UNITED
        STATES


SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 FORM
        10-Q
 
 QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE
        SECURITIES EXCHANGE ACTOF 1934
 
 For
                  the fiscal quarter ended:
              Commission
                  file number:September
                  30, 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, Inc**
                **Consolidated
                  Balance Sheets**September
                30,
            
            June
                30,2008
            
            2008Unaudited
            
            AuditedAssetsCurrent
                AssetsCash
            
            
            28,675
            
            
            32,508Accounts
                Receivable - Net
            
            
            2,822,227
            
            
            2,742,067Inventory
            
            
            524,308
            
            
            665,338Prepaid
                Expenses
            
            
            31,621
            
            
            44,071Total
                Current Assets
            
            
            3,406,831
            
            
            3,483,984Long
                Term Notes Receivable
            
            
            3,303,214
            
            
            3,375,008Equipment
                - Net
            
            
            106,938
            
            
            84,293Goodwill
            
            
            716,179
            
            
            716,179Total
                Assets
            
            
            7,533,162
            
            
            7,659,464Liabilities
                and Stockholders' Equity (Deficit)Current
                LiabilitiesAccounts
                Payable
            
            
            312,773
            
            
            431,307Taxes
                Payable
            
            
            7,184
            
            
            8,877Line
                of Credit
            
            
            2,117,654
            
            
            2,102,490Accrued
                Payroll
            
            
            29,874
            
            
            50,604Deferred
                Revenue
            
            
            1,131,455
            
            
            1,085,449Other
                Loans
            
            
            101,462
            
            
            129,440Total
                Current Liabilities
            
            
            3,700,402
            
            
            3,808,167Long
                Term Notes Payable
            
            
            5,934,212
            
            
            5,355,922Commitment
            
            
            0
            
            
            0Total
                Liabilities
            
            
            9,634,613
            
            
            9,164,090Stockholders'
                EquityCommon
                  Stock, authorized 100,000,000 shares, $0.001 par value; Issued
                  and
                  outstanding September 30, 2008 - 9,843,046 shares; June 30, 2008 -
                  9,843,046 shares;
            
            
            9,842
            
            
            9,842Treasury
                Stock
            
            
            (12,500
            )
            
            (6,500
            )Paid
                in Capital
            
            
            4,565,631
            
            
            4,565,631Retained
                Earnings/(Deficit)
            
            
            (6,664,424
            )
            
            (6,073,599
            )Total
                Stockholder's Equity (Deficit)
            
            
            (2,101,451
            )
            
            (1,504,626
            )Total
                Liabilities and Stockholder's Equity (Deficit)
            
            
            7,533,162
            
            
            7,659,464




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**


Paid
                in
            
            Subscriptions
            
            Treasury
            
            Accumulated
            
            TotalShares
            
            Amount
            
            Capital
            
            Receivable
            
            Stock
            
            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
            
            
            27
            
            
            3,473
            
            
            
            
            
            
            
            
            
            
            
            3,500Common
                shares issued for cash
            
            
            38,461
            
            
            38
            
            
            4,962
            
            
            
            
            
            
            
            
            
            
            
            5,000Subscribtions
                received
            
            
            
            
            
            
            
            
            1,005,500
            
            
            (1,005,500
            )Net
                (Loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (441,926
            )
            
            (441,926
            )Balance,
                June 30, 2006
            
            
            9,843,046
            
            
            9,842
            
            
            4,565,631
            
            
            0
            
            
            0
            
            
            (2,070,319
            )
            
            2,505,154Net
                Income (Loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,286,402
            )
            
            (2,286,402
            )Balance
                June 30, 2007
            
            
            9,843,046
            
            
            9,842
            
            
            4,565,631
            
            
            0
            
            
            0
            
            
            (4,356,721
            )
            
            218,752Treasury
                Stock Receivable
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (6,500
            )
            
            
            
            
            (6,500
            )Net
                Income (Loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,716,878
            )
            
            (1,716,878
            )Balance
                June 30, 2008
            
            
            9,843,046
            
            
            9,842
            
            
            4,565,631
            
            
            0
            
            
            (6,500
            )
            
            (6,073,599
            )
            
            (1,504,626
            )Treasury
                Stock Receivable
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (6,000
            )
            
            
            
            
            (6,000
            )Net
                Income (Loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (590,825
            )
            
            (590,825
            )Balance
                Sept 30, 2008 (unaudited)
            
            
            9,843,046
            
            
            9,842
            
            
            4,565,631
            
            
            0
            
            
            (12,500
            )
            
            (6,664,424
            )
            
            (2,101,451
            )




The
        accompanying notes are an integral part of these financial
        statements





**NowAuto
        Group, Inc**
 **Consolidated
          Statements of Cash Flows**


3
                Months
            
            3
                MonthsEnded
            
            EndedSeptember
                30,
            
            September
                30,2008
            
            2007Unaudited
            
            UnauditedOperating
                ActivitiesNet
                Income (Loss)
            
            
            (590,825
            )
            
            (491,439
            )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
            
            
            (107,669
            )
            
            (14,827
            )(Increase)/Decrease
                in Inventory
            
            
            141,579
            
            
            (122,465
            )(Increase)/Decrease
                in Other Current Assets
            
            
            53,234
            
            
            8,166(Decrease)/Increase
                in Accounts Payable
            
            
            (132,080
            )
            
            (11,037
            )(Decrease)/Increase
                in Other Liabilities
            
            
            10,488
            
            
            147,936Net
                Cash (Used) by Operating Activities
            
            
            (622,590
            )
            
            (480,985
            )Investing
                Activities(Increase)/Decrease
                in Purchase of Fixed Assets
            
            
            (25,326
            )
            
            (1,945
            )(Increase)/Decrease
                in Long Term Notes Receivable
            
            
            71,794
            
            
            27,355Net
                Cash provided by (used in) Investing Activities
            
            
            46,468
            
            
            25,410Financing
                Activities(Decrease)/Increase
                in Bank loan
            
            
            578,290
            
            
            447,442Proceeds
                from Purchase of Treasury Stock
            
            
            (6,000
            )Net
                cash provided by Financing Activities
            
            
            572,290
            
            
            447,442Net
                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
            
            
            222,677
            
            
            216,071Income
                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 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.
 
 June
                    30,
                
                September
                    30,2008
                
                2008Financed
                    Contracts Receivable
                
                $
                4,635,443
                
                $
                5,261,020Allowance
                    for doubtful accounts
                
                
                (33,491
                )
                
                (33,491
                )Financed
                    Contracts-net
                
                $
                4,601,950
                
                $
                5,227,529
 
 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. 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 September 30, 2008 was as follows:
 
 Quarter
                    Ending September 30,
                
                
                2008
                
                
                2007$
                716,179
                
                $
                714,179
 
 **Note
          6. 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
          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.
 
 No
          shares
          have been issued since June 30, 2006.
 
 **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 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
          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 $128,000. The other officer currently receives salary of less than $100,000.
 
 **Note
          12. 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
          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. 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
          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
          17. 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
                    2007
                
                September
                    2008Accounts
                    Receivable (net)
                
                
                5,429,286
                
                
                6,125,441Inventory
                
                
                653,051
                
                
                524,308Equipment
                
                
                89,093
                
                
                106,938Goodwill
                
                
                714,179
                
                
                716,179Accounts
                    Payable
                
                
                314,242
                
                
                312,773Taxes
                    Payable
                
                
                44,853
                
                
                7,184Deferred
                    Revenue
                
                
                409,898
                
                
                1,131,455
 
 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
          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-Q, 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 we made a number of improvements
          in the IT
          area including (i) hiring a seasoned chief accountant; (ii) installing
          new
          software programs specific to our business; and (iii) improving operational
          reporting procedures and controls. During the year ended June 30, 2008
          we
          decided to convert to a different system that will better support auto
          leasing
          and the expanding service shop department. This conversion was started
          subsequent to the end of the 2008 fiscal year and is expected to be completed
          by
          the end of the quarter ending December 31, 2008.
 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