UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                   FORM 10-KSB

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    For the fiscal year ended March 31, 2000

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    For the transition period from __________ to __________

                           COMMISSION FILE NO. 0-14819

                          RENT-A-WRECK OF AMERICA, INC.
                 ----------------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

            DELAWARE                                             95-3926056
-------------------------------                               ----------------
(State or other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

10324 South Dolfield Road, Owings Mills, MD                        21117
-------------------------------------------                      ----------
 (Address of Principal Executive Offices)                        (Zip Code)

                    Issuer's telephone number: (410) 581-5755

       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, par value $0.01

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 [ ]

     Check if no  disclosure  of  delinquent  filers in  response to Item 405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year. $6,281,894

     3,568,217 shares of common stock were outstanding as of May 30, 2000.

     Aggregate market value of voting stock held by nonaffiliates of registrant,
based  upon the  average  of the high and low price of the  Common  Stock on the
Nasdaq SmallCap Market,  was approximately  $3.8 million on May 30, 2000. Shares
of Common  Stock held by each  officer and  director and by each person who owns
10% or more of the  outstanding  Common  Stock have been  excluded  in that such
persons may be deemed to be affiliates.  This  determination of affiliate status
is not necessarily conclusive.

     The following  documents are  incorporated  by reference and made a part of
the Form 10-KSB:

     1. None

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I

Item 1.  Description of Business............................................   3
Item 2.  Description of Property............................................   9
Item 3.  Legal Proceedings..................................................   9
Item 4.  Submission of Matters to a Vote of Security Holders................   9

PART II

Item 5.  Market for the Common Equity and Related Stockholder Matters.......  10
Item 6.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations..........................................  12
Item 7.  Financial Statements...............................................  20
Item 8.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure...........................................  45

PART III

Item  9. Directors and Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act..................  46

Item 10. Executive Compensation.............................................  48

Item 11. Security Ownership of Certain Beneficial Owners and Management.....  50

Item 12. Certain Relationships and Related Transactions.....................  52

Item 13. Exhibits and Reports on Form 8-K...................................  52

                                        2
<PAGE>
                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS

General

     Rent-A-Wreck of America,  Inc. (the "Company") was incorporated in Delaware
on October 12, 1983. The Company conducts its operations  primarily  through its
wholly owned  subsidiary,  Bundy  American  Corporation  ("Bundy"),  and Bundy's
subsidiary Priceless Rent-A-Car,  Inc. ("Priceless").  Bundy was incorporated in
California on April 22, 1977 and  redomesticated in Maryland effective March 29,
1996.  Priceless was incorporated in Maryland on September 30, 1999. The Company
markets and  administers the  Rent-A-Wreck  (R) and PRICELE$$ (R) vehicle rental
franchise  programs  and  related  services.  The  Company's   franchisees,   in
aggregate,  operate one of the largest used vehicle rental fleets in the nation,
offering rentals of cars,  trucks and vans at rates that are generally less than
those charged by new car rental  companies.  The Company also has franchisees in
Europe and Asia.  Reference to the "Company"  includes  Rent-A-Wreck of America,
Inc. and its subsidiaries unless the context otherwise requires.

THE FRANCHISE PROGRAM

     The Company sells to qualified  persons the right to operate a Rent-A-Wreck
or PRICELE$$  franchise,  or both,  for renting and leasing used motor  vehicles
(automobiles,  vans and  trucks) to the  general  public.  The  franchisees  who
participate in the PRICELE$$ used vehicle rental franchise  program are required
by the Company to meet higher standards than the Rent-A-Wreck  program,  such as
utilizing vehicles that are less than three years old. As of March 31, 2000, 164
of the Company's 675 franchisees were  participating  in the Priceless  program.
The Company  believes the  PRICELE$$  name appeals to a different  clientele and
therefore   complements  the  Rent-A-Wreck  program.  The  Company  offers  each
franchisee  territory  rights  in  which  the  Company  will  not  open  another
franchise.  Franchisees  purchase  the  right to use  certain  of the  Company's
resources,  experience  and  knowledge in  connection  with the operation of the
business for a specified  period of time,  typically ten years.  The  franchisee
utilizes the Company's  systems,  methods,  specifications,  standard  operating
procedures,  guidance,  and trade and service  marks.  When the Company  sells a
franchise,  it charges an initial  franchise  fee that varies  according  to the
population of the franchisee's primary service area at the time the franchise is
granted.  The  Company  may  finance the initial fee over a period not to exceed
twelve months based on the  creditworthiness  of the  franchisee.  Additionally,
franchisees are required to pay the Company monthly  royalties and contribute to
the  national  advertising  fund.  These fees vary  according  to the  Company's
franchisees' fleet size or gross revenues.

                                        3
<PAGE>
     The Company  believes the  Rent-A-Wreck  name is unique and enjoys national
recognition.  Ongoing  marketing  programs  further  promote  recognition of the
Rent-A-Wreck  and  PRICELE$$  names in both  domestic and foreign  markets.  The
Company  develops and executes  advertising  and  marketing  programs  that have
included  radio and  television  commercials,  direct mail,  print  advertising,
promotional   items  and  sponsorship  at  sporting  events.   Public  relations
activities  conducted  on the  franchisees'  behalf  include a  franchise  award
announcement,  grand  opening  press  release and  anniversary  press  releases.
Assistance  in  planning  and  implementing  local  promotional   activities  is
available to franchisees.  The Public  Relations  Department of the Company also
publishes  the  "Rent-A-Wreck  Reporter",  which is  distributed  internally  to
franchisees and externally to trade and consumer media and referral sources such
as insurance  adjusters,  automotive  repair shops,  travel agents and corporate
travel managers.

     In  1997,  the  Company  formed  a  wholly  owned   insurance   subsidiary,
Consolidated  American Rental Insurance Company, Ltd ("CAR Insurance") domiciled
in Bermuda,  to offer  automobile  liability  and  physical  damage  reinsurance
through American  International  Group ("AIG") for the vehicles belonging to its
franchisees.

     CAR Insurance has an agreement with AIG whereby CAR Insurance's coverage is
subject to a per loss limit of $100,000 per person and  $300,000  per  accident.
Under the  contract,  AIG also  provides an aggregate  stop loss  protection  of
$1,300,000,  thus capping CAR Insurance's  exposure to loss. In carrying out the
program,  the Company utilizes Hertz Claim  Management  Corporation as the Third
Party Administrator,  Rental Industry Services ("Rise") as the insurance broker,
and Willis Corroon as a consultant for this program. The focus of growth for CAR
Insurance will be in those states where the Company's insurance advisor believes
the driver's (not the owner's)  insurance is deemed to be primarily  responsible
for  any  losses.  As of  March  31,  2000,  approximately  85 of the  Company's
franchisees  were  insuring  a total  of  2,092  vehicles  under  this  program.
Franchisees  apply for this  insurance  coverage with Rise.  Rise  processes the
franchisees'  applications  and, if approved,  the franchisee is required to pay
premiums in advance on a monthly basis.  Hertz Claim  Management  Corporation is
responsible  for  processing  all  claims  and  assisting  the  Company  on  the
appropriate  reserves for all known claims.  Willis Corroon  further assists the
Company in establishing reserves for known and unknown claims.

     On March 1,  1999,  the  Company  added a new  program  to offer  insurance
coverage to all of its  franchisees  who do business in those  states  where the
Company's insurance advisor believes the owner's (not the driver's) insurance is
deemed to be primarily  responsible for any losses. In those states, this is the
only program that the Company  offers to its  franchisees.  In carrying out this
new program,  the Company utilizes Rise as the insurance broker, and franchisees
apply for this insurance  coverage with Rise.  Rise  processes the  franchisees'
applications  and, if approved,  the  franchisee  is required to pay premiums in

                                        4
<PAGE>
advance on a monthly basis.  The Company bills and collects the premiums,  which
are forwarded to Rise, and receives fees from Rise for this program. The Company
believes it has no exposure to loss from insurance claims under this program. As
of March 31, 2000, approximately 12 of the Company's franchisees were insuring a
total of 196 vehicles under this program.

     Priceless  operates a  wheelchair  van rental  program,  on a limited  test
basis, in Maryland and Florida.  The Company  markets this program  primarily in
communities catering to disabled individuals.  There are four vehicles currently
operating under this program.

     The Company has arranged a program whereby  franchisees may finance vehicle
purchases  over a 24-30 month  period.  The program is  available  to  qualified
applicants  who  maintain  a level  of  creditworthiness  that the  Company  has
assessed on a case-by-case  basis.  The  franchisees'  qualification is based on
their  credit  history with the  Company,  as well as their  credit  standing as
reported by  national  credit  bureaus.  The  franchisees  are  responsible  for
purchasing the vehicles with funds loaned by the Company, and the Company's loan
is secured by the  vehicles.  As of March 31, 2000,  the Company was financing 8
vehicles for 2 of its franchisees.

     The Company is  committed to educating  and training its  franchisees.  The
Company  conducts  Rent-A-Wreck  School at its headquarters in Maryland every 45
days. All new franchisees are required to attend. School is also available at no
charge to current  franchisees  and their staff.  During an  intensive  five-day
period,  attendees learn all aspects of the Rent-A-Wreck and PRICELE$$ programs.
This includes vehicle acquisition,  maintenance and sales, telephone techniques,
counter procedures,  rental operations,  promotion,  publicity,  advertising and
sales  approaches,  relevant aspects of insurance,  accounting and other general
business  skills.  The Company also employs  field  service  staff who have many
years of experience in the car rental  industry and whose  responsibility  is to
provide continuous advice via personal visits and a toll-free telephone number.

     Additionally,  the Company  holds and strongly  encourages  franchisees  to
attend its convention once a year, and regional  meetings which are held twice a
year in eastern and western regions of the United States.  The Company  utilizes
these meetings to present new programs to franchisees  and to provide  continued
training and advice.

     The Company's National Franchisee Advisory Council, which consists of seven
members,  meets quarterly.  Six of the members are elected by the franchisees in
their region. The seventh member is a franchisee  appointed by the Company.  The
Council is a forum through which  franchisees can express  opinions and concerns
to the Company.  The Council also provides  suggestions  as to how the Company's
National  Advertising  Fund is  allocated.  Advertising  monies  paid  into  the
National Advertising Fund are expended by the Company on the franchisees' behalf
after consultation with the National Franchisee  Advisory Council.  Based on the

                                       5
<PAGE>
Council's  recommendations,  the  Company  has  expended  amounts  on  different
programs such as advertising on Westwood One Radio, and sponsoring a race car to
further promote the Company's national exposure.

     The Company markets its franchise  programs  primarily by attending various
trade shows and by conducting an ongoing  direct mailing  campaign.  The Company
employs  three  full-time  salespeople  at its  corporate  headquarters,  and in
addition,  utilizes the services of two  independent  franchise  brokers located
throughout the United States.

     During the  fiscal  year  ended  March 31,  2000,  75 new  franchises  were
granted,  13 existing franchise  locations were transferred to new ownership and
52 franchises were terminated by the Company. The majority of these terminations
resulted from default of the franchise agreement. This resulted in approximately
652 franchised  locations throughout the United States, as well as 23 franchised
locations  in Europe and Asia at March 31, 2000  compared to  approximately  633
franchised  locations  throughout  the United  States,  as well as 19 franchised
locations in Europe and Asia at March 31, 1999.

EMPLOYEES

     As of March 31,  2000,  the Company  employed 24 people,  consisting  of 12
full-time  employees and 3 part-time  employees  engaged in franchise  sales and
service  and  8  full-time   employees  and  1  part-time  employee  engaged  in
administrative  activities.  In addition,  the Company retains the services of 2
franchise  brokers  who market and sell the  Company's  franchises.  None of the
employees  are covered by a  collective  bargaining  agreement,  and  management
believes that its relations with its employees are good.

COMPETITION

     The  Company  pioneered  the  concept  of  used  car  rentals.  Unlike  the
traditional airport rental companies,  Rent-A-Wreck  developed its niche serving
the "neighborhood" rental market. The Company emphasizes convenience and service
and offers  rentals of used  cars,  trucks and vans at rates that are  typically
lower than those charged by new car rental companies.

     Although most franchisees  service some business and leisure travelers from
outside the  community,  the Company's  customers  generally are people from the
local community.  The Company's  franchisees  generally serve customers  needing
vehicles for insurance and service  replacement,  commercial,  short-term moving
and general use.

     Rent-A-Wreck  franchisee  fleets  usually  consist  of a  variety  of  used
vehicles although some locations rent new cars as well. The franchisees offer to
customers various vehicles according to local demand. Trucks, passenger vans and
cargo vans are  available at many  locations.  This allows the  franchisees  the
flexibility to offer an appropriate range of vehicles for their areas.

                                       6
<PAGE>
     Significant  competition  exists in the local  markets.  Large systems like
U-Save compete  nationwide.  Dozens of regional and local independent  companies
also  compete  with the Company in various  areas.  In most major  urban  areas,
companies such as Hertz, Avis, National,  Enterprise and Budget operate city and
suburban offices, as well as operating in airport terminals.

     During the early 1990's,  many of the new car rental  companies were owned,
wholly  or  partially,  by  automobile   manufacturers  who  sold  their  rental
subsidiaries'  cars at discounted prices and guaranteed to repurchase cars after
four to nine months in rental service. This enabled the rental companies to pass
along their savings to retail customers in the form of lower rental prices. Over
the last few years,  the rental  companies  have been  returning to  independent
ownership,  the new car discounts  and buybacks  have been reduced,  and new car
retail  rental  prices  have often  risen.  Because  the  Company's  franchisees
generally attempt to provide substantial discounts off the retail prices charged
by the large new car rental companies, the Company believes that the increase in
prices  charged by such  companies  has enabled  the  Company's  franchisees  to
compete more effectively and profitably.

GOVERNMENT REGULATIONS

     The  offering  and sale of  franchises  is  subject  to  Federal  and State
regulation and regulations by foreign governments.  The Federal Trade Commission
("FTC")  has  adopted   regulations   requiring  full  pre-sale   disclosure  to
prospective franchisees of certain information,  including information about the
franchisor,  its existing franchises, the rights and obligations of franchisees,
and termination,  cancellation and renewal of franchises. Disclosure is required
to be made prior to the sale in the form of an offering circular. Many states in
which the Company sells or may sell franchises may require pre-sale registration
of the Company and/or the Company's offering circular and franchise agreement to
be used in selling  franchises from or in the state.  The Company must apply for
renewal with many of these states  annually.  Many states also regulate  various
aspects  of  the  franchisor-franchisee   relationship,   including  regulations
regarding awarding, renewing and terminating franchise relationships.

     Compliance  with  the  laws of the  state  from or in  which  the sale of a
franchise is to be made, in addition to the Federal regulations, may be required
because FTC  franchising  regulations  will not preempt  state or local laws and
regulations  which are consistent  with its Federal  regulations,  or which,  if
inconsistent,  would provide  protection to prospective  franchisees equal to or
greater than that imposed by the Federal franchising regulations.

     As of May 2000, the Company is currently  authorized to sell  franchises in
all 50 states under its  "Rent-A-Wreck" and "PRICELE$$" trade and service marks.

                                       7
<PAGE>
The  Company  has  registered  its  "Rent-A-Wreck"  trade  and  service  mark in
approximately 44 foreign countries and its "PRICELE$$" trade and service mark in
approximately 17 foreign countries.

TRADEMARKS

     The  Company  believes  that  name  recognition  of its  primary  trademark
"Rent-A-Wreck"  is important to its franchise  program.  A trademark may be held
for an  indefinite  duration,  but it may be lost  or its  value  diminished  if
adequate  steps to police its use are not taken.  The Company  believes that its
efforts  to police  the use of its  trademarks  are  adequate.  The  Company  is
actively promoting its existing "PRICELE$$" trademark. The Company believes this
trademark will provide additional sales opportunities for its franchisees due to
new target customers of "PRICELE$$" rental fleets.

INSURANCE REGULATIONS

     GOVERNMENT  REGULATION  RELATING  TO  INSURANCE  PROGRAM.  As  part  of the
insurance  program,  the  Company  utilizes  CAR  Insurance,  its  wholly  owned
subsidiary  domiciled in Bermuda.  Insurance companies such as CAR Insurance are
subject  to the laws and  regulations  of the  jurisdictions  in which  they are
chartered and do business.  Such laws and regulations  generally are designed to
protect the interests of policyholders rather than the interests of shareholders
of the Company. In general,  insurance  regulatory agencies have broad authority
over  insurers'  capital  and  surplus  levels,  dividend  payments,   financial
disclosure,  reserve requirements,  investment parameters and premium rates. The
regulation of CAR Insurance and its insurance program involving AIG, Hertz Claim
Management Corporation, and the financing of such insurance program could have a
material effect on the Company's  business,  financial  condition and results of
operations.

     The Company's  insurance program offered through CAR Insurance is conducted
via "fronting"  arrangements with AIG. Because some states currently restrict or
limit such  arrangements,  the ability of the Company to expand the program into
those states is also limited. In addition, the National Association of Insurance
Commissioners  ("NAIC")  has  adopted a model  act  concerning  such  "fronting"
arrangements. The model act requires reporting and prior approval of reinsurance
transactions  relating to these  arrangements  and limits the amount of premiums
that can be written under certain circumstances. No determination can be made as
to whether,  or in what form,  such act may  ultimately be adopted by any state,
and the Company is therefore unable to predict whether the model act will affect
its operations or relationships  with insurers.  Some states currently  regulate
third party  administration  and premium financing  arrangements,  such as those
used by the  Company.  Any or all of these  regulations  could  have a  material
effect on the program being offered by the Company.

                                       8
<PAGE>
     State  regulation  requires  licensing  of persons  soliciting  the sale of
insurance  within  that  state.  In certain  states,  licenses  are  obtained by
individual  agents rather than a corporate  entity.  Due to the Company's recent
development of the  reinsurance  program and limited  experience  with its other
insurance  programs,  there can be no assurance that its activities  will not be
deemed to be in violation of licensing or other  insurance laws or  regulations.
Such  violations  could subject the Company to  significant  fines and penalties
which could have a material adverse effect on its business,  financial condition
and results of operations.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company currently leases  approximately  9,100 square feet of executive
office space at 10324 South Dolfield Road,  Owings Mills, MD 21117,  which lease
will expire in October 2006 (see note 7 to the Company's  consolidated financial
statements and Item 8, Certain Relationships and Related Party Transactions).

     Management  believes that the facilities leased by the Company are adequate
for the Company's current and foreseeable future operations.

ITEM 3. LEGAL PROCEEDINGS

     The  Company  is party  to  routine  legal  proceedings  incidental  to its
business from time to time.  Certain claims,  suits and complaints  arise in the
ordinary course of business and may be filed against the Company. Based on facts
now known to the Company,  management  believes all such matters are  adequately
provided  for,  covered by insurance  or, if not so covered or provided for, are
without  merit,  or involve  such amounts  that would not  materially  adversely
affect the  consolidated  results of  operations  or  financial  position of the
Company.  The  Company  resolved a lawsuit in August  1999,  and the Company was
awarded $101,045, which was received by the Company in April 2000.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters  were  submitted  to a vote of security  holders  during the 4th
quarter of the fiscal year ended March 31, 2000.

                                       9
<PAGE>
                                     PART II
                                OTHER INFORMATION

ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's common stock,  $.01 par value,  trades on the Nasdaq SmallCap
Market under the symbol RAWA.

     The range of high and low bid quotations  for the quarterly  periods of the
current and prior fiscal years was as follows:

              Year Ended
            March 31, 2000                            High*      Low*
          ------------------                         ------     ------
          First Fiscal Quarter                       $1.75      $1.37
          Second Fiscal Quarter                       2.00       2.00
          Third Fiscal Quarter                        2.00       1.75
          Fourth Fiscal Quarter                       2.25       1.95

              Year Ended
            March 31, 1999                            High*      Low*
          ------------------                         ------     ------
          First Fiscal Quarter                       $1.09      $1.03
          Second Fiscal Quarter                       1.00       0.91
          Third Fiscal Quarter                        1.50       1.12
          Fourth Fiscal Quarter                       1.25       1.19

----------
*   Bid quotations as reported by Nasdaq reflect  inter-dealer  prices,  without
    retail  mark-up,  mark-down,  or  commission  and may not  represent  actual
    transactions.

     The Company has never paid any cash dividends on its common stock, nor does
it anticipate  paying  dividends on its common stock in the foreseeable  future.
The Company has preferred stock issued with 1,105,000 shares outstanding for the
fiscal year ended March 31, 2000. This stock has a cumulative quarterly dividend
of two cents per share.  Based on the current  number of  outstanding  preferred
shares, the annual aggregate  dividend is $88,400.  The terms of the outstanding
preferred  stock  provide  that the Company  may not  declare or pay  dividends,
whether in cash or in property, on the common stock unless the full dividends on
the  preferred  stock for all past  dividend  periods and the  current  dividend
period have been paid or declared and a sum set aside for payment  thereof.  The
preferred stock is convertible into common on a share-for-share  basis. There is
no public market for the preferred stock.

     The number of  stockholders  of record of the Company's  common stock as of
May 30, 2000 was 179. This figure does not include  individual  participants  in
securities  position  listings  of  registered  clearing  agencies.  The Company
believes that the number of beneficial  stockholders was approximately  1,300 as
of May 30,  2000.  Trading  activity  with  respect to the Common Stock has been
limited,  and the  volume  of  transactions  should  not of  itself be deemed to
constitute an  "established  public  trading  market".  A public  trading market
having the characteristics of depth,  liquidity and orderliness depends upon the
existence  of market  makers  as well as the  presence  of  willing  buyers  and
sellers, which are circumstances over which the Company does not have control.

                                       10
<PAGE>
SELECTED FINANCIAL DATA

     Set forth below is selected financial data with respect to the consolidated
statements of earnings of the Company and its  subsidiaries for each of the five
years in the period ended March 31, 2000, and with respect to the balance sheets
thereof at March 31 in each of those years.

     The selected  financial  data has been derived from the  Company's  audited
consolidated  financial  statements and should be read in  conjunction  with the
audited  financial  statements  and related  notes  thereto and other  financial
information  appearing  elsewhere  herein.  The selected  financial  data is not
required by Form 10-KSB and has been  included  herein to provide an overview of
the Company's operations.

<TABLE>
<CAPTION>
                                                      Year ended March 31,
                                     -------------------------------------------------------
                                      1996        1997        1998        1999        2000
                                     -------     -------     -------     -------     -------
                                    (in thousands except per share and number of franchises)
<S>                                 <C>         <C>         <C>         <C>         <C>
FRANCHISEES' RESULTS (UNAUDITED)

Franchisees' Revenue (1)             $29,864     $34,661     $40,018     $45,358     $51,707
Number of Franchises                     429         477         558         652         675
 (outstanding at year-end)

COMPANY'S RESULTS OF OPERATIONS

Total Revenue                        $ 3,455     $ 3,785     $ 4,677     $ 5,601     $ 6,282
Operating expenses                     3,029       3,252       3,983       4,564       5,279

Income before income taxes           $   489     $   600     $   756       1,113       1,101
Net income                               459         537         548         858         821

EARNINGS PER COMMON SHARE

Basic                                $   .08     $   .10     $   .10     $   .18         .19
Weighted average common shares         4,210       4,102       4,267       4,086       3,808

Diluted                              $   .07     $   .09     $   .09     $   .15         .14
Weighted average common shares
 plus convertible preferred
 stock, options and warrants           6,197       6,083       5,915       5,611       5,902

EBITDA (2)                               568         721         888       1,313       1,922

COMPANY'S BALANCE SHEET DATA

Working Capital                      $   902     $ 1,191     $ 1,527     $ 1,531     $ 1,240
Total assets                           2,164       2,594       3,664       3,886       3,980
Long-term obligations                     36          30          --          --          --
Shareholders' Equity                   1,372       1,755       2,028       2,041       1,836
</TABLE>
----------
(1) The franchisees'  revenue data have been derived from unaudited  license fee
    reports provided by franchisees.

(2) "EBITDA" is earnings before interest  expense,  depreciation,  amortization,
    taxes and  repurchase  of options.  EDITDA  should not be  interpreted  as a
    measure of operating results, cash flow provided by operating activities,  a
    measure  of  liquidity,  or as an  alternative  to  any  generally  accepted
    accounting principle measure of performance. The Company is reporting EBITDA
    because it is a widely used financial measure of the potential capacity of a
    company to incur and service debt. Rent-A-Wreck's reported EBITDA may not be
    comparable to similarly titled measures used by other companies.

                                       11
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS

Year ended March 31, 2000 as compared to year ended March 31, 1999:

     The Company  operates in two principal  segments:  Vehicle Rental Franchise
Programs (franchising) and Insurance Coverage (insurance).  Franchising consists
of operations under the  Rent-A-Wreck  and Priceless lines of business.  For the
year ended March 31, 2000,  franchising operations comprised 86% of consolidated
net revenues  (87% in 1999) and 161% of  consolidated  operating  income (99% of
operating income before repurchase of options; 112% in 1999).

     Revenue from franchising  operations,  which includes initial license fees,
continuing  license fees, and  advertising  fees,  increased by $476,267  (10%).
Initial  license  fees  increased  by $21,802  (2%) due to the  addition  of new
franchises.  The timing of closings of new franchise sales, each of which is for
a  relatively  large  amount,  varies,  contributing  to periodic  increases  or
decreases in reported  results.  Management  does not believe  these  short-term
variations  are  indicative  of  longer-term  trends.  Continuing  license  fees
increased by $380,889 (14%),  and advertising fees increased by $73,576 (8%) due
to the fleet growth at existing franchises and the Company's  dedication of more
resources to its collection efforts.

     Revenues from insurance  premiums increased by $148,778 (20%) due to higher
participation  by  the  Company's  franchisees  in  the  CAR  Insurance  program
established in March 1997.  Insurance premium revenue is recognized ratably over
the life of the policies.

     Vehicle rental operations  increased by $18,736 (118%) due primarily to the
wheelchair van program, partially offset by the cancellation of the truck rental
program.

     Other  revenue  increased  by $36,798  (23%) due  primarily  to a gain from
litigation  against a former  franchisee,  which the Company  resolved in August
1999, partially offset by lower sales of promotional materials.  The Company was
awarded  $101,045,  which it collected  in April 2000,  in  connection  with the
litigation  of the award.  $49,750 was  allocated  to other  revenue,  while the
remaining amount of $51,295 was allocated to license fees,  advertising fees and
interest income.

     Total  operating  expenses  increased by $715,839 (16%) in fiscal year 2000
compared to the prior year.  Salary expense  increased by $15,869 (2%) primarily
as a result of hiring  additional  employees  in  response  to the growth of the
Company's franchising  operations.  Advertising and promotion expenses increased
by  $86,901  (7%),  which  resulted  primarily  from  an  increase  in  national
advertising  expense  to  promote  the  Company.  Sales and  marketing  expenses
decreased  by  $57,385  (9%),  which  resulted  primarily  from  the cost of the
repurchase of a territory  from an existing  franchisee in the prior year, and a
reduction in the Company's annual and regional  meetings  expenses.  General and
administrative expenses increased by $97,840 (11%), which resulted primarily

                                       12
<PAGE>
from the expense related to the Company's move to its new location,  an increase
in the  management fee earned by K.A.B.,  Inc.  ("KAB"),  a related  party,  and
payment of monthly  consulting fees to Richter Investment Corp.  ("Richter"),  a
related party.

     Insurance underwriting expenses decreased by $45,291 (7%) due to a decrease
in loss reserves for unreported claims,  offset by an increase in paid losses in
connection  with higher  participation  by the Company's  franchisees in its CAR
Insurance program.

     Effective June 30, 1993, the Company issued options (the "Options") to KAB,
for the purchase of up to 2,250,000  shares of the Company's  common stock.  All
are currently vested.  During the year ended March 31, 2000, the Company entered
into an agreement to repurchase 500,000 of the options for $625,000.

     Depreciation  and amortization  expense  decreased by $7,095 (4%) in fiscal
year 2000 compared to the prior year.  This  decrease  resulted  primarily  from
certain assets becoming fully depreciated. Vehicles, office furniture, equipment
and leasehold  improvements are carried at cost.  Depreciation has been provided
by the  straight-line  method  over the  estimated  useful  lives of the  assets
ranging from 3 to 7 years.  Amortization of leasehold improvements is calculated
on the  straight-line  basis  over  the  shorter  of the  estimated  life of the
improvements or the term of the lease.  Betterments,  renewals and extraordinary
repairs  that extend the life of the asset are  capitalized;  other  repairs and
maintenance are expensed.

     The Company  realized  operating  income of  $1,002,387,  before  taxes and
interest, in 2000 compared to operating income of $1,037,647 in 1999, reflecting
a decrease of $35,260 (3%). This decrease resulted  primarily from the Company's
repurchase  of 500,000  options for  $625,000,  offset by an increase in initial
license fees and, especially, continuing license fees due to the addition of new
franchises,  fleet  growth at existing  franchises  and the  Company's  improved
collection efforts and collection of previously reserved accounts, as well as an
increase in other revenues due primarily to a litigation award. If repurchase of
options had not impacted the  Consolidated  Statement of Earnings for the fiscal
year  ended  March 31,  2000 (in  which  case it also  would  have  produced  no
partially  offsetting  reduction in income tax expense),  operating income would
have been  $1,627,387  in 2000 instead of  $1,002,387,  which would have been an
increase  versus 1999 of $589,740  (57%) rather than a decrease of $35,260 (3%).
Net income would have been  $1,204,379  instead of $820,629,  basic earnings per
share would have been $.29 instead of $.19, and diluted earnings per share would
have been $.20 instead of $.14.

     The Company  incurred an expense of $625,000 for  repurchase  of options in
2000 when it implemented such repurchase as part of the stock buyback program it
initiated  in 1995.  Including  the 500,000  options  recently  repurchased  and
400,000  common shares  bought from a founder of the Company in November,  1999,
the  Company  has now  bought  back a total of more  than 2  million  shares  or
potential shares.  The Company believes  management's  options are attractive to
repurchase  for  several  reasons.   First,  by  choosing  to  repurchase  those

                                       13
<PAGE>
exercisable at the highest exercise price ($1.15 options),  the Company was able
to retire a larger  number of shares for fewer  dollars  because their value was
lower.  Second,  because they represent  taxable  ordinary income to the holders
when  they are  exercised,  options  represent  a  substantial  and  potentially
depressing  overhang  on the  market  because  holders  generally  need  to sell
exercised   options   promptly  to  pay  income  taxes  generated  by  exercise.
Repurchasing options removes the threat of this overhang.  Furthermore, by using
a portion of net income as or after it has been earned,  supplemented by the tax
deduction an option repurchase generates, to finance the repurchase of a portion
of  management's   options,   the  aggregate  number  of  options  and  warrants
outstanding  can be reduced to a reasonable  level while  enhancing the value of
all outstanding shares by increasing prospective earnings per share.

     Net interest income increased by $23,284 (31%). This increase was primarily
due to interest earned on the increased cash deposits which are held in interest
bearing  accounts  and  the  interest  earned  on the  proceeds  from a  lawsuit
settlement.

     Income tax expense for the year ended March 31, 2000  increased  by $25,370
(10%) over 1999 due to a lower  reduction in the  deferred  tax asset  valuation
allowance  in the  current  year  compared  with the prior year.  The  valuation
allowance has been eliminated as of March 31, 2000.

     Effective  January  1,  1999,  the  annual  management  fee  earned  by KAB
increased from $250,000 to $300,000 (in addition to reimbursement of expenses).

     Inflation  has had no  material  impact  on the  operations  and  financial
condition of the Company for all years presented.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 2000, the Company had working  capital of $1,239,523  compared
to $1,530,647 at March 31, 1999.  This decrease of $291,124  resulted  primarily
from an increase in accounts payable in connection with the Company's repurchase
of 500,000 options, cash paid by the Company to repurchase 400,000 shares of its
common stock, as well as the payment of preferred stock dividends, offset by net
profit  earned  during the year.  In fiscal 2000,  the  Company's  allowance for
doubtful  accounts  was  $832,253  compared to  $655,418 in the prior year.  The
Company wrote off $68,279 of doubtful  accounts  during fiscal 2000 and $215,787
during the prior year. The Company generally  requires officers and directors of
franchisees to provide personal guarantees of the franchisee's obligations under
the franchise agreement. The Company's collection effort is designed to increase
liquidity  through improved cash flow;  however,  there can be no assurance that
the Company will be successful in these efforts.

     Cash and cash  equivalents  decreased  by  $159,986  (19%).  This  decrease
resulted  primarily from  additional  deposits paid to AIG and Willis Corroon in
connection  with the  Company's  CAR  Insurance  Program.  These  deposits  were

                                       14
<PAGE>
refunded  to the Company in April and May 2000.  Restricted  cash  increased  by
$26,971 (4%) due to an increase in the national  advertising  funds.  Restricted
cash  includes  (1) a deposit of $600,000  as security  for the letter of credit
with Bank of America backing the insurance program described below and (2) funds
being held on behalf of the Company's  franchisees  in the national  advertising
fund to be spent on various advertising programs.

     In March 2000, the Company obtained a $1,000,000 letter of credit with Bank
of America in  connection  with the  Company's  CAR  Insurance  subsidiary,  and
replaced  its  letters of credit with The Chase  Manhattan  Bank and the Bank of
Butterfield.  This letter of credit is part of the agreement between the Company
and Bank of America as  security  for the  letter of credit  issued to  American
International Group ("AIG") by Bank of America. This letter of credit is secured
by a certificate  of deposit of $600,000 held by Bank of America plus 50% of all
the Company's  eligible accounts  receivable.  Funds drawn against the letter of
credit bear  interest at Bank of America's  prime  commercial  lending rate plus
1.5% (which  prime rate was 9.50% on June 12,  2000).  For the years ended March
31, 2000 and 1999, AIG has not drawn any funds from the letter of credit.

     In November 1999, the Company moved to a new location, which is owned by KA
Real Estate Associates,  LLC, ("KA") a related party to KAB. The Company entered
into an  operating  lease  with KA which  requires  monthly  payments  of $9,290
through October 2006.

     Property and equipment  increased by $196,600  (29%) from March 31, 1999 to
March 31, 2000. This increase occurred primarily due to additional investment in
computer software and hardware, leasehold improvements and vehicles. The Company
purchased three vehicles in connection with the wheelchair van program.

     Cash provided by operations was  $1,723,790,  resulting  primarily from net
income before  depreciation  plus the decrease in accounts and notes receivable,
offset by the increase in prepaid expenses,  accounts payable, accrued expenses,
insurance  loss  reserves,   and  deferred  income  taxes.  Accounts  and  notes
receivable decreased primarily from the collection of amounts financed under the
insurance  program  at the end of the prior  year.  Prepaid  expenses  increased
primarily due to expenses paid in connection with the Company's regional meeting
for the year  ended  March 31,  2000.  Accounts  payable  and  accrued  expenses
increased  primarily from compensation  expense in connection with the Company's
repurchase of 500,000 options.  Insurance loss reserves increased  primarily due
to estimates for unreported claims in connection with the CAR Insurance program.
Income taxes payable increased $156,888 (86%) due to current taxable income.

     Cash used in  investing  activities  of $292,677  related  primarily  to an
increase in restricted cash in connection with the national  advertising  funds,
the  acquisition  of  property  and  equipment  and the  costs  associated  with
obtaining  trademarks,  partially  offset by the proceeds from the sale of three
vehicles.

                                       15
<PAGE>
     Cash used in financing  activities during the year ended March 31, 2000 was
$1,591,099,  resulting  from the payment of preferred  dividends,  retirement of
common stock and financing for insurance operations.

     In 1995 and 1996,  the Company  approved the repurchase of up to a total of
500,000 shares of the Company's  outstanding common or preferred stock. On April
23, 1998,  the Company  approved the  repurchase of up to an additional  500,000
shares of the Company's outstanding common or preferred stock. On March 3, 1999,
the Company  approved the  repurchase  of an  additional  119,075  shares of the
Company's outstanding common or preferred stock. During the year ended March 31,
1998, the Company  repurchased and retired 117,575 shares of its common stock at
a cost of $121,509 and also bought back 20,625 shares of its preferred  stock at
a cost of $25,781. During the year ended March 31, 1999, the Company repurchased
and  retired  311,600  shares of its  common  stock at a cost of  $358,674.  The
Company also  repurchased and retired 226,875 shares of its preferred stock at a
cost of $363,001 and also bought back 102,500 warrants at a cost of $11,250.  As
of March 31, 1999, the Company had  repurchased and retired a total of 1,119,075
shares under this program,  which was the total number of shares  authorized for
repurchase at that time. In November 1999, the Company  repurchased  and retired
400,000  shares of its common stock at a cost of $790,000.  In January 2000, the
Company's Board of Directors authorized the repurchase and retirement of up to 1
million shares of common stock, convertible cumulative series A preferred stock,
options or warrants.  The Board also authorized the repurchase,  and the Company
entered into an agreement to repurchase, 500,000 options for $625,000 under this
program.  The  obligation to purchase these options was paid in April and May of
2000.

     The  Company  believes  it has  sufficient  working  capital to support its
business plan through fiscal 2001.

IMPACT OF INFLATION

     Inflation  has had no  material  impact  on the  operations  and  financial
condition of the Company.

                                       16
<PAGE>
IMPORTANT FACTORS

     The  statements  regarding  anticipated  future  performance of the Company
contained in this report are forward-looking  statements which are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These  forward-looking  statements  involve risks and  uncertainties  that
could  cause  the  Company's  actual  results  to  differ  materially  from  the
forward-looking  statements.  Factors  which could cause or  contribute  to such
differences include, but are not limited to, the Company's limited experience in
the reinsurance  business and the potential for negative claims experience,  the
effects of  government  regulation  on the  Company's  franchise  and  insurance
programs  including  maintaining  properly  registered  franchise  documents and
making any required  alterations  in the Company's  franchise  program to comply
with changes in the laws,  competitive pressures from other motor vehicle rental
companies which have greater marketing and financial resources than the Company,
protection  of the  Company's  trademarks,  and the  dependence on the Company's
relationships with its franchisees. These risks and uncertainties are more fully
described  elsewhere  in,  "Item 6 -  Management's  Discussion  and  Analysis of
Financial  Condition  and  Results of  Operations  -  Important  Factors"  which
information is incorporated in this section by reference in the Company's Annual
Report  on  Form  10-KSB  for  the  fiscal  year  ended  March  31,  2000.   All
forward-looking  statements  should be  considered  in light of these  risks and
uncertainties.

     LIMITED INSURANCE EXPERIENCE; POTENTIAL FOR NEGATIVE CLAIMS EXPERIENCE. The
Company's  reinsurance business exposes its assets to significant  liability for
claims and losses under the program. There can be no assurance that the premiums
collected  will be  adequate  to  cover  the  liabilities  incurred  or that the
Company's  reserves  will  be  sufficient.  Because  of  the  Company's  limited
experience with insurance risks and the inherent uncertainties in estimating the
ultimate  costs of claims,  reserves are  particularly  uncertain and losses and
adjustment  expenses may deviate  substantially from expectations.  Furthermore,
the timing,  frequency and extent of  liabilities  under this program  cannot be
predicted  accurately  because the conditions and events which  established  the
Company's  loss  expectancies  may not recur in the  future.  Unexpected  losses
associated  with  this  program  could  have a  material  adverse  effect on the
Company's business, financial condition and results of operations as a result of
the need to make  payments in excess of reserves.  Additionally,  if the Company
expands  the program as  anticipated,  the effect of such losses and or reserves
could be compounded.

                                       17
<PAGE>
     DEPENDENCE  ON  FRANCHISEES;  CREDIT  RISKS.  The  Company's  revenues  are
substantially  dependent on fees paid by its  franchisees.  These fees fluctuate
based on the franchisees'  performance.  Franchisees are independent contractors
who  operate  their  business   independent  of  the  Company.  Any  failure  of
franchisees to operate their businesses,  or inability of the Company to collect
fees owed by franchisees,  could have a material adverse effect on the Company's
business, financial condition and results of operations.

     DEPENDENCE ON TRADEMARKS. The Company's success depends in significant part
on its ability to maintain  and protect  its primary  trademarks  involving  the
"Rent-A-Wreck"   and  "PRICELE$$"  names.  The  Company's  revenues  are  almost
exclusively  derived from the goodwill  associated  with the names.  Significant
negative  publicity  related  to  either of the  names or the  inability  of the
Company to pursue infringements and maintain its proprietary rights could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

     INTENSE  COMPETITION.  The vehicle rental industry in which the Company and
its franchisees  operate is characterized by intense  competition,  particularly
with respect to price and service,  from  national,  regional and local  vehicle
rental companies.  Many of these competitors,  particularly national competitors
and those with  relationships  with vehicle  manufacturers,  have  substantially
greater resources than the Company.  In addition,  competition  exists from many
smaller, independent operations in local markets. Any failure by the Company and
its  franchisees  to offer  services  and prices that  compete  favorably in the
marketplace  would have a material  adverse  effect on the  Company's  business,
financial condition and results of operations.

     COMPLIANCE  WITH  GOVERNMENTAL  REGULATIONS.  The Company's  operations are
subject to numerous federal,  state,  local and foreign laws,  including federal
and state laws governing the offer and sale of franchises and relationship  with
franchisees.  Several  states'  laws  require  the  Company  to renew  its state
franchise registration annually. If the Company does not maintain required state
registrations, it must terminate franchise sales activity in those states. While
the  Company  has  suspended  franchise  sales  activity  in the past until such
registrations  were properly renewed,  the Company believes that it is currently
in material  compliance with such laws.  Changes in franchise laws could require
the Company to make material  alterations  to its core  business.  Additionally,
failure to comply  with  franchise  or other laws could  subject  the Company to
significant  fines  and  penalties  and have a  material  adverse  effect on the
Company's business, financial condition and results of operations.

     During the past several years, a number of states have interpreted existing
laws as  requiring  out-of-state  companies  which  generate  income by granting
franchises in the state to file returns and pay tax in the state. Following this
trend,  other states have adopted  laws  specifically  designed to impose tax on
out-of-state  companies granting  franchises in the state. While many companies,
along with many tax practitioners and commentators, contend that the application
of such laws violates the federal constitution,  the United States Supreme Court

                                       18
<PAGE>
has not yet ruled on the issue  directly.  If the  application  of these laws is
constitutional,  if the laws apply to the  activities of the Company,  or if the
states' interpretation of existing laws is applied retroactively,  any resulting
taxes and associated  interest and penalties for which the Company may be liable
also could have a material adverse effect on the Company.

     RISKS OF INTERNATIONAL  OPERATIONS.  During the fiscal year ended March 31,
2000, approximately 1% of the Company's revenues were derived from international
operations. The Company's international operations are subject to certain risks,
including adverse  developments in foreign political and economic  environments,
varying government  regulations,  including regulations regarding the protection
of  trademarks  and  the  offer  and  sale  of  franchises,   foreign   currency
fluctuations and potential adverse tax  consequences.  There can be no assurance
that any of these factors,  especially if the Company is successful in expanding
its  international  presence,  will not have a  material  adverse  effect on the
Company's business, financial condition and results of operations.

     Developments  in any  of  these  areas,  which  are  more  fully  described
elsewhere in "Item 1 - Description of Business" which is incorporated  into this
section by  reference,  could cause the Company's  results to differ  materially
from results that have been or may be projected by or on behalf of the Company.

     The Company  cautions that the foregoing  list of important  factors is not
exclusive.  The  Company  does not  undertake  to update  any  forward-  looking
statement that may be made from time-to-time by or on behalf of the Company.

                                       19
<PAGE>
ITEM 7. FINANCIAL STATEMENTS

       INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES

                                                                            Page
                                                                            ----

Report of Independent Certified Public Accountants.........................  21

Financial Statements:

  Consolidated Balance Sheet as of March 31, 2000..........................  22

  Consolidated Statements of Earnings for the Years Ended
  March 31, 1999 and 2000..................................................  24

  Consolidated Statements of Shareholders' Equity for the Years
  Ended March 31, 1999 and 2000............................................  25

  Consolidated Statements of Cash Flows for the Years Ended
  March 31, 1999 and 2000..................................................  26

  Notes to Consolidated Financial Statements...............................  27

Supporting Schedules:

  Schedule II - Valuation and Qualifying Accounts..........................  53

     Schedules  other than those listed above have been omitted because they are
either not required,  inapplicable,  or the required  information is included in
the Consolidated Financial Statements or notes thereto.

                                       20
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Rent-A-Wreck of America, Inc.

We have audited the accompanying  consolidated  balance sheet of Rent-A-Wreck of
America,  Inc. (a Delaware  corporation)  and subsidiaries as of March 31, 2000,
and the related  consolidated  statements of earnings,  shareholders' equity and
cash  flows  for the  years  ended  March 31,  2000 and  1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Rent-A-Wreck of
America,  Inc.  and  subsidiaries,  as of March 31, 2000,  and the  consolidated
results  of their  operations  and their  consolidated  cash flows for the years
ended March 31, 2000 and 1999 in conformity with accounting principles generally
accepted in the United States of America.

We have also audited Schedule II for the years ended March 31, 2000 and 1999. In
our opinion,  this  schedule  presents  fairly,  in all material  respects,  the
information required to be set forth therein.

/s/ Grant Thornton LLP

Baltimore, Maryland
May 25, 2000

                                       21
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2000


                                     ASSETS

CURRENT ASSETS:
  Cash and Cash Equivalents ...................................     $   701,808
  Restricted Cash .............................................         745,514
  Accounts Receivable, net of allowance
   for doubtful accounts of $829,253:
   Continuing License Fees and Advertising Fees ...............         365,462
   Current Portion of Notes Receivable ........................         416,002
   Current Portion of Direct Financing Leases .................           5,406
   Other ......................................................         305,685
   Prepaid Expenses and Other .................................         184,045
   Deferred Taxes .............................................         614,541
                                                                    -----------

      TOTAL CURRENT ASSETS ....................................       3,338,463
                                                                    -----------
PROPERTY AND EQUIPMENT:
  Furniture ...................................................          99,399
  Computer Hardware and Software ..............................         431,918
  Machinery and Equipment .....................................          98,172
  Leasehold Improvements ......................................          54,321
  Vehicles ....................................................         187,360
                                                                    -----------
                                                                        871,170
  Less: Accumulated Depreciation and
        Amortization ..........................................        (493,612)
                                                                    -----------

      NET PROPERTY AND EQUIPMENT ..............................         377,558
                                                                    -----------
OTHER ASSETS:
  Intangible Assets, net of accumulated amortization
   of $132,035 ................................................         193,666
  Long-term Portion of Notes and Direct Financing Lease
  Receivables, net of allowance of $3,000 .....................          70,438
                                                                    -----------

                                                                        264,104
                                                                    -----------

      TOTAL ASSETS ............................................     $ 3,980,125
                                                                    ===========

    The accompanying notes are an integral part of this financial statement.

                                       22
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2000


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts Payable and Accrued Expenses .......................       $1,359,215
  Dividends Payable ...........................................           22,100
  Insurance Loss Reserves .....................................          379,075
  Income Taxes Payable ........................................          338,550
                                                                      ----------

      TOTAL CURRENT LIABILITIES ...............................        2,098,940
                                                                      ----------

LONG-TERM LIABILITIES:
  Deferred tax liability ......................................           45,681
                                                                      ----------

      TOTAL LONG-TERM LIABILITIES .............................           45,681
                                                                      ----------

      TOTAL LIABILITIES .......................................        2,144,621
                                                                      ----------

COMMITMENTS AND CONTINGENCIES .................................               --

SHAREHOLDERS' EQUITY:
  Convertible Cumulative Series A Preferred Stock, $.01
   par value; authorized 10,000,000 shares; issued and
   outstanding 1,105,000 shares (aggregate liquidation
   preference $884,000)........................................           11,050
  Common Stock, $.01 par value; authorized 25,000,000 shares;
   issued and outstanding 3,568,217 shares ....................           35,682
  Additional Paid-In Capital ..................................        1,423,181
  Retained Earnings ...........................................          365,591
                                                                      ----------

      TOTAL SHAREHOLDERS' EQUITY ..............................        1,835,504
                                                                      ----------

      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..............       $3,980,125
                                                                      ==========

    The accompanying notes are an integral part of this financial statement.

                                       23
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 2000
<TABLE>
<CAPTION>

                                                                   1999                2000
                                                               -----------         -----------
<S>                                                            <C>                 <C>
REVENUES:
 Initial License Fees ....................................     $ 1,068,201         $ 1,090,003
 Continuing License Fees .................................       2,721,506           3,102,395
 Advertising Fees ........................................         897,550             971,126
 Insurance Premiums ......................................         738,533             887,311
 Vehicle Rental Operations ...............................          15,879              34,615
 Other ...................................................         159,646             196,444
                                                               -----------         -----------
                                                                 5,601,315           6,281,894
                                                               -----------         -----------
EXPENSES:
 Salaries, Consulting Fees, and Employee Benefits ........         917,121             932,990
 Advertising and Promotion ...............................       1,290,099           1,377,000
 Insurance Underwriting Expenses .........................         616,256             570,965
 Sales and Marketing .....................................         636,666             579,281
 Repurchase of Options ...................................              --             625,000
 General and Administrative ..............................         925,091           1,022,931
 Depreciation and  Amortization ..........................         178,435             171,340
                                                               -----------         -----------
                                                                 4,563,668           5,279,507
                                                               -----------         -----------

      OPERATING INCOME ...................................       1,037,647           1,002,387

OTHER INCOME (EXPENSE)
 Interest Income .........................................          96,915             122,919
 Interest Expense ........................................         (21,780)            (24,500)
                                                               -----------         -----------
                                                                    75,135              98,419
                                                               -----------         -----------

      INCOME BEFORE INCOME TAX EXPENSE ...................       1,112,782           1,100,806


INCOME TAX EXPENSE .......................................         254,807             280,177
                                                               -----------         -----------

      NET INCOME .........................................         857,975             820,629

DIVIDENDS ON CONVERTIBLE CUMULATIVE PREFERRED STOCK.......         (104,742)            (89,500)
                                                                -----------         -----------
NET INCOME AFTER DIVIDENDS ON CONVERTIBLE CUMULATIVE
 PREFERRED STOCK ..........................................     $   753,233         $   731,129
                                                                ===========         ===========
EARNINGS PER SHARE

 Basic ....................................................     $       .18         $       .19
                                                                ===========         ===========

 Weighted average common shares ...........................       4,085,860           3,808,147
                                                                ===========         ===========

 Diluted ..................................................     $       .15         $       .14
                                                                ===========         ===========
Weighted average common shares plus convertible preferred
 stock, options and warrants ..............................       5,611,423           5,901,617
                                                                ===========         ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       24
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 2000


<TABLE>
<CAPTION>
                                                                                               (Accumulated
                                      Preferred Stock         Common Stock         Additional    Deficit)
                                    --------------------   --------------------     Paid-in      Retained
                                     Shares      Amount     Shares      Amount      Capital      Earnings     Total
                                     ------      ------     ------      ------      -------      --------     -----
<S>                               <C>         <C>         <C>         <C>        <C>           <C>         <C>
Balance, April 1, 1998 ..........   1,366,000   $13,660    4,189,692   $ 41,897   $ 2,900,381   $(927,554)  $2,028,384

 Issuance of common stock .......          --        --       56,000        560        36,340          --       36,900

 Retirement of common stock .....          --        --     (311,600)    (3,116)     (355,558)         --     (358,674)

 Retirement of preferred stock ..    (226,875)   (2,269)          --         --      (360,732)         --     (363,001)

 Retirement of warrants .........          --        --           --         --       (11,250)         --      (11,250)

 Preferred dividends paid
  ($.08 per share) ..............          --        --           --         --            --    (104,742)    (104,742)

 Preferred dividend arrearages
   paid .........................          --        --           --         --            --     (44,302)     (44,302)

 Net income .....................          --        --           --         --            --     857,975      857,975
                                   ----------   -------   ----------   --------   -----------   ---------   ----------
Balance, March 31, 1999 .........   1,139,125    11,391    3,934,092     39,341     2,209,181    (218,623)   2,041,290

 Retirement of common stock .....          --        --     (400,000)    (4,000)     (786,000)         --     (790,000)

 Conversion of preferred stock
  to Common stock ...............     (34,125)     (341)      34,125        341            --          --           --

 Preferred dividends paid ($.08
   per share) ...................          --        --           --         --            --     (89,500)     (89,500)

 Preferred dividend arrearages
   paid .........................          --        --           --         --            --    (146,915)    (146,915)

 Net income .....................          --        --           --         --            --     820,629      820,629
                                   ----------   -------   ----------   --------   -----------   ---------   ----------

Balance, March 31, 2000 .........   1,105,000   $11,050    3,568,217   $ 35,682   $ 1,423,181   $ 365,591   $1,835,504
                                   ==========   =======   ==========   ========   ===========   =========   ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       25
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED MARCH 31, 1999 AND 2000


<TABLE>
<CAPTION>
                                                                  1999               2000
                                                              -----------         -----------
<S>                                                       <C>            <C>
Increase (decrease) in cash and cash equivalents

Cash flows from operating activities:
 Net Income ..........................................        $   857,975         $   820,629
 Adjustments to reconcile net income
   to net cash provided by operating activities:
   Depreciation and amortization .....................            178,435             171,340
   Deferred income taxes .............................           (130,520)           (369,832)
   Gain (loss) on disposal of property and equipment .             (3,382)              1,757
   Provision for doubtful accounts ...................            (27,153)            173,775
 Changes in assets and liabilities:
   Accounts and notes receivable .....................           (100,784)            124,777
   Prepaid expenses and other ........................            (32,564)            (17,624)
   Accounts payable and accrued expenses .............             75,861             649,027
   Income taxes payable ..............................            (31,496)            156,888
   Insurance loss reserves ...........................            119,701              13,053
                                                              -----------         -----------
      Net cash provided by operating activities ......            906,073           1,723,790
                                                              -----------         -----------
Cash flows from investing activities:
 Increase in restricted cash .........................           (324,521)            (26,971)
 Proceeds from sale of property and equipment ........             51,602              43,000
 Acquisition of property and equipment ...............           (208,208)           (252,071)
 Additions to intangible assets ......................             (9,985)            (56,635)
                                                              -----------         -----------
      Net cash used in investing activities ..........           (491,112)           (292,677)
                                                              -----------         -----------
Cash flows from financing activities:
 Increase (decrease) in insurance financing payable ..             76,287            (564,684)
 Issuance of common stock ............................             36,900                  --
 Retirement of warrants ..............................            (11,250)                 --
 Retirement of common stock ..........................           (358,674)           (790,000)
 Retirement of preferred stock .......................           (363,001)                 --
 Preferred dividends paid ............................           (149,044)           (236,415)
                                                              -----------         -----------
      Net cash used in financing activities ..........           (768,782)         (1,591,099)
                                                              -----------         -----------
      Net decrease in cash and cash equivalents ......           (353,821)           (159,986)

Cash and cash equivalents at beginning of year .......          1,215,615             861,794
                                                              -----------         -----------
Cash and cash equivalents at end of year .............        $   861,794         $   701,808
                                                              ===========         ===========

Supplemental disclosure of cash flow information:
  Interest paid ......................................        $    21,780         $    24,500
  Income taxes paid ..................................        $   415,454         $   481,669
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       26
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND NATURE OF BUSINESS

     The consolidated financial statements presented herein include the accounts
of  Rent-A-Wreck  of  America,   Inc.  ("RAWA,   Inc.")  and  its  wholly  owned
subsidiaries, Rent-A-Wreck One Way, Inc,. ("RAW One Way"), Consolidated American
Rental Insurance Company,  Ltd ("CAR Insurance") and Bundy American  Corporation
("Bundy"), and Bundy's subsidiaries, Rent-A-Wreck Leasing, Inc. ("RAW Leasing"),
and Priceless Rent-A-Car, Inc. ("Priceless").

     All of the above  entities are  collectively  referred to as the  "Company"
unless the context  provides or requires  otherwise.  All material  intercompany
balances and transactions have been eliminated.

     The Company markets and administers the Rent-A-Wreck and PRICELE$$  vehicle
rental  franchise  programs  throughout  the United  States,  as well as various
foreign countries.  The Company also provides insurance coverage on the vehicles
of some of its  franchisees.  The Company's  operations  are subject to numerous
federal,  state,  local and  foreign  laws,  including  federal  and state  laws
governing the offer and sale of franchises and relationship with franchisees.

RESTRICTED CASH

     Restricted  cash  includes  a deposit  of  $600,000  being  held in Bank of
America  securing the letter of credit with Bank of America and $145,514 held on
behalf of the Company's franchisees in the national advertising fund to be spent
on various advertising programs.

ACCOUNTS AND NOTES RECEIVABLE

     Substantially  all  receivables  derived  from  franchises  granted  by the
Company  are  personally   guaranteed  by  the  officers  or  directors  of  the
franchisees.  Initial  license fees are collected upon execution of the contract
or financed,  generally  over a twelve-month  period with interest.  The Company
maintains  an  allowance   for  doubtful   accounts   based  upon  the  expected
collectibility of all accounts receivable,  which takes into consideration prior
account loss experience and creditworthiness of the franchisees.

                                       27
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                 MARCH 31, 2000


PROPERTY AND EQUIPMENT

     Depreciation  and  amortization  are provided for in amounts  sufficient to
relate the cost of depreciable assets to operations over their estimated service
lives,  utilizing  primarily the  straight-line  method for financial  statement
purposes.  Accelerated  methods of depreciation  and  amortization  are used for
substantially  all assets for income tax purposes.  The estimated  service lives
used in determining depreciation for financial reporting are as follows:

          Furniture                                          3   years
          Computer Hardware and Software                     3-5 years
          Machinery and Equipment                            5   years
          Leasehold Improvements                             3-7 years
          Vehicles                                           5   years

INTANGIBLE ASSETS

     Intangible  assets  include the value of trademarks  which are amortized on
the  straight-line  method to operations  over periods ranging from ten to forty
years. The  recoverability  of carrying values of intangible assets is evaluated
on  a  recurring  basis.  The  primary  indicators  are  current  or  forecasted
profitability  of the related  business.  There have been no  adjustments to the
carrying values of intangible assets resulting from these evaluations.

INSURANCE RESERVES

     The Company recognizes a liability for re-insured auto claims at the time a
claim is reported to the  Company by the third  party  administrator.  The third
party  administrator  establishes the initial claim reserve based on information
relating to the nature,  severity  and the cost of similar  claims.  The Company
provides for claims  incurred,  but not reported,  based on the  Company's  past
claims  experience.  The liability  recorded may be more or less than the actual
amount of the claims when they are submitted and paid.  Changes in the liability
are charged or credited to operations as the estimates are revised.

                                       28
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                 MARCH 31, 2000


INCOME TAXES

     Income tax  liabilities  and assets are  recognized  for the  deferred  tax
consequences of temporary  differences or carry-forwards that will result in net
taxable income or deductible amounts in future periods.  Deferred tax expense or
benefit  is the result of changes  in the net asset or  liability  for  deferred
taxes.

REVENUE RECOGNITION

     INITIAL LICENSE, ADVERTISING AND CONTINUING LICENSE FEES

     Revenues are composed primarily of initial license fees, continuing license
fees, and advertising fees. Franchisees have certain rights to use the Company's
trademarked  names,  "Rent-A-Wreck" and "PRICELE$$",  in a specified  territory.
Although  the  franchisee  has  continuing  access to the use of  certain of the
Company's  resources,  experience  and  knowledge,  the Company  recognizes  the
initial  license fee as revenue upon  completion of an initial  orientation  and
training course since this represents  substantially all of the initial services
required to be rendered by the Company. Many franchisees have had prior business
experience; consequently, they require little assistance in commencing business.
There is no  obligation  beyond the  initial  training as related to the initial
license fee.  Continuing license and advertising fees are recognized as revenues
on a monthly  basis over the  contract  year  based  primarily  on  franchisees'
reported gross revenues.

     DIRECT FINANCING LEASES

     The Company  offers,  on a selective  basis to qualified  franchisees,  the
opportunity to finance vehicles for their rental fleets under a direct financing
program.  The  Company  recognizes  the  related  interest,   documentation  and
administrative  revenues  as they are  received.  The Company  accounts  for the
financing of the vehicles with the franchisees as direct  financing  leases (see
Note 3).

                                       29
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


     INSURANCE PREMIUMS

     Insurance premiums are recognized ratably over the term of the coverage.

ADVERTISING

     Advertising   costs  are  expensed  as  incurred  and  are   classified  as
advertising and promotion expenses.

STOCK-BASED COMPENSATION

     Compensation costs for stock options are measured as the excess, if any, of
the quoted  market  price of the  Company's  stock at the date of grant over the
amount to be paid to acquire the stock.  Compensation  cost for stock  awards is
recorded based on the quoted market value of the Company's  stock at the time of
grant.

EARNINGS PER COMMON SHARE

     Basic  earnings per share amounts have been  computed  based on the average
number of common shares  outstanding.  Diluted  earnings per share  reflects the
increase in average common shares outstanding that would result from the assumed
exercise of  outstanding  options and warrants and the  conversion  of preferred
stock,   calculated   using  the  treasury   stock   method,   unless  they  are
anti-dilutive.

STATEMENT OF CASH FLOWS

     For purposes of the  statement  of cash flows,  the Company  considers  all
highly liquid financial instruments purchased with a maturity of three months or
less to be cash equivalents.

ESTIMATES

     In preparing financial statements in conformity with accounting  principles
generally  accepted in the United  States of America,  management is required to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities,  the  disclosure  of  contingent  assets and reported  revenues and
expenses. Actual results could differ from those estimates.

                                       30
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


NEWLY ISSUED ACCOUNTING STANDARDS

     In June 1998,  SFAS No. 133,  ACCOUNTING  FOR  DERIVATIVE  INSTRUMENTS  AND
HEDGING  ACTIVITIES,  was issued and is  effective  for all fiscal  quarters  of
fiscal years beginning after June 15, 2000. The statement establishes accounting
and reporting standards for derivative instruments,  and for hedging activities.
Implementation  of this  standard  is not  anticipated  to have an effect on the
Company.

RECLASSIFICATIONS

     Certain  prior year amounts have been  reclassified  to conform to the 2000
presentation.

2. CAPTIVE INSURANCE COMPANY

     In March  1997,  Rent-A-Wreck  of  America,  Inc.  formed  a wholly  owned,
Bermuda-based  captive  insurance   subsidiary,   Consolidated  American  Rental
Insurance Company,  LTD ("CAR Insurance"),  to provide automobile  liability and
physical damage insurance for vehicles owned by participating  franchisees.  The
Company's  insurance  operations are subject to the laws and  regulations in the
jurisdictions   in  which  they  are   chartered   and  do  business.   American
International   Group  ("AIG")  supports  the  operations  and  provides  policy
fronting,  excess insurance  coverage,  and an aggregate stop loss protection of
$1,300,000.  CAR Insurance  reinsures AIG's coverage subject to a per loss limit
of $100,000 per person and $300,000 per accident.

     The Company is required to maintain a letter of credit in  connection  with
its insurance operations. On March 31, 2000, the Company replaced its letters of
credit with The Chase Manhattan Bank and Bank of Butterfield  with a new standby
letter of credit from Bank of America for  $1,000,000.  This letter of credit is
secured by a certificate of deposit held by Bank of America  ($600,000) plus 50%
of the Company's eligible accounts receivable.

                                       31
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


3. DIRECT FINANCING LEASES

     The components of the Company's net investment in direct  financing  leases
as of March 31, 2000 are as follows:

Total Minimum Lease Payments to be Received...........................   $30,525
  Less Amounts Representing Administration Costs Included in
   Total Minimum Lease Payments.......................................       696
                                                                         -------

Minimum Lease Payment Receivable......................................    29,829

  Less Allowance for Uncollectibles...................................    13,715
                                                                         -------

Net Minimum Lease Payments Receivable.................................    16,114

  Less Unearned Income................................................     3,386
                                                                         -------

Net Investment in Direct Financing Leases.............................   $12,728
                                                                         =======

  Current Portion ....................................................   $ 5,406
  Non-Current Portion.................................................     7,322
                                                                         -------

Net Investment in Direct Financing Leases.............................   $12,728
                                                                         =======

     The total minimum lease payments  receivable in succeeding fiscal years are
as follows:

  2001................................................................   $22,916
  2002................................................................     7,609
                                                                         -------
           Total......................................................   $30,525
                                                                         =======

                                       32
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following at March 31,
2000:

Accounts Payable ..................................................   $   98,315
National Advertising Fund .........................................      145,514
Option Repurchase Obligation ......................................      625,000
Payroll ...........................................................       28,845
Commissions and Royalties .........................................      171,688
Professional Fees .................................................       84,872
Other .............................................................      204,981
                                                                      ----------

                                                                      $1,359,215
                                                                      ==========

                                       33
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


5. EARNINGS PER SHARE

     A reconciliation of the numerators and denominators used in the computation
of basic and diluted  earnings  per share for the years ended March 31, 1999 and
2000 is as follows:

                                                          1999           2000
                                                       ----------     ----------
BASIC EPS COMPUTATION

Numerator:
  Net income applicable to common shares .........     $  753,233     $  731,129

Denominator:
  Weighted average common shares .................      4,085,860      3,808,147
                                                       ----------     ----------

Basic EPS ........................................     $      .18     $      .19
                                                       ==========     ==========

DILUTED EPS COMPUTATION

Numerator:
  Net income applicable to common shares .........     $  753,233     $  731,129

  Dividends on convertible preferred stock .......        104,742         89,500
                                                       ----------     ----------
                                                          857,975        820,629
                                                       ----------     ----------
Denominator
 Weighted average common shares ..................      4,085,860      3,808,147
 Weighted average convertible preferred stock ....      1,346,731      1,122,993
 Weighted average options and warrants ...........        178,832        970,477
                                                       ----------     ----------
                                                        5,611,423      5,901,617
                                                       ----------     ----------

Diluted EPS ......................................     $      .15     $      .14
                                                       ==========     ==========

                                       34
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


6. INCOME TAXES

     The  provision for income taxes for the years ended March 31, 1999 and 2000
consists of the following:

                                                       1999         2000
                                                     ---------    ---------
     Currently payable
       State income taxes ........................   $  52,461    $  79,659
       Federal income taxes ......................     332,866      570,350
                                                     ---------    ---------
           Total currently payable ...............     385,327      650,009

     Deferred ....................................    (130,520)    (369,832)
                                                     ---------    ---------

           Total .................................   $ 254,807    $ 280,177
                                                     =========    =========

     The  Company's  provision  for income taxes  differs  from the  anticipated
United States federal statutory rate. Differences between the statutory rate and
the Company's provision are as follows:

                                                       1999         2000
                                                     ---------    ---------
     Federal taxes at statutory rate .............        34.0%        34.0%

     Reduction in valuation allowance ............       (15.8)        (9.2)

     State taxes, net ............................         4.7          4.8

     Other .......................................          --         (4.1)
                                                     ---------    ---------

           Total .................................        22.9%        25.5%
                                                     =========    =========

                                       35
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


6. INCOME TAXES-CONTINUED

     The   significant   components  of  the  deferred   income  tax  asset  and
(liability), stated by source of the difference between financial accounting and
tax basis as of March 31, 2000, are as follows:

     Deferred tax assets:
       Reserve for doubtful accounts...........................   $ 333,785
       Accrued expenses........................................     271,581
       Other ..................................................       9,175
                                                                  ---------
                                                                    614,541
     Deferred tax liabilities:
       Fixed assets............................................     (45,681)
                                                                  ---------
     Net deferred tax asset before
       valuation allowance.....................................     568,860

     Valuation allowance.......................................          --
                                                                  ---------

     Net deferred tax asset....................................   $ 568,860
                                                                  =========

     The net change in the valuation allowance for the year ended March 31, 2000
was a decrease of $100,730. The valuation allowance has been eliminated in light
of favorable earnings and expected future earnings.

                                       36
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


7. COMMITMENTS AND CONTINGENCIES

     LEASE COMMITMENTS

     The Company's  corporate offices were occupied under the terms of operating
leases from both related and non-related  parties,  the longest of which expired
in November 1999. On November 19, 1999, the Company moved its corporate  offices
to a new location,  which is owned by KA Real Estate  Associates,  LLC, ("KA") a
related party. The operating  lease,  which expires on October 31, 2006, has the
following minimum annual lease payments:

     March 31,
     2001.....................   $ 112,868
     2002.....................     116,254
     2003.....................     119,742
     2004.....................     123,335
     2005.....................     127,034
     Thereafter...............      75,384
                                 ---------
       Total..................   $ 674,617
                                 =========

     Total rent  expense for the years ended March 31, 1999 and 2000 was $71,510
and $85,824, of which $8,044 and $45,670,  respectively,  was to a related party
(see Note 8).

     LITIGATION

     The  Company  is party  to  routine  legal  proceedings  incidental  to its
business from time to time.  Certain claims,  suits and complaints  arise in the
ordinary course of business and may be filed against the Company. Based on facts
now known to the Company,  management  believes all such matters are  adequately
provided  for,  covered by insurance  or, if not so covered or provided for, are
without  merit,  or involve  such amounts  that would not  materially  adversely
affect the  consolidated  results of  operations  or  financial  position of the
Company.

                                       37
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


8. RELATED PARTY TRANSACTIONS

     The Company entered into a Management  Agreement with K.A.B., Inc. ("KAB"),
a management consulting group controlled by and affiliated with Kenneth L. Blum,
Sr.,  Chairman  of the Board of  Directors  and Chief  Executive  Officer of the
Company. As a part of this agreement,  KAB provides direct overall management of
the  Company's  operations.  Total annual fees paid to KAB under the  management
agreement for the years ended March 31, 1999 and 2000 were $262,500 and $300,000
respectively.  On January 19, 2000, the Company's Board of Directors  reached an
agreement  with KAB to  extend  the term of its  Management  Agreement  with the
Company for five  additional  years through June 30, 2008 on its present  terms.
The Board also  authorized the  repurchase  of, and the Company  entered into an
agreement  to  repurchase,  500,000  options,  originally  issued  to  KAB,  for
$625,000.

     Through  November 19, 1999,  the Company  leased a portion of its corporate
offices  under the  terms of a  month-to-month  operating  lease  with  American
Business Information  Systems,  Inc. (ABIS), a related party of KAB. The Company
paid   $8,044  and  $4,951  for  the  years  ended  March  31,  1999  and  2000,
respectively,  to ABIS under this  agreement.  On November 1, 1999,  the Company
entered  into a lease  agreement  with KA,  a  related  party  of KAB,  to lease
approximately  9,100 square feet of executive  office  space,  which  expires on
October 31, 2006. The Company paid KA $40,719 for the year ended March 31, 2000.

     On  January  19,  2000,  the  Board of  Directors  authorized  expenditures
totaling  $250,000  for  the  development  by  ABIS  of a  centralized  software
reporting  package to be used by the  Company's  franchisees.  The Company  paid
$4,940 for the year ended March 31, 2000 to ABIS under this arrangement.

     The Company has retained Richter Investment Corp. ("Richter"), an affiliate
of William  L.  Richter  (a  director  of the  Company),  to serve as  exclusive
financial advisor for the Company. For its role of financial advisor,  Richter's
fees will be based upon transactions completed, as defined in the agreement. For
the years  ended  March 31,  1999 and 2000,  there  were no fees paid to Richter
pursuant to this agreement.

                                       38
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


8. RELATED PARTY TRANSACTIONS-CONTINUED

     Through  March 31, 1999,  Richter  provided  ongoing  financial  management
services to the Company at no charge.  Effective April 1, 1999, Richter receives
an annual consulting fee of $30,000. In the opinion of management,  the terms of
the  Company's  agreements  with  Richter,  KAB and ABIS taken as a whole are at
least as favorable to the Company as could be obtained from third parties.

9. COMMON STOCK, STOCK OPTION PLANS AND COMMON STOCK WARRANTS

     In November 1999, the Company repurchased and retired 400,000 shares of its
common stock at a cost of $790,000.

     Options and warrants to acquire  shares of the  Company's  common stock are
granted at a value not less than 100% of the fair market value of the underlying
stock on the date of issuance.

     The Company has issued  stock  options to acquire  2,250,000  shares of its
common stock to KAB in  conjunction  with its management  agreement.  During the
year ended March 31, 1996,  KAB  transferred  (a)483,333  and 604,167 vested and
unvested  options,  respectively,  to each of Kenneth L. Blum Jr., the Company's
president,  and Mr. Blum's sister,  Robin Cohn; (b) 20,000 and 25,000 vested and
unvested options, respectively, to Richter, and (c) 13,333 and 16,667 vested and
unvested  options,  respectively,  to William L.  Richter.  In April  1996,  the
Company  approved the extension of the term of the KAB Management  Agreement for
five years  expiring  June 30, 2003,  the  extension  of the options  originally
granted to KAB by five years (with a  corresponding  delay in the fixed  vesting
date until July 1, 2002), and the addition of a cashless exercise  feature.  The
unvested  options  were  subject  to  an  acceleration  of  exercisability  upon
achievement  of certain  financial  stock  targets.  Such targets were  achieved
during the year ended March 31, 1999,  and at March 31,  1999,  all options were
fully vested. On January 19, 2000, the Board of Directors approved the extension
of the  term  of the KAB  Management  Agreement  for an  additional  five  years
expiring June 30, 2008.  The Board also  authorized  the  repurchase of, and the
Company  entered  into  an  agreement  to  repurchase,  500,000  options  for an
aggregate   price  of  $625,000.   The  repurchase  has  been  included  in  the
consolidated statement of earnings for the year ended March 31, 2000.

     The fair  value of each  option  grant is  estimated  on the date of grant,
using the  Black-Scholes  options-pricing  model.  There  were no stock  options
granted during fiscal years 1999 and 2000.

                                       39
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


9. COMMON STOCK, STOCK OPTION PLANS AND COMMON STOCK WARRANTS - CONTINUED

         The following table summarizes option activity:

<TABLE>
<CAPTION>
                                                                              1999        2000
                                                                             Weighted    Weighted
                                                                             Average     Average
                                                 1999            2000        Exercise    Exercise
                                                Shares          Shares        Price       Price
                                                ------          ------        -----       -----
<S>                                            <C>             <C>            <C>         <C>
Options outstanding at beginning of year       2,250,000       2,250,000      $1.08       $1.08
Options exercised                                     --              --         --          --
Options granted                                       --              --         --          --
Options repurchased                                   --        (500,000)        --        1.15
Options expired                                       --              --         --          --
                                              ----------      ----------
Options outstanding at end of year             2,250,000       1,750,000      $1.08       $1.06
Option price range at end of year             $  1.00 to      $  1.00 to
                                              $  1.15         $  1.15
Option price range for exercised shares               --              --

Weighted-average fair value of options,
 granted during the year                      $       --      $       --
</TABLE>

At March 31, 1999 and 2000, 2,250,000 and 1,750,000 options were exercisable.

     The following table summarizes options outstanding at March 31, 2000:

                                                        Weighted Average
       Number        Exercise      Weighted Average        Remaining
     Outstanding      Price         Exercise Price      Contractual Life
     -----------    ---------       --------------      ----------------
      1,750,000     $ 1.00 to           $ 1.06             3.25 years
                    $ 1.15

                                       40
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


9. COMMON STOCK, STOCK OPTION PLANS AND COMMON STOCK WARRANTS - CONTINUED

     The  following  table  presents  the pro forma net income and  earnings per
share that would have been recorded had compensation  cost been recognized based
on the fair value at the grant date on a  straight-line  basis over the  vesting
period of the grant for the fiscal 1997 awards.

                                                     1999           2000
                                                   --------       --------
     Net income applicable to common
       and common equivalent shares
         As reported                               $753,233       $731,129
         Pro forma                                 $668,270       $646,166

     Earnings per share

       Basic:
         As reported                               $    .18       $    .19
         Pro forma                                 $    .16       $    .17


       Diluted:
         As reported                               $    .15       $    .14
         Pro forma                                 $    .12       $    .13


     In consideration of investment banking services rendered in connection with
the  negotiation  of the  management  agreement  with KAB,  the Company  granted
Richter  five-year  warrants,  originally  expiring  June 30, 1998,  to purchase
155,000  shares of the Company's  common stock.  The exercise price of 20,000 of
such warrants was $.80.  Those were exercised on June 25, 1998, and the exercise
price of the  remaining  135,000  warrants is tied to the  exercise  and vesting
provisions  of the  options  issued  to KAB in  connection  with the  management
agreement. Richter assigned 62,000 of these warrants to William L. Richter.

     In April 1996,  the Company  extended  135,000 of the  warrants  originally
issued to Richter  for an  additional  five years in  consideration  of services
rendered in connection with the  renegotiation  of the KAB Management  Agreement
and related services.

     Warrants for 30,000 shares of the  Company's  common stock  exercisable  at
$.80 per share were  issued to  Richter  in  connection  with  previous  private
placement transactions for which Richter acted as agent. Richter assigned 12,000
of these warrants to William L. Richter and 4,000 warrants to Richter employees.
On February 11, 1999,  Richter exercised 14,000 of these warrants and William L.
Richter exercised 12,000 of these warrants. On March 1, 1999, the Company bought
back a total of  2,500 of these  warrants  from  Richter  employees  at $.50 per
warrant, and the remaining 1,500 of these warrants expired.

                                       41
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


9. COMMON STOCK, STOCK OPTION PLANS AND COMMON STOCK WARRANTS - CONTINUED

     A summary of changes in  outstanding  warrants for the year ended March 31,
2000 is as follows:

                                                Number of    Exercise Price
                                                 Warrants      per Warrant
                                                 --------      -----------
     Outstanding, beginning of year...........   135,000      $1.00 - $1.15
     Issued...................................        --      $  --
     Exercised................................        --      $  --
     Bought Back..............................        --      $  --
     Canceled.................................        --      $  --
                                                 -------
     Outstanding, end of year.................   135,000      $1.00 - $1.15
                                                 =======

10. PREFERRED STOCK

     The terms of the  outstanding  preferred stock provide that the Company may
not  declare or pay  dividends,  whether in cash or in  property,  on the common
stock unless all dividends on the preferred stock for all past dividend  periods
and the current  dividend  period shall have been paid or declared and a sum set
aside for payment thereof.  Holders of preferred  stock,  voting as a class, are
entitled  to elect up to four  members of the  Company's  seven-member  Board of
Directors  and  are  also  entitled  to vote as a  class  on  other  significant
corporate  actions.  Pursuant to the terms of a voting  trust,  Richter  holds a
proxy to vote  approximately  95% of the preferred stock,  and, by virtue of his
control over  Richter,  William L. Richter can be deemed to have voting  control
over such  shares.  The  holders  of the  Series A  Preferred  are  entitled  to
cumulative  dividends  at an annual rate of eight cents per share.  The Series A
Preferred is convertible, at the option of the holder, into common shares on the
basis of one share of common  for each share of Series A  Preferred.  During the
year ended March 31, 2000,  34,125 shares of preferred  stock were  converted to
common  stock  reducing  the  outstanding  preferred  shares from  1,139,125  to
1,105,000.  During the year ended March 31, 2000, the Company declared preferred
dividends totaling $89,500, plus $146,915 (100%) of dividend arrearages,  and at
March 31, 2000, unpaid declared preferred dividends totaled $22,100.

                                       42
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


11. OTHER REVENUES

     Components  of other  revenues  for the years ended March 31, 1999 and 2000
were as follows:

                                                       1999          2000
                                                     --------      --------
     Promotional materials .......................   $135,278      $128,141
     Litigation settlement .......................         --        49,750
     Other .......................................     24,368        18,553
                                                     --------      --------

                                                     $159,646      $196,444
                                                     ========      ========

12. CONCENTRATIONS OF CREDIT RISK - CASH

     The Company  maintains its cash balances in financial  institutions,  which
balances  at times may exceed  federally  insured  limits.  The  Company has not
experienced any losses in such accounts,  and management believes the Company is
not exposed to significant credit risk.

                                       43
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


13. GEOGRAPHIC AND INDUSTRY SEGMENTS

     The Company currently  operates in two principal  segments:  Vehicle Rental
Franchise Programs and Insurance Coverage. Corporate costs are allocated to each
segment's operations and are included in the measure of each segment's profit or
loss. The  geographic  data include  revenues based upon customer  locations and
assets based on physical locations.

     The Company's foreign  operations are presently  conducted by CAR Insurance
in Bermuda (see note 2).

     Information by geographic area and industry segment is as follows:

                                                        1999           2000
                                                     -----------    -----------
Net revenues from external customers
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $ 4,540,953    $ 4,879,638
  Vehicle Rental Franchises-Priceless-(U.S.)             302,950        495,214
  Corporate-(U.S.)                                        18,879         21,202
  Insurance-(U.S.)                                       738,533        885,840
  Insurance-(Bermuda)                                         --             --
                                                     -----------    -----------
                                                     $ 5,601,315    $ 6,281,894
                                                     ===========    ===========
Segment operating income
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $ 1,120,554    $ 1,586,007
  Vehicle Rental Franchises-Priceless-(U.S.)              41,434         25,534
  Corporate-(U.S.)                                      (136,961)      (709,957)
  Insurance-(U.S.)                                        12,620        100,803
  Insurance-(Bermuda)                                         --             --
                                                     -----------    -----------
                                                     $ 1,037,647    $ 1,002,387
                                                     ===========    ===========
Segment assets
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $ 1,377,394    $ 2,264,794
  Vehicle Rental Franchises-Priceless-(U.S.)             185,982        388,517
  Corporate-(U.S.)                                       935,381        256,127
  Insurance-(U.S.)                                       742,156      1,062,789
  Insurance-(Bermuda)                                    645,033          7,898
                                                     -----------    -----------
                                                     $ 3,885,946    $ 3,980,125
                                                     ===========    ===========
Expenditures for segment assets
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $       355    $        --
  Vehicle Rental Franchises-Priceless-(U.S.)                  --        187,605
  Corporate-(U.S.)                                       207,853         64,466
  Insurance-(U.S.)                                            --             --
  Insurance-(Bermuda)                                         --             --
                                                     -----------    -----------
                                                     $   208,208    $   252,071
                                                     ===========    ===========

                                       44
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                 MARCH 31, 2000


13. GEOGRAPHIC AND INDUSTRY SEGMENTS-CONTINUED

                                                        1999           2000
                                                     -----------    -----------
Depreciation and amortization
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $    65,166    $    17,701
  Vehicle Rental Franchise-Priceless-(U.S.)                5,076         51,480
  Corporate-(U.S.)                                       108,193        102,159
  Insurance-(U.S.)                                            --             --
  Insurance-(Bermuda)                                         --             --
                                                     -----------    -----------
                                                     $   178,435    $   171,340
                                                     ===========    ===========
Interest income
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $    39,301    $    52,057
  Vehicle Rental Franchises-Priceless-(U.S.)               1,176          6,132
  Corporate-(U.S.)                                        24,395         20,732
  Insurance-(U.S.)                                            --             --
  Insurance-(Bermuda)                                     32,043         43,998
                                                     -----------    -----------
                                                     $    96,915    $   122,919
                                                     ===========    ===========
Interest expense
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $       163    $       396
  Vehicle rental Franchise-Priceless-(U.S.)                   --             17
  Corporate-(U.S.)                                            19              1
  Insurance-(U.S.)                                        21,598         24,086
  Insurance- (Bermuda)                                        --             --
                                                     -----------    -----------
                                                     $    21,780    $    24,500
                                                     ===========    ===========
Income taxes
  Vehicle Rental Franchises-Rent A Wreck-(U.S.)      $   254,807    $   280,177
  Vehicle rental Franchises-Priceless-(U.S.)                  --             --
  Corporate-(U.S.)                                            --             --
  Insurance-(U.S.)                                            --             --
  Insurance-(Bermuda)                                         --             --
                                                     -----------    -----------
                                                     $   254,807    $   280,177
                                                     ===========    ===========

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Not Applicable.

                                       45
<PAGE>
                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Under the securities  laws of the United States,  the Company's  directors,
its executive  officers,  and any persons holding more than 10% of the Company's
common  stock are required to report their  initial  ownership of the  Company's
common stock and any subsequent  changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established,
and the Company is required to disclose any failure to file by these dates.  The
Company believes that all of these filing requirements were satisfied during the
fiscal  year  ended  March 31,  2000,  except  for a late  filing of a Form 4 by
Kenneth  L.  Blum,   Jr.  and  Robin  Cohn  in  connection   with  January  2000
transactions.  In making  these  disclosures,  the Company has relied  solely on
representations  of its  directors  and  executive  officers  and  copies of the
reports that they have filed with the Commission.

CLASS I DIRECTORS:

     Kenneth L. Blum, Sr., 73. Kenneth L. Blum, Sr. has served as Chairman and a
Director of the Company since June 1993, has been the Company's  Chief Executive
Officer since  December  1993,  and was its President  from June 1993 to October
1994.  Since 1990,  Mr. Blum has been a  management  consultant  to a variety of
companies,  including American Business Information Systems, Inc., a high-volume
laser printing  company.  Mr. Blum is a director of Avesis  Incorporated,  which
markets and administers discount benefit programs. Mr. Blum is the father of the
Company's  President,  Kenneth L. Blum,  Jr. Mr. Blum controls  K.A.B.,  Inc., a
Florida corporation ("KAB"),  which has a Management Agreement with the Company.
See "Certain Transactions."

     Kenneth L. Blum,  Jr.,  36, has served as  Secretary  of the Company  since
March 1994, as Vice President from May 1994 to October 1994, as President  since
October 1994,  and as director since October 1998. Mr. Blum is also President of
American  Business  Information  Systems,  Inc., a  high-volume  laser  printing
company  and  computer  service  bureau.  Mr.  Blum is the son of the  Company's
Chairman and Chief Executive Officer.

                                       46
<PAGE>
CLASS II DIRECTORS:

     William L. Richter,  57, has been a director of the Company since  November
1989 and served  previously  as a director  from 1983 to 1985.  Mr.  Richter was
Co-Chairman  of the Company  from  November  1989 to June 1993 and has been Vice
Chairman  since June 1993.  For the past  eleven  years,  Mr.  Richter  has been
President of Richter and its wholly  owned  subsidiary,  Richter & Co.,  Inc., a
registered broker-dealer until November 1999, and merchant banking firm. Richter
& Co.,  Inc. was merged into its parent on December 31,  1999.  Mr.  Richter has
been a Senior Managing  Director of Cerberus  Capital  Management,  L.P. (or its
predecessor  organization)  since its  founding in late 1992.  Mr.  Richter is a
Director and Co-Chairman of Avesis  Incorporated,  which markets and administers
discount benefit programs.

     Alan L. Aufzien, 70, has served as a Director of the Company since November
1989. Mr. Aufzien has also been a partner in the Norall Organization,  a private
investment company, since 1987. Since 1983, he has also been the president and a
director of New York Harbour Associates,  Inc. (a real estate development firm).
From 1986 to 1996,  Mr.  Aufzien  was the  Chairman  of  Meadowlands  Basketball
Association  (New  Jersey  Nets)  and  currently  serves as a  director  of that
organization.  Mr.  Aufzien is also a director of First Real Estate Trust of New
Jersey.

     All directors hold office for one-year  terms,  until their  successors are
duly elected at the next annual meeting and qualified.

                                       47
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE

     The following table and related notes set forth  information  regarding the
compensation  awarded to,  earned by or paid to the  Company's  Chief  Executive
Officer for services rendered to the Company during the fiscal years ended March
31,  1998,  1999 and 2000.  No other  executive  officer  who was  serving as an
executive  officer during fiscal 2000 received salary and bonus which aggregated
at least  $100,000 for services  rendered to the Company  during the fiscal year
ended March 31, 2000.

                                        Annual            Long-term Compensation
                                     Compensation                Awards
                                   -------------------    ----------------------
                                                          Securities Underlying
Name and Principal Position        Year      Salary(1)       Options/SARS(#)
---------------------------        ----      ---------       ---------------
Kenneth L. Blum, Sr., CEO          2000      $300,000            -- (2)
                                   1999       262,500            -- (2)
                                   1998       250,000            -- (2)
----------
(1) Mr. Blum became Chief  Executive  Officer of the Company in connection  with
    the  Management  Agreement  between the Company and KAB,  effective June 30,
    1993. Mr. Blum does not receive cash compensation directly from the Company.
    KAB  receives  cash  compensation  pursuant to the  Management  Agreement of
    $300,000  per year  (250,000 per year prior to January 1, 1999) plus expense
    reimbursements  ($9,293  in the year  ended  March 31,  2000).  The  amounts
    indicated in the table  represent  compensation  received by KAB pursuant to
    the  Management  Agreement.  Mr. Blum is the sole  stockholder  of KAB.  See
    "Certain   Transactions   -  Management   Agreement  with  KAB  and  Related
    Transactions - Management Agreement."
(2) During the year ended March 31, 1994, KAB received  options for the purchase
    of 2,250,000  shares of the Company's  common stock in  connection  with the
    Management Agreement.  During the year ended March 31, 1996, KAB transferred
    the  options to certain  related  parties.  During the year ended  March 31,
    1995,  the Board of  Directors  approved  the vesting of  1,000,000 of these
    options at an exercise  price of $1.00 per share.  Effective  July 20, 1995,
    the  exercise  price of the  balance of the  options was set by the Board of
    Directors at $1.15 per share, with vesting, subject to continued employment,
    on July 1, 2002, or earlier subject to satisfaction of performance  targets.
    As a result of the Company's financial performance for the fiscal year ended
    March 31, 1999, the Company met the performance  targets, and the balance of
    the  options  became  fully  vested  as of  March  31,  1999.  See  "Certain
    Transactions  - Management  Agreement  with KAB and Related  Transactions  -
    Stock Option Grant."

                                       48
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR

     No stock options or SARs were granted to the executive officer named in the
Summary  Compensation  Table  during the last fiscal  year.  See Item 12 Certain
Relationships and Related Transactions,  under the caption "Certain Transactions
- Management Agreement with KAB and Related Transactions - Stock Option Grant."

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

     No  executive  officer  named in the  Summary  Compensation  Table  held or
exercised  options  at the end of the last  fiscal  year.  See  Item 12  Certain
Relationships and Related Transactions,  under the caption "Certain Transactions
- Management Agreement with KAB and Related Transactions - Stock Option Grant."

EMPLOYMENT/CHANGE OF CONTROL ARRANGEMENTS

     In the event of termination  of the  Management  Agreement with KAB without
cause,  all options granted to KAB in connection  with the Management  Agreement
remain  outstanding  for the  balance of their term  through  2003.  See Item 12
Certain  Relationships  and Related  Transactions,  under the  caption  "Certain
Relationships  and Related  Transactions  -- Management  Agreement  with KAB and
Related Transactions - Stock Option Grant."

COMPENSATION OF DIRECTORS

     Currently,  directors  of the  Company  who also serve as  officers  of the
Company and outside  directors  receive no cash  compensation in connection with
the services they render as directors.  (Officers, however, receive compensation
in their capacity as officers as described above).  Directors are reimbursed for
expenses incurred in connection with their board service.  On March 3, 1999, the
Company's  Board of Directors  approved  that the Company pay William L. Richter
consulting  fees of $30,000 per year beginning April 1, 1999. The fees have been
assigned to Richter.

                                       49
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of May 30, 2000,  the persons and entities  identified  in the following
table,  including  all  directors,  executive  officers and persons known to the
Company  to  own  more  than  5%  of  the  Company's  voting  securities,  owned
beneficially,  within the meaning of  Securities  and Exchange  Commission  Rule
13d-3,  the  shares  of  voting  securities  reflected  in such  table.  All the
outstanding  shares of Series A Preferred  are  immediately  convertible  at the
option of the holder into common stock, on a  share-for-share  basis.  Except as
otherwise  specified,  the named beneficial owner has sole investment and voting
power with respect to such shares.

<TABLE>
<CAPTION>
                                                                                          Total (1)
                                                                                    ---------------------
                                                                 Shares             Percent      Percent
Name and Address of Beneficial Owner      Title of Class    Beneficially Owned      of Class    of Common
------------------------------------      --------------    ------------------      --------    ---------
<S>                                       <C>               <C>                   <C>         <C>
David Schwartz                               Common              465,000              13.0         13.0
Bundy Rent-A-Wreck
12333 W. Pico Blvd.
Los Angeles, California 90064

William L. Richter                           Common              992,706(3)           26.3(3)      26.3
c/o Richter Investment Corp.               Preferred(3)        1,050,000(3)           95.0         38.1(4)
450 Park Avenue
New York, NY 100022

Alan L. Aufzien                              Common               32.500                **           **
P.O. Box 2369                              Preferred(4)           34,375               3.1          1.8
Secaucus, NJ 07094

Kenneth L. Blum, Sr.(5)                        --                     --                --           --
10324 S. Dolfield Road
Owings Mills, MD 21117

Kenneth L. Blum, Jr.(5)(6)                   Common              980,167              22.2         22.2
10324 S. Dolfield Road
Owings Mills, MD 21117

Robin Cohn (5)(6)                            Common              964,667              21.9         21.9
c/o Rent-A-Wreck of America, Inc.
10324 S. Dolfield Road
Owings Mills, MD  21117

Robert M. Temko                              Common              240,000               6.7          6.7
39 Hidden Valley Drive
Newark, Delaware 19711

All Directors and Executive Officers
 as a Group including the Directors          Common              2,005,373(3)(5)(6)    43.5         43.5(4)
 Named Above (4 persons)                     Preferred(2)(3)     1,050,000(3)(4)       95.0         51.5
</TABLE>
----------
*   Represents  percentage ownership of common stock based upon shares of Common
    Stock  owned or  deemed  owned due to  presently  exercisable  warrants  and
    options and after such person's  conversion  of Series A Preferred.  ** Less
    than 1%.

                                       50
<PAGE>
FOOTNOTES

(1) Based on 3,568,217  common  shares and 1,105,000  Series A Preferred  Shares
    outstanding on the date of this table, May 30, 2000.

(2) Holders of Series A Preferred,  voting as a class,  are entitled to elect up
    to four members of a seven member Board of Directors  and are also  entitled
    to vote as a class on other significant  corporate actions.  Pursuant to the
    terms of proxies granted to Richter,  95.0% of the Series A Preferred may be
    voted by Richter as of the date of this table.  The  proxies  are  effective
    until such time that less than 500,000  shares of Series A Preferred  remain
    outstanding. See note 4 below.

(3) Includes 84,000 shares of Common Stock issuable upon exercise of options and
    warrants,  178,750 shares of Series A Preferred,  and 1,200 shares of Common
    Stock  held by spouse  and  13,750  shares of Series A  Preferred  and 5,000
    shares of Common Stock held by a family member. Also includes 550,000 shares
    of Series A Preferred  and 321,600  shares of Common  Stock held by Richter,
    296,375  shares  of Common  Stock and  warrants  (currently  exercisable  or
    exercisable  within 60 days) held by Richter.  Also  includes an  additional
    307,500  shares of  Series A  Preferred  as to which  Richter  holds  voting
    authority  via  proxy  (see  note 2  above).  William  L.  Richter  holds  a
    controlling  interest in Richter.  William L.  Richter and Richter  have the
    same address.  Mr. Aufzien's 34,375 shares of Series A Preferred,  held by a
    partnership controlled by Mr. Aufzien, are subject to a voting proxy granted
    to Richter.

(4) Excludes  307,500  shares of Series A Preferred  as to which  Richter  holds
    voting  authority via proxy (see notes 3 and 4 above) because  Richter would
    not have voting or investment  control of the converted  Common Stock issued
    upon conversion of such shares of Series A Preferred.

(5) Mr. Blum, Sr. is the father of Kenneth L. Blum, Jr. and Robin Cohn; see note
    6 below. Mr. Blum disclaims beneficial ownership of shares held by Mr. Blum,
    Jr. and Ms. Cohn.

(6) Includes 837,500 shares issuable pursuant to currently  exercisable  options
    and, in the case of Ms.  Cohn,  includes  127,167  shares held  jointly with
    spouse.  See note 6 above.  Mr. Blum,  Jr. and Ms. Cohn disclaim  beneficial
    ownership of shares held by each other. For additional information regarding
    options held by Mr. Blum,  Jr. and Ms. Cohn, see footnote 9 of the Company's
    audited financial statements found in Item 7.

                                       51
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Reference  is  made  to  footnote  8 of  the  Company's  audited  financial
statements for the description of such information.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a) The following documents are filed as part of this report:

            1.  The   financial   statements,   notes   thereto  and  Report  of
                Independent   Public   Accountants   listed   in  the  Index  to
                Consolidated Financial Statements set forth in Item 7.

            2.  The  Exhibits   listed  in  the  Exhibit  Index   following  the
                Signatures page, is incorporated herein by this reference.

            3.  Financial  Statement Schedules for the years in the period ended
                March 31, 1999 and 2000, as applicable.

     (b) No reports on Form 8-K were filed during the last quarter of the period
         covered by this report.


                                       52
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                  SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
                       YEARS ENDED MARCH 31, 1999 AND 2000


<TABLE>
<CAPTION>
                                                           Additions
                                                   -------------------------
                                      Balance At   Charged to                                   Balance
                                      Beginning    Costs and     Charged to                      At End
Description                           of Period    Expenses    Other Accounts    Deductions    of Period
-----------                           ---------    --------    --------------    ----------    ---------
<S>                                   <C>          <C>            <C>            <C>            <C>
MARCH 31, 1999

Allowance for doubtful accounts       $682,631     $ 188,574      $     --       $215,787(1)    $655,418
                                      ========     =========      ========       ========       ========

Valuation allowance on net
 deferred tax assets                  $277,000     $      --      $     --       $176,270(2)    $100,730
                                      ========     =========      ========       ========       ========
MARCH 31, 2000

Allowance for doubtful accounts       $655,418     $ 245,114      $     --       $ 68,279(1)    $832,253
                                      ========     =========      ========       ========       ========

Valuation allowance on net
 deferred tax assets                  $100,730     $      --      $     --       $100,730(2)    $     --
                                      ========     =========      ========       ========       ========
</TABLE>
----------
(1)  Accounts written off

(2)  Reduction in the valuation  allowance based on evaluation of realization of
     net deferred tax assets.

                                       53
<PAGE>
                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  Rent-A-Wreck of America, Inc. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized:

Rent-A-Wreck of America, Inc.
        Registrant


By: /s/ Mitra Ghahramanlou                                   Date: June 26, 2000
    -----------------------------------
    Mitra Ghahramanlou
    Chief Accounting Officer

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

  Signature and Title                                                  Date
  -------------------                                                  ----

/s/ Kenneth L. Blum, Sr.                                           June 26, 2000
---------------------------------------
Kenneth L. Blum, Sr.
Chairman of the Board and Director
(Principal Executive Officer)


/s/ Mitra Ghahramanlou                                             June 26, 2000
---------------------------------------
Mitra Ghahramanlou
Chief Accounting Officer (Principal
Financial and Accounting Officer)


/s/ Kenneth L. Blum, Jr.                                           June 26, 2000
---------------------------------------
Kenneth L. Blum, Jr.
President and Director


/s/ William L. Richter                                             June 26, 2000
---------------------------------------
William L. Richter
Vice Chairman of the Board and Director


/s/ Alan Aufzien                                                   June 26, 2000
---------------------------------------
Alan Aufzien, Director

                                       54
<PAGE>
                          RENT-A-WRECK OF AMERICA, INC.
                                  EXHIBIT INDEX
                                   FORM 10-KSB
                                 FOR FISCAL YEAR
                              ENDED MARCH 31, 2000

<TABLE>
<CAPTION>

Exhibit No.          Exhibit                                 Incorporated by Reference from
-----------          -------                                 ------------------------------
<S>          <C>                                             <C>
  3.1         Certificate of Incorporation                    Form 10-K for the Fiscal  year
                                                              ended March 31, 1997.

  3.2         Bylaws, as amended                              Form 10-K for the fiscal  year
                                                              ended March 31, 1986, in which
                                                              the Bylaws,  are  incorporated
                                                              by reference and amendments to
                                                              Bylaws are filed therein.

  9           Voting Trust Agreement                          Form 10-K for the fiscal  year
                                                              ended   March   31,   1990  is
                                                              incorporated by reference

  10.1        Option Plan                                     Form 10-K for the fiscal  year
                                                              ended   March   31,   1993  is
                                                              incorporated by reference.

  10.2*       Management   Agreement  -  K.A.B.,  Inc.        Form 8-K, dated June 30, 1993
              related party dated June 30, 1993               and is incorporated by
                                                              reference.

  10.2.1*     Amendment to Management  Agreement  with        Form 10-K for the fiscal  year
              K.A.B.,  Inc., related party dated March        ended March 31, 1997.
              27, 1996

  10.3*       Stock Option Grant to K.A.B., Inc. dated        Form 8-K, dated June 30, 1993
              June 30, 1993                                   and is incorporated by
                                                              reference.  Amendment filed on
                                                              Form 10-K for the fiscal  year
                                                              ended March 31, 1997.

  10.3.1*     Amendment   to  Stock  Option  Grant  to        Form 10-K for the fiscal year
              K.A.B., Inc. dated July 20, 1995                ended March 31, 1997.


  10.4        Registration Rights Agreement dated June        Form 8-K,  dated June 30, 1993
              30, 1993, among K.A.B., Inc., Kenneth L.        and is incorporated by
              Blum, Jr., Alan S. Cohn and the Company         reference.

  10.5        Warrant Agreement - Richter & Co., Inc.         Form 8-K,  dated June 30, 1993
                                                              and   is    incorporated    by
                                                              reference.

  10.6        Software  Development and Computer Usage        Form  10-KSB  for  the  fiscal
              Agreement   effective  January  1,  1995        year ended March 31, 1995.
              between National Computer Services, Inc.
              and the Company.

  10.7        Financial Advisory Agreement between the        Form  10-KSB  for  the  fiscal
              Company  and Richter & Co.,  Inc.  dated        year ended March 31, 1995.
              March 20, 1995.
</TABLE>
                                       55
<PAGE>
<TABLE>
<CAPTION>
<S>          <C>                                             <C>
  10.9        Franchise  Agreement - standard  form as        Form  10-KSB  for  the  fiscal
              of August 3, 1995                               year ended March 31, 1996.

  10.10       Facultative  Reinsurance Agreement dated        Form  10-KSB  for  the  fiscal
              March 1,  1997  between  National  Union        year ended March 31, 1998.
              Fire Insurance Company of Pittsburg, PA.
              and    Consolidated    American   Rental
              Insurance Company, LTD.

  10.11       Standby or Performance  Letter of Credit        Form  10-KSB  for  the  fiscal
              Application  and Agreement dated June 3,        year ended March 31, 1998.
              1997  between  Rent-A-Wreck  Of America,
              Inc. and The Chase Manhattan Bank

  10.11.1     First  Amendment  dated  June 1, 1998 to        Form  10-KSB  for  the  fiscal
              the  Standby  or  Performance  Letter of        year ended March 31, 1998.
              Credit  Application  and Agreement dated
              June 3,  1997  between  Rent-A-Wreck  Of
              America,  Inc.  and The Chase  Manhattan
              Bank

  10.12       Borrowing  Base  Agreement,  dated March        Filed herewith.
              29,  2000,  between  Bank of America and
              Rent-A-Wreck    of    America,     Inc.,
              Rent-A-Wreck   One  Way,   Inc.,   Bundy
              American    Corporation,    Rent-A-Wreck
              Leasing,  Inc. and PRICELESS Rent-A-Car,
              Inc.

  10.13       Loan  Agreement,  dated March 29,  2000,        Filed herewith.
              between   Bank  of  America,   N.A.  and
              Rent-A-Wreck    of    America,     Inc.,
              Rent-A-Wreck   One  Way,   Inc.,   Bundy
              American    Corporation,    Rent-A-Wreck
              Leasing,   Inc.,  PRICELESS  Rent-A-Car,
              Inc. and  Consolidated  American  Rental
              Insurance Company

  10.14       Promissory  Note,  dated March 29, 2000,        Filed herewith.
              between   Bank  of  America,   N.A.  and
              Rent-A-Wreck    of    America,     Inc.,
              Rent-A-Wreck   One  Way,   Inc.,   Bundy
              American    Corporation,    Rent-A-Wreck
              Leasing,   Inc.,  PRICELESS  Rent-A-Car,
              Inc. and  Consolidated  American  Rental
              Insurance Company
</TABLE>
                                       56
<PAGE>
<TABLE>
<CAPTION>
<S>          <C>                                             <C>
  10.15       Security  Agreement,   dated  March  29,        Filed herewith.
              2000, between Bank of America,  N.A. and
              Bundy American Corporation

  10.16       Security  Agreement,   dated  March  29,        Filed herewith.
              2000,  between  Bank of America,  N.A. a
              and PRICELESS Rent-A-Car, Inc.

  10.17       Security  Agreement,   dated  March  29,        Filed herewith.
              2000, between Bank of America,  N.A. and
              Rent-A-Wreck One Way, Inc.

  10.18       Security  Agreement,   dated  March  29,        Filed herewith.
              2000,  between  Bank of America,  N.A. d
              and Rent-A-Wreck Leasing, Inc.

  10.19       Security  Agreement,   dated  March  29,        Filed herewith.
              2000, between Bank of America,  N.A. and
              Rent-A-Wreck of America, Inc.

  10.20       Application  and  Agreement  for Standby        Filed herewith.
              Letter  of Credit  between  Consolidated
              American Rental Insurance Company,  Ltd.
              and   National   Union  Fire   Insurance
              Company

  10.21       Financing   Statement  between  Bank  of        Filed herewith.
              America,   N.A.  and   Rent-A-Wreck   of
              America, Inc.

  10.22       Financing   Statement  between  Bank  of        Filed herewith.
              America,  N.A. and Rent-A-Wreck One Way,
              Inc.

  10.23       Financing   Statement  between  Bank  of        Filed herewith.
              America,   N.A.   and   Bundy   American
              Corporation

  10.24       Financing   Statement  between  Bank  of        Filed herewith.
              America,  N.A. and Rent-A-Wreck Leasing,
              Inc.

  10.25       Financing   Statement  between  Bank  of        Filed herewith.
              America,  N.A. and PRICELESS Rent-A-Car,
              Inc.

  10.26       Borrowing Base Certificate                      Filed herewith.
</TABLE>
                                       57
<PAGE>
<TABLE>
<CAPTION>
<S>          <C>                                             <C>
  10.27       Pledge  and   Assignment   of   Deposits        Filed herewith.
              between   Bank  of  America,   N.A.  and
              Consolidated  American Rental  Insurance
              Company, LTD

  10.28       Irrevocable    Line   of   Credit   from        Filed herewith.
              Consolidated  American Rental  Insurance
              Company, Ltd. to AIG Management, Inc.

  10.29       Bank    of    America    Statement    of        Filed herewith.
              Commissions,   Fees  and  Charges  dated
              03/30/00 to Consolidated American Rental
              Insurance Company, Ltd.

  10.30       Bank  of  America   Irrevocable  Standby        Filed herewith.
              Letter   of   Credit   to   Consolidated
              American Rental Insurance Company, Ltd.

  10.31       Certificate of Corporate  Resolutions of        Filed herewith.
              Rent-A-Wreck of America, Inc.

  10.32       Certificate of Corporate  Resolutions of        Filed herewith.
              Rent-Wreck Leasing, Inc.

  10.33       Certificate of Corporate  Resolutions of        Filed herewith.
              Bundy American Corporation, Inc.

  10.34       Certificate of Corporate  Resolutions of        Filed herewith.
              Rent-A-Wreck One Way, Inc.

  10.35       Certificate of Corporate  Resolutions of        Filed herewith.
              PRICELESS Rent-A-Car, Inc.

  10.36       Certificate of Corporate  Resolutions of        Filed herewith.
              Consolidated  American Rental  Insurance
              Company, LTD

  10.37       Lease  Agreement,  dated  June 3,  1999,        Filed herewith.
              between KA Real Estate  Associates,  LLC
              and Rent-A-Wreck, Inc. with Confirmatory
              Addendum to Lease,  dated  September 16,
              1999, between KA Real Estate Associates,
              LLC and Rent-A-Wreck of America, Inc.

  10.38       Financial  Advising   Agreement,   dated        Filed herewith.
              November   6,  1999,   between   Richter
              Investment  Corp.  and  Rent-A-Wreck  of
              America, Inc.

  21          List of Subsidiaries                            Filed herewith.

  27          Financial Data Schedule                         Filed herewith.
</TABLE>

----------
* Management contract or compensatory plan or arrangement.

                                       58