129,440Total
      Liabilities
                
                $
                8,384,906
                
                
                $
                7,984,747Stockholders'
      EquityCommon Stock,
      authorized100,000,000 shares, $0.001 par
      value;Issued and
      outstandingJune 30, 2008 - 9,843,046
      shares;less 400,000
      Treasury stockJune 30, 2007 - 9,843,046
      shares;
                
                $
                9,853
                
                
                $
                9,853Paid in
    Capital
                
                
                4,649,920
                
                
                
                4,649,920Retained
      Earnings/(Deficit)
                
                
                (9,510,154
                )
                
                
                (8,919,328
                )(4,850,381
                )
                
                
                (4,259,555
                )Less: treasury stock, 400,000 at
      as ofJune 30,
    2008
                
                
                (12,500
                )
                
                
                (12,500
                )Total Stockholder's Equity
      (Deficit)
                
                
                (4,862,881
                )
                
                
                (4,272,055
                )Total Liabilities and
      Stockholder's Equity (Deficit)
                
                $
                3,522,025
                
                
                $
                3,712,693
  The accompanying notes are an integral
part of these financial statements  
  NowAuto Group,
Inc
 Consolidated
Statements of Operations
 3
      Months
                  
                  3
      MonthsEnded
                  
                  EndedSept
      30,
                  
                  Sept
      30,2008
                  
                  
                  2007Unaudited
                  
                  
                  UnauditedIncomeVehicle
      & Finance Income
                  
                  $
                  1,106,226
                  
                  
                  1,086,539Cost
      of Goods Sold
                  
                  
                  724,253
                  
                  
                  583,500Gross
      Profit/Loss
                  
                  
                  381,973
                  
                  
                  503,039Gross
      Margin
                  
                  
                  34.5
                  %
                  
                  46.3
                  %ExpensesSelling
      and Financing Costs
                  
                  
                  471,892
                  
                  
                  536,210General
      and Administrative
                  
                  
                  500,905
                  
                  
                  458,266Profit/Loss
      before Income Taxes
                  
                  
                  (590,826
                  )
                  
                  (491,439
                  )Provision
      for Income TaxNOL
      Carry ForwardNet
      Income (Loss)
                  
                  $
                  (590,826
                  )
                  
                  (491,439
                  )Earnings
      Per Share
                  
                  $
                  (0.06
                  )
                  
                  (0.05
                  )Weighted
      Average Number ofCommon
      Shares Outstanding
                  
                  
                  9,843,046
                  
                  
                  9,843,046
  The accompanying notes
are an integral part of these financial statements
  
  NowAuto Group,
Inc
 Consolidated Stockholders'
Equity
  AdditionalPaid in
                          
                          
                          Treasury
                          
                          
                          Accumulated
                          
                          
                          TotalShares
                          
                          
                          Amount
                          
                          
                          Capital
                          
                          
                          Stock
                          
                          
                          Deficit
                          
                          
                          EquityBalance June 30,
      2007
                          
                          
                          9,843,046
                          
                          
                          $
                          9,842
                          
                          
                          $
                          4,565,631
                          
                          
                          $
                          0
                          
                          
                          $
                          (4,356,721
                          )
                          
                          $
                          218,752Restatement
                          
                          
                          
                          
                          
                          
                          11
                          
                          
                          
                          84,289
                          
                          
                          
                          
                          
                          
                          
                          (2,459,973
                          )
                          
                          
                          (2,375,673
                          )Balance June 30,
      2007
                          
                          
                          9,843,046
                          
                          
                          
                          9,853
                          
                          
                          
                          4,649,920
                          
                          
                          
                          0
                          
                          
                          
                          (6,816,694
                          )
                          
                          
                          (2,156,921
                          )Treasury Stock
      Receivable
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (12,500
                          )
                          
                          
                          
                          
                          
                          
                          (12,500
                          )Net Income
      (Loss)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (2,102,634
                          )
                          
                          
                          (2,102,634
                          )Balance June 30,
      2008
                          
                          
                          9,843,046
                          
                          
                          
                          9,853
                          
                          
                          
                          4,649,920
                          
                          
                          
                          (12,500
                          )
                          
                          
                          (8,919,328
                          )
                          
                          
                          (4,272,055
                          )Net Income
      (Loss)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (590,826
                          )9,843,046
                          
                          
                          $
                          9,853
                          
                          
                          $
                          4,649,920
                          
                          
                          $
                          (12,500
                          )
                          
                          $
                          (9,510,154
                          )
                          
                          $
                          (6,374,689
                          )
  NowAuto Group,
Inc
 Consolidated Statements of Cash
Flows
  3 Months
                                
                                
                                3 MonthsEnded
                                
                                
                                EndedSeptember
    30,
                                
                                
                                September
    30,2008
                                
                                
                                2007Unaudited
                                
                                
                                UnauditedOperating
      ActivitiesNet Income
      (Loss)
                                
                                $
                                (590,824
                                )
                                
                                
                                (491,439
                                )Adjustments to reconcile Net
      Income(Loss) to Net Cashused in
      Operating ActivitiesSignificant Non-Cash
      TransactionsDepreciation/Amortization
      Expense
                                
                                
                                2,681
                                
                                
                                
                                2,681Loss on disposal of fixed
      assets
                                
                                
                                0
                                
                                
                                
                                0Interest expense capitalized into
      principle
                                
                                
                                222,677
                                
                                
                                
                                216,071Changes in assets and
      liabilitiesInvestment in sales-type
      leases
                                
                                
                                41,993
                                
                                
                                
                                12,528Inventory
                                
                                
                                141,579
                                
                                
                                
                                (122,465
                                )Prepaid
      Expenses
                                
                                
                                12,450
                                
                                
                                
                                8,166Accounts
      Payable
                                
                                
                                (133,718
                                )
                                
                                
                                (11,037
                                )Other
      Liabilities
                                
                                
                                (46,120
                                )
                                
                                
                                147,936Net Cash (Used) by Operating
      Activities
                                
                                
                                (349,282
                                )
                                
                                
                                (237,559
                                )Investing
      ActivitiesPurchase of property and
      equipment
                                
                                
                                (25,326
                                )
                                
                                
                                (1,945
                                )Net Cash provided by (used in)
      Investing Activities
                                
                                
                                (25,326
                                )
                                
                                
                                (1,945
                                )Financing
      ActivitiesProceeds from line of
      credit
                                
                                
                                956,493
                                
                                
                                
                                955,000Prinipal payments on line of
      credit
                                
                                
                                (585,718
                                )
                                
                                
                                (723,629
                                )Net cash provided by Financing
      Activities
                                
                                
                                370,775
                                
                                
                                
                                231,371Net Increase/(Decrease) in
      Cash
                                
                                
                                (3,833
                                )
                                
                                
                                (8,132
                                )Cash, Beginning of
      Period
                                
                                
                                32,508
                                
                                
                                
                                37,454Cash, End of
      Period
                                
                                $
                                28,675
                                
                                
                                
                                29,322Supplemental
      Information:Period
    interest
                                
                                $
                                
                                
                                
                                $Income Taxes
      paid
                                
                                $
                                
                                
                                
                                $
  
  
  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 September 30, 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 are 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.
 
 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 $15,856 and $20,779
for the quarters ended September 30, 2007 and 2008, 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
September 30, 2008 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 up to 29.99% per annum, b) are collateralized by the vehicle sold and c)
provide for payments over a period of 39 months. As of September 30, 2008 the
Company was holding financed contracts. These are shown below.
  September
    30,
                                        
                                        
                                        June 30,2008
                                        
                                        
                                        2008Total Minimum Lease Payments to be
      Received
                                        
                                        
                                        5,208,312
                                        
                                        
                                        
                                        5,373,748Residual
    Value
                                        
                                        
                                        147,850
                                        
                                        
                                        
                                        131,400Lease Carrying
      Value
                                        
                                        
                                        5,356,162
                                        
                                        
                                        
                                        5,505,148Less: Allowance for Uncollectible
      Amounts
                                        
                                        
                                        (1,114,497
                                        )
                                        
                                        
                                        (1,302,209
                                        )Less: Unearned
      Income
                                        
                                        
                                        (1,128,087
                                        )
                                        
                                        
                                        (1,085,449
                                        )Net Investment is Sales-Type
      Leases
                                        
                                        
                                        3,113,578
                                        
                                        
                                        
                                        3,117,490
  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:
 
 June
      30,
                                      
                                      September
      30,2008
                                      
                                      2008Furniture,
      fixtures and Equipment
                                      
                                      $
                                      41,622
                                      
                                      $
                                      41,622Leasehold
      improvements
                                      
                                      
                                      58,235
                                      
                                      
                                      61,451Computers
      & Software
                                      
                                      
                                      18,100
                                      
                                      
                                      40,210Less
      accumulated depreciation
                                      
                                      
                                      (33,664
                                      )
                                      
                                      (36,345
                                      )Net
      Equipment
                                      
                                      $
                                      84,293
                                      
                                      $
                                      106,938
  Note 5. INCOME
TAXES
 
 The
provision for income taxes for the fiscal quarters ended September 30, 2008 and
2007 were as follows below. A valuation account has been set up in the amount of
the deferred asset.
 
 Quarter ended
      September 30,
                                      
                                      2007
                                      
                                      2008Provision
      for income taxes:Current
      taxes payable
                                      
                                      $
                                      0
                                      
                                      $
                                      0Change
      in the deferred tax asset(net
      of the valuation account)
                                      
                                      
                                      0
                                      
                                      
                                      0Total
                                      
                                      $
                                      0
                                      
                                      $
                                      0
 
 Note 6. 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.
 
 No shares
have been issued since June 30, 2006.
 
 Note 7. 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 8. STOCK OPTIONS AND
WARRANTS
 
 Currently
the Company has no outstanding options or warrants.
 
 Note 9. 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, 2008, the aggregate
rentals due under such leases, including renewal options that are reasonably
assured, are as follows:
 
 2008
                                      182,7412009
                                      139,4632010
                                      138,6122011
                                      138,6122012
                                      138,612
 
 Note 10. 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 $128,000. The other officer currently receives salary of less than $100,000.
 
 Note 11. CONTRACT
FINANCING
 
 During
the quarter ended September 30, 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 12. 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 13. TREASURY
STOCK
 
 In the
quarter ending June 30, 2008 and September 30, 2008, we repurchase stock from a
shareholder. These shares are still in transit and are therefore still reported
as being outstanding.
 
 Note 14 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 15. GOING
CONCERN
 
 The
accompanying financial statements have been prepared assuming that we will
continue as a going concern. We sustained a material loss in the year ended June
30, 2005. This loss continued through June 30, 2008 and at September 30, 2008.
This raised substantial doubt about our 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 our profitability by increasing the margins on cars
sold. They have also hired new finance and accounting personnel to better track
our profitability and negotiate selling contracts. Additionally, we may need to
attract capital 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 September 30, 2008 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, 2008 estimated credit losses as a percentage of contracts declined over
the prior year. In the past nine 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. 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.
 
 Three Months Ended September
30, 2008 vs. Three Months Ended September 30, 2007
 
 Revenue
for the quarter ended September 30, 2008 was $1,106,226 versus revenue of
$1,086,539 for the quarter ended September 30, 2007. The 2% increase in revenue
was a result of significantly lower contract purchases during the September 30,
2008 quarter caused by an increased 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
September 30, 2008 was 34.5% vs. 46.3% for the quarter ended September 30, 2007.
Old inventory was liquidated at local auctions during the quarter and this has
reduced margins. Gross profit excluding the auction sales was 44.2% which is
well within historical parameters. Interest earnings remain strong.
 
 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 September 30, 2008
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 45% for the three
months ended September 30, 2008 versus 42% for the three months ended September
30, 2007. Interest expense has increased substantially as a result of line of
credit financing (See Note 12) 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.
 September
    2008
                                              
                                              
                                              June 2008Accounts Receivable
      (net)
                                              
                                              
                                              3,113,578
                                              
                                              
                                              
                                              3,117,490Inventory
                                              
                                              
                                              247,676
                                              
                                              
                                              
                                              414,515Equipment
                                              
                                              
                                              106,938
                                              
                                              
                                              
                                              84,293Accounts
      Payable
                                              
                                              
                                              197,559
                                              
                                              
                                              
                                              341,612Taxes
    Payable
                                              
                                              
                                              5,146
                                              
                                              
                                              
                                              4,679Line of
    Credit
                                              
                                              
                                              8,051,865
                                              
                                              
                                              
                                              7,458,412
 
 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, 2008, 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 September 30, 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
September 30, 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
4T.  Controls and Procedures
  (a)    EVALUATION OF DISCLOSURE CONTROLS AND
PROCEDURES
 
 The Company carried out, under the
supervision and with the participation of the Company’s management, including
the Company’s Chief Executive Officer and the Company’s Chief Financial Officer,
an evaluation of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as amended).  Based on their
evaluation, the Company’s Chief Executive Officer and its Chief Financial
Officer concluded that, the Company’s disclosure controls and procedures were
not effective as of the end of the period covered by this report, because of the
material weakness identified as of June 30, 2009.  Notwithstanding the
existence of the material weakness identified as ofMarch31, 2008, management has concluded that the
consolidated financial statements in this Form 10-Q/A fairly present, in all material
respects, the Company’s financial position, results of operations and cash flows
for the periods and dates presented.
  (b)CHANGES
ININTERNAL CONTROL OVER FINANCIAL REPORTING
  There were no changes in our internal
control over financial reporting that occurred during our last fiscal quarter
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
 PART
II
 Other
Information
 
 Item
      1.
                                    Legal
      Proceedings
  None
 
 Item
      6.
                                    Exhibits
 
 31.1
                                    Rule
      13a-14(a) certification
  31.2
                                    Rule
      13a-14(a) certification
  32.1
                                    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
  
  SIGNATURES
  In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
  NOW
      AUTO GROUP, INC.Date:
                                      By:
                                      /s/ Scott
      Miller,5/6/10
                                      Scott
      Miller,Chief
      Executive Officer
  
 NOW
      AUTO GROUP, INC.Date:
                                      By:
                                      /s/ Faith
      Forbis5/6/10
                                      Faith
      ForbisChief
      Financial Officer, Principle Accounting Officer