U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)
         [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ended September 30, 1997

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

         For the transition period from ____________ to ____________

                  Commission File Number 0-14819

                          RENT-A-WRECK OF AMERICA, INC.
      -----------------------------------------------------------------
      (Exact name of small business issuer as specified in its Charter)

      Delaware                                                   95-3926056
----------------------------                                --------------------
(State or other jurisdiction                                (I.R.S. Employer
 of incorporation or organization)                           Identification No.)

11460 Cronridge Drive, Suite 120, Owings Mills, MD    21117
--------------------------------------------------    -----
(Address of Principal Executive Offices)           (Zip Code)

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

-----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)

         Check whether the issuer (1) has 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 [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares  outstanding of each of the issuer's classes
of common equity,  as of the latest  practicable  date:  4,300,392  shares as of
October 15, 1997.

         Transitional Small Business Disclosure Format (Check One):
Yes [ ]   No [X]
<PAGE>
                  RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES

                       FORM 10-QSB - September 30, 1997


                                      INDEX



Part I.   Financial Information                          Page
-------------------------------                          ----

Item   1. Financial Statements

          Consolidated Balance Sheets as of
            March 31, 1997 and
            September 30, 1997 (Unaudited)                2-3

          Consolidated Statements of Earnings for
            the Three and Six Months ended
            September 30, 1996 and 1997 (Unaudited)         4

          Consolidated Statements of Cash Flows for
            the Six Months ended September 30, 1996
            and 1997 (Unaudited)                            5

          Notes to Consolidated Financial Statements
            (Unaudited)                                   6-7

Item   2. Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations                                    7-11

Part II.  Other Information
---------------------------



Item   1. Legal proceedings                                 12

Item   2. Changes in Securities and Use of Proceeds         12

Item   3. Defaults Upon Senior Securities                   13

Item   4. Submission of Matters to a Vote of Security
          Holders                                           13

Item   5. Other Information-Retirement of
          Stock Information                                 13

Item   6. Exhibits and Reports on Form 8-K                  14

          Signatures                                        15
<PAGE>
Part I - Financial Information

Item 1 - Financial Statements


                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                     ASSETS


                                                            March 31,    September 30,
                                                              1997           1997
                                                           -----------    -----------
                                                                          (Unaudited)
<S>                                                        <C>            <C>        
CURRENT ASSETS:
Cash and Cash Equivalents, including restricted cash ...   $ 1,077,578    $ 1,538,129
Accounts Receivable, net of allowance
  for doubtful accounts of $762,757 and $752,645 at
    March 31, 1997 and September 30, 1997, respectively:
    Continuing License Fees and
      Advertising Fees .................................       291,181        344,086
    Current Portion of Notes Receivable ................       415,072        375,253
    Current Portion of Direct Financing
      Leases ...........................................        47,228         42,224
    Insurance Premiums Receivable ......................        25,784         73,248
    Other ..............................................        25,136         11,282
Prepaid Expenses .......................................       117,566        224,524
                                                           -----------    -----------

    TOTAL CURRENT ASSETS ...............................     1,999,545      2,608,746
                                                           -----------    -----------


PROPERTY AND EQUIPMENT:
  Vehicles .............................................        53,025         31,340
  Furniture, Equipment and Leasehold
    Improvements .......................................       738,130        498,766
  Less:  Accumulated Depreciation and
         Amortization ..................................      (448,472)      (221,091)
                                                           -----------    -----------

NET PROPERTY AND EQUIPMENT .............................       342,683        309,015
                                                           -----------    -----------

OTHER ASSETS:
  Trademarks and other  Intangible  Assets,  net of
    accumulated  amortization of $88,729 and $96,006
    at March 31, 1997 and September 30, 1997,
    respectively .......................................       219,086        212,251
  Long-term Portion of Notes and Direct Financing Lease
    Receivables, net of allowance of $16,278 and $0
    at March 31, 1997 and September 30, 1997,
    respectively .......................................        32,629         22,146
                                                           -----------    -----------

                                                               251,715        234,397
                                                           -----------    -----------


    TOTAL ASSETS .......................................   $ 2,593,943    $ 3,152,158
                                                           ===========    ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
                                        2
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                      LIABILITIES AND SHAREHOLDERS' EQUITY


                                                           March 31,    September 30,
                                                             1997           1997
                                                          -----------    -----------
                                                                         (Unaudited)
<S>                                                       <C>            <C>        
CURRENT LIABILITIES:
  Accounts Payable and Accrued Expenses ...............   $   720,338    $   762,945
  Dividends Payable ...................................        28,782         27,733
  Insurance Premiums, Deposits, and Provision for
    Loss ..............................................        50,828        359,907
  Current Maturities of Capital Lease Obligations .....         8,578           --
                                                          -----------    -----------

    TOTAL CURRENT LIABILITIES .........................       808,526      1,150,585
                                                          -----------    -----------


CAPITAL LEASE OBLIGATIONS, Less Current Maturities ....        30,089           --
                                                          -----------    -----------

    TOTAL LIABILITIES .................................       838,615      1,150,585
                                                          -----------    -----------



COMMITMENTS AND CONTINGENCIES                                    --             --

SHAREHOLDERS' EQUITY:

  Convertible  Cumulative Series A Preferred Stock,
    $.01 par value; authorized 10,000,000 shares;
    issued and outstanding 1,439,125 shares at March
    31, 1997 and 1,386,625 shares at September 30, 1997
    (aggregate liquidation preference $1,151,300
    at March 31, 1997 and $1,109,300 at
    September 30, 1997) ...............................        14,391         13,866
  Common Stock, $.01 par value; authorized
    25,000,000 shares; issued and
    outstanding 4,234,767 shares at March 31, 1997 and
    4,300,392 shares at September 30, 1997 ............        42,347         43,004
  Additional Paid-In Capital ..........................     3,021,490      3,038,572
  Accumulated Deficit .................................    (1,322,900)    (1,093,869)
                                                          -----------    -----------

    TOTAL SHAREHOLDERS' EQUITY ........................     1,755,328      2,001,573
                                                          -----------    -----------

    TOTAL LIABILITIES AND SHAREHOLDERS'
      EQUITY ..........................................   $ 2,593,943    $ 3,152,158
                                                          ===========    ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
                                        3
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                              Three Months           Six Months
                                           Ended September 30,    Ended September 30,
                                             1996      1997         1996        1997
                                         ----------------------  ----------------------
<S>                                      <C>         <C>         <C>         <C>       
REVENUES:
  Initial License Fees...................$  234,500  $  125,750  $  462,500  $  396,250
  Advertising Fees.......................   185,649     214,914     356,367     391,759
  Continuing License Fees................   576,271     753,276   1,091,667   1,302,001
  Insurance premiums.....................    50,540     148,436      93,441     236,003
  Direct Financing Leases to Franchisees.     3,133       1,700       5,498       2,075
  Other..................................    29,091      38,382      50,626      81,701
                                         ----------- ----------  ----------- ----------
                                          1,079,184   1,282,458   2,060,099   2,409,789
                                         ----------  ----------  ----------- ----------
EXPENSES:
  Salaries, Consulting Fees and
    Employee Benefits....................   191,726     195,678     379,515     390,893
  Sales and Marketing Expenses...........   156,688      92,064     328,332     278,029
  Advertising and Promotion..............   264,255     314,813     491,134     571,223
  Underwriting Expenses..................     5,775     121,535      16,643     182,634
  General and Administrative Expenses....   196,836     256,004     389,095     487,059
  Depreciation & Amortization............    27,214      30,252      55,555      60,796
                                         ----------- ----------- ----------- ----------
                                            842,494   1,010,346   1,660,274   1,970,634
                                         ----------- ----------- ----------- ----------

      OPERATING INCOME...................   236,690     272,112     399,825     439,155

INTEREST INCOME, NET.....................    15,483      14,476      30,754      32,567
                                         ----------- ----------- ----------- ----------

      INCOME BEFORE INCOME TAX EXPENSE...   252,173     286,588     430,579     471,722
                                         ----------- ----------- ----------- ----------

INCOME TAX EXPENSE.......................    23,400      94,603      45,300     147,103
                                         ----------- ----------- ----------- ----------

      NET INCOME.........................$  228,773  $  191,985  $  385,279  $  324,619

DIVIDENDS ON CONVERTIBLE CUMULATIVE
  PREFERRED STOCK........................    29,975      27,733      60,890      56,378
                                         ----------- -----------  ---------- ----------

NET INCOME APPLICABLE TO COMMON
  AND COMMON EQUIVALENT SHARES...........$  198,798  $  164,252  $  324,389  $  268,241
                                         ----------- ----------- ----------- ----------

EARNINGS PER COMMON SHARE................$      .04  $      .04  $      .07  $      .06
                                         =========== =========== =========== ==========


WEIGHTED AVERAGE NUMBER OF COMMON AND
  COMMON EQUIVALENT SHARES OUTSTANDING... 4,441,142   4,525,918   4,441,142   4,525,918
                                         =========== =========== =========== ==========

</TABLE>
 The accompanying notes are an integral part of these Consolidated Statements.
                                        4
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                  Six Months Ended September 30,
                                                  ------------------------------
                                                        1996           1997
                                                     -----------    -----------
Increase (decrease) in cash and cash
equivalents

Cash flows from operating activities:
  Net income .....................................   $   385,279    $   324,619
  Adjustments to reconcile net income
    to net cash provided by operating activities:
      Depreciation and amortization ..............        55,555         60,796
      Gain on disposal of property and equipment .        (1,578)        (4,011)
      Provision for doubtful accounts ............       155,268        (23,390)
      Changes in assets and liabilities:
        Accounts and notes receivable ............      (292,784)        (7,820)
        Prepaid expenses .........................       (11,243)      (106,958)
        Accounts payable and accrued
          expenses ...............................        27,915         41,558
        Insurance premiums, deposits, and
          loss reserves ..........................        21,149        309,079
                                                     -----------    -----------

      Net cash provided by operating activities ..       339,561        593,873
                                                     -----------    -----------

Cash flows from investing activities:
  Proceeds from sale of property and equipment ...        28,250         29,160
  Acquisition of property and equipment ..........      (101,569)       (42,032)
  Additions to trademarks and other ..............       (15,958)          (442)
                                                     -----------    -----------

      Net cash used in investing activities ......       (89,277)       (13,314)
                                                     -----------    -----------

Cash flow from financing activities:
  Repayments of long-term debt ...................        (6,957)       (38,667)
  Issuance of common stock .......................          --           25,000
  Retirement of common stock .....................       (16,996)        (7,787)
  Retirement of preferred stock ..................       (85,300)          --
  Preferred dividends paid .......................       (95,101)       (98,554)
                                                     -----------    -----------

      Net cash used in financing activities ......      (204,354)      (120,008)
                                                     -----------    -----------

      Net increase in cash and cash
         equivalents .............................        45,930        460,551

Cash and cash equivalents at beginning of period .       579,871      1,077,578
                                                     -----------    -----------

Cash and cash equivalents at end of period .......   $   625,801    $ 1,538,129
                                                     ===========    ===========

Supplemental disclosure of cash flow information:
  Interest paid ..................................   $     3,317    $    11,262
  Taxes paid .....................................   $    44,729    $    70,991

 The accompanying notes are an integral part of these consolidated statements.
                                        5
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997




1.       CONSOLIDATED FINANCIAL STATEMENTS

                  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 Operations, Inc. ("RAW OPS"), 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"),  URM  Corporation
("URM") and Central Life and Casualty Company, Limited ("CLC").

         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   consolidated   balance  sheet  as  of  September  30,  1997,  the
consolidated  statements of earnings for the three and  six-month  periods ended
September  30, 1996 and 1997 and the  consolidated  statements of cash flows for
the six-month  periods  ended  September 30, 1996 and 1997 have been prepared by
the Company without audit. In the opinion of management,  all adjustments  which
are necessary to present a fair  statement of the results of operations  for the
interim  periods  have  been  made,  and all  such  adjustments  are of a normal
recurring nature. Certain information and footnote disclosures normally included
in  financial   statements   prepared  in  accordance  with  generally  accepted
accounting principles have been condensed or omitted. It is suggested that these
financial  statements be read in conjunction  with the financial  statements and
notes  thereto  included  in the  Company's  March 31,  1997  audited  financial
statements.   The  results  of  operations  for  the  interim  periods  are  not
necessarily indicative of the results for a full year.


2.       PREFERRED STOCK

         As of March 31, 1997, preferred dividend arrearages were $274,180.  The
Company paid $41,127 of these arrearages during the quarter ended June 30, 1997.
A quarterly  preferred  dividend of $28,645 was declared  for the first  quarter
ended June 30, 1997 and it was paid on August 11,  1997.  For the quarter  ended
September 30, 1997, the Company declared  preferred  dividends  totaling $27,733
which are expected to be paid during the third quarter of the  Company's  fiscal
year.
                                        6
<PAGE>
3.EARNINGS PER COMMON SHARE

         The  computation  of  earnings  per  common  share  for the  three  and
six-month periods ended September 30, 1996 and 1997, respectively,  is presented
on a fully diluted basis and is based upon the weighted average number of common
shares  outstanding for those periods.  Any dilutive effect of stock options and
warrants was  considered in  computation  of earnings per common  share.  In the
computation  for the three and  six-month  periods  ended  September  30,  1996,
cumulative  preferred  dividends  in the amounts of $29,975 and $60,890 for each
period were subtracted  from net income to arrive at the earnings  applicable to
common  shareholders.  For the three and six-month  periods ended  September 30,
1997,  cumulative  preferred dividends in the amounts of $27,733 and $56,348 for
each period were subtracted from net income to arrive at the earnings applicable
to common shareholders.


4.LITIGATION

         The Company is party to 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.

Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
          Condition and Results of Operations
          -----------------------------------


RESULTS OF  OPERATIONS-THREE  MONTHS ENDED  SEPTEMBER 30, 1997 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996

         Revenue from  franchising  operations,  which includes  initial license
fees,  continuing  license fees,  advertising  fees and direct  financing leases
increased by $96,087 (10%). This increase occurred  primarily due to an increase
in continuing license fees and advertising fees, partially offset by a reduction
in the initial  license fees.  Initial  license fees decreased by $108,750 (46%)
due to the sale of fewer 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 $177,005  (31%),  and  advertising  fees increased by
$29,265 (16%) due to the fleet growth at existing  franchises  and the Company's
dedication of more
                                        7
<PAGE>
resources to its  collection  efforts.  Revenues  from  insurance  premiums were
$148,436  due to the  new  reinsurance  program  that  started  in  March  1997,
partially  offset by a $30,617 (100%) reduction in the physical damage insurance
program  ("CLC") and by a $19,911  (100%)  reduction in the  national  insurance
program ("URM") due to their termination and replacement by CAR Insurance. Other
revenue increased by $9,291 (32%) due primarily to increased  internal marketing
activity.

         Total  operating  expenses  increased by $167,852  (20%) in this period
compared to the same  period in the prior  year.  Salary  expense  increased  by
$3,952 (2%) primarily as a result of additional  hires in response to the growth
of the Company.  General and administrative expenses increased by $59,168 (30%),
which resulted primarily from additional expenses such as management fees, audit
fees and  letter of credit  (LOC)fees  related to the new  reinsurance  company.
Sales and marketing  expenses decreased by $64,624 (41%). This decrease resulted
primarily  from a reduction in bad debt expense due to the Company's  collection
efforts as well as from lower  commission  expense due to lower franchise sales.
Underwriting  expenses increased by $115,760 (2,004%),  which resulted primarily
from  additional  expenses such as paid losses and loss reserves  related to the
new reinsurance company.

         Net interest income  decreased $1,007 (6%). This decrease was primarily
due to interest paid to AICCO on the funds which CAR Insurance  Company borrowed
from  AICCO  to meet the  capital  requirements  of the  Bermuda  Government  in
conjunction with the reinsurance program.

         Depreciation and amortization expense increased by $3,038 (11%) in this
period  compared  to the same  period  in the  prior  year.  This  increase  was
primarily due to additional investment to update computer software and hardware.

         The Company  realized  operating  income of $272,112,  before taxes and
interest,  for the  three-month  period  ended  September  30, 1997  compared to
operating  income of $236,690 for the same period in the prior year,  reflecting
an increase of $35,422 (15%). This increase resulted primarily from the increase
in continuing  license fees due to the fleet growth at existing  franchises  and
the Company's collection efforts.

         Income tax expense for the three-month  period ended September 30, 1997
increased by $71,203 (304%) compared to the  three-month  period ended September
30, 1996 due to higher  pre-tax  earnings  and the  depletion  of the  Company's
federal income tax net operating loss carryforward.

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

YEAR TO DATE RESULTS OF OPERATIONS COMPARED TO SAME PERIOD IN PRIOR YEAR

         Net revenues increased by $349,690 (17%) for the six-month period ended
September  30,  1997 as  compared  to the same  period in the prior  year.  This
increase occurred due to a $210,334 (19%) increase in continuing license
                                        8
<PAGE>
fees,  $35,392  (10%)increase in advertising fees and a $142,562 (153%) increase
in premiums in connection with the new reinsurance program.

         Total operating expenses increased by $310,360 (19%) in this period due
primarily to an increase in general and administrative expenses of $97,964 (25%)
and an increase in underwriting expenses of $165,991 (997%), partially offset by
a reduction in sales and marketing  expenses of $50,303 (15%).  These  increases
resulted primarily from the new reinsurance program.

         The Company  realized  operating  income of $439,155,  before taxes and
interest,  for the six months compared to operating income of $399,825 for 1996,
reflecting an increase of $39,330.  This increase  resulted  primarily  from the
increase in continuing license fees.


LIQUIDITY AND CAPITAL RESOURCES

         At September  30, 1997,  the Company had working  capital of $1,458,161
compared to  $1,191,019 at March 31, 1997.  This increase of $267,142  primarily
resulted from the net profit earned during the six-month  period ended September
30, 1997.

         In June 1997 the Company  finalized  an $800,000  letter of credit with
The Chase  Manhattan  Bank  ("Chase") in  connection  with the Company's new CAR
Insurance subsidiary. This letter of credit is part of the reinsurance agreement
with American  International  Group ("AIG") to secure  payment of claims.  Funds
drawn  against the letter of credit bear  interest at Chase's  prime  commercial
lending  rate plus 3% (which prime rate was 8.5% on October 20,  1997).  For the
quarter ended September 30, 1997, AIG has not drawn any funds from the letter of
credit. This letter of credit is secured by all of the Company's assets.

         The Company is committed  under  capital lease  agreements  for various
equipment,  and it rents its office  facilities  under the terms of an operating
lease.  The capital lease  obligations  were $38,667 and $0 at March 31,1997 and
September 30, 1997,  respectively.  The Company has utilized its working capital
to pay for these  obligations.  During the quarter ended September 30, 1997, the
Company fully paid its obligations under these capital leases.

         Furniture,  equipment and leasehold  improvements decreased by $239,364
(32%). This decrease occurred  primarily due to writing off the assets that were
not in use and were fully  depreciated.  Vehicles decreased by $21,685 (41%) due
to sale of a vehicle which was  partially  offset by the purchase of a truck for
the one way program.

         Cash provided by operations was $593,873, resulting from an increase in
net income, an increase in reinsurance premiums, deposits, and loss reserves and
an increase in accounts  payable and accrued  expenses  offset by an increase in
accounts  and notes  receivable  and an  increase in prepaid  expenses.  Prepaid
expenses  increased  primarily  due to expenses  related to the new  reinsurance
company such as LOC fees and legal and secretarial fees.
                                        9
<PAGE>
Insurance  premiums,  deposits,  and  loss  reserves  increased  due to the  new
insurance program.  Accounts and notes receivable  increased  primarily from the
addition of new  franchises  which financed a portion of their initial fees owed
to the  Company by notes  issued by the  Company.  Accounts  payable and accrued
expenses  increased  primarily  due to increased  collections  for the Company's
national  advertising funds which are to be used for the benefit of franchisees.
This  increase  resulted  from fleet growth at the existing  franchises  and the
Company's  collection  efforts.  Cash used in  investing  activities  of $13,314
related  primarily  to the  acquisition  of computer  software  and hardware and
maintaining  trademarks.  Cash used in financing activities was $120,008,  which
was applied to payments of  preferred  dividends  and  long-term  debt offset by
issuance of common stock in connection with the acquisition of assets.

         The Company  believes  cash  provided by  operations  and its letter of
credit will provide  sufficient  working  capital to support its  business  plan
through fiscal 1998.


IMPACT OF INFLATION

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


         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 in the
Company's new reinsurance program,  the effects of government  regulation of the
Company's  franchise and reinsurance  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 under the
caption, "Item 6 Management's Discussion and Analysis of Financial Condition and
Results of  Operations - Important  Factors" in the  Company's  Annual Report on
Form  10-KSB  for the fiscal  year ended  March 31,  1997.  All  forward-looking
statements should be considered in light of these risks and uncertainties.
                                       10
<PAGE>
         Selected Financial Data
         -----------------------

Set forth below are selected  financial  data with  respect to the  consolidated
statements  of earnings of the  Company and its  subsidiaries  for the three and
six-month  periods  ended  September  30, 1996 and 1997 and with  respect to the
balance  sheets  thereof  at  September  30 in each of those  years.  Except  as
otherwise  noted,  the  selected  financial  data  have  been  derived  from the
Company's  unaudited  consolidated  financial  statements  and should be read in
conjunction  with the financial  statements  and related notes thereto and other
financial information appearing elsewhere herein.

                                       Three Months        Six Months
                                       Ended September 30, Ended September 30,
                                       1996      1997      1996      1997
                                       -----------------------------------------
                                       (in thousands except per share and number
                                        of franchises)
                                                      (Unaudited)

Franchisees' Results (Unaudited)
--------------------------------

Franchisees' Revenue (1)               $ 9,605   $12,555   $18,194   $21,700
Number of Franchises                       461       469       461       469

Results of Operations
---------------------

Total Revenue                          $ 1,079   $ 1,282   $ 2,060   $ 2,410
Costs and expenses and Other               842     1,010     1,660     1,971
Income before income
taxes                                      252       287       431       472
Net income                                 229       192       385       325
Earnings per share (2)                 $   .04   $   .04   $   .07   $   .06
Weighted average number of
  shares outstanding                     4,441     4,526     4,441     4,526


                                                         Six Months
                                                         Ended September 30,
                                                         1996             1997
                                                         -----------------------
                                                               (Unaudited)
Balance Sheet Data
------------------

Working capital                                          $1,024           $1,458
Total assets                                             $2,394           $3,152
Long-term obligations                                    $   35           $ --
Shareholders' equity                                     $1,562           $2,002


(1) The  franchisees'  revenue  data have been derived  from  unaudited  reports
provided by franchisees  submitted when paying license fees and advertising fees
to the Company.

(2)  Earnings  per common share are after  deducting a provision  for  preferred
dividends  of $29,975 and $60,890,  for the three and  six-month  periods  ended
September  30, 1996.  For the three and six-month  periods  ended  September 30,
1997,  earnings per common share are after  deducting a provision  for preferred
dividends of $27,733 and $56,378.
                                       11
<PAGE>
Part II.  Other Information

ITEM 1.           LEGAL PROCEEDINGS
-------           -----------------

         Information is incorporated by reference from the Company's Report Form
10-KSB  for the year  ended  March  31,  1997  under the  caption  "Item 3 Legal
Proceedings".

         On June 2,  1997,  the  Circuit  Court of  Baltimore  County,  Maryland
dismissed  a lawsuit  by a former  employee  of Bundy who had  alleged  wrongful
discharge.  The  plaintiff's  motion for  reconsideration  of that dismissal was
denied on June 26, 1997.  The  plaintiff  appealed the dismissal to the Court of
Special Appeals on July 1, 1997. The lawsuit in the U.S.  District Court for the
District of Maryland by the same plaintiff based on the same  circumstances  was
withdrawn by the plaintiff on September 2, 1997.

         On October 1, 1997 suit was initiated in the District Court of Oklahoma
County,  State of Oklahoma against the Company and a Rent-A-Wreck  franchisee by
an automobile  dealer in  connection  with the  plaintiff's  sale of cars to the
franchisee  for which  plaintiff  has  allegedly  not yet been  paid.  Plaintiff
alleges that the Company fraudulently induced it to deal with the franchisee and
seeks $241,000 in damages plus interest.  The Company believes the claim against
it is without merit and intends to defend it vigorously.

         Regarding the lawsuit that was initiated in August 1994 by Mongo,  Inc.
and John and Roberta Batcher and ultimately dismissed in April 1997, the Company
is aware that Mongo,  Inc. and John Batcher have filed another summons on August
21, 1997 in the Supreme Court,  State of New York, County of Suffolk regarding a
lawsuit against the Company,  Bundy,  K.A.B.  Inc.,  officers of the Company and
other  defendants.  The  summons  mentions  relief  sought  of  $7,000,000  plus
interest.  The summons is not  accompanied  by a  complaint,  and the Company is
investigating  the basis for this summons  given that the  plaintiffs'  previous
claims against the Company were dismissed.


ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS
-------           -----------------------------------------

         The Company  issued  6,875  shares of its common  stock on June 4, 1997
pursuant to section  3(a)(9) of the  Securities  Act of 1933,  as  amended.  The
shares were issued to a holder of the Company's  preferred  shares who converted
his  preferred  shares into common shares on a  one-for-one  basis.  The Company
issued  31,875 and 13,750  shares of its common  stock on July 16, 1997 and July
25, 1997  respectively,  pursuant to section  3(a)(9) of the  Securities  Act of
1933, as amended.  The shares were issued to a holder of the Company's preferred
shares who converted  her  preferred  shares into common shares on a one-for-one
basis.
                                       12
<PAGE>
         On August 11, 1997 the Company issued 10,000 shares of its common stock
as part of a private  placement  transaction  pursuant  to  Section  4(2) of the
Securities  Act of 1933 as  amended.  These  shares  were  issued  to  Insurance
Rentals,  Inc. to satisfy the earn-out provision of the asset purchase agreement
as of December 3, 1996  between the  Company,  Baltimore  Car and Truck  Rental,
Inc., Insurance Rentals, Inc., and Mark Eisenberg. See "Part II - Item 2" of the
Company's Quarterly Report on Form 10QSB for the period ended December 31, 1996.


ITEM 3.           DEFAULTS UPON SENIOR SECURITIES
-------           -------------------------------

         The  information  disclosed in footnote 2 to the  financial  statements
provided in Part I Item 1 of this Report on Form 10-QSB is  incorporated  herein
by this reference.


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

         (a) The 1997 Annual Meeting of  Stockholders of the Company was held on
September 15, 1997.

         (b) The  following  persons were elected as directors of the Company at
the Annual Meeting for a one-year term:

                                                            Withheld   Broker
                                                    For     Authority  Non-Votes
Class I directors
(elected by holders
of common stock):        Kenneth L. Blum, Sr.    2,812,871    9,900       --
                         David Schwartz          2,813,871    8,900       --

Class II directors
(elected by holders
of preferred stock):     Alan L. Aufzien         1,311,000     --         --
                         William L. Richter      1,311,000     --         --


ITEM 5.           OTHER INFORMATION-RETIREMENT OF STOCK INFORMATION
-------           -------------------------------------------------

         During the quarter ended June 30, 1997, 6,875 shares of preferred stock
were converted to common shares,  reducing total  outstanding  preferred  shares
from  1,439,125  to  1,432,250.  The  Company  bought back and retired the 6,875
common shares on September 2, 1997. During the quarter ended September 30, 1997,
45,625 shares of preferred stock were converted to common shares, reducing total
outstanding preferred shares to 1,386,625.
                                       13
<PAGE>
ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K
-------           --------------------------------

                  (a) See Exhibit Index following the Signatures  page, which is
incorporated herein by reference.

                  (b) No reports on Form 8-K were filed  during the  quarter for
which this report is filed.
                                       14
<PAGE>
                                   Signatures

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

         Rent-A-Wreck of America, Inc.
         -----------------------------
         (Registrant)

By:                                       Date:



/s/Mitra Khosravi                            November 14, 1997
----------------------------              ---------------------------
Mitra Khosravi
Chief Accounting Officer









/s/Kenneth L. Blum, Sr.                      November 14, 1997
----------------------------              ---------------------------
Kenneth L. Blum, Sr.
CEO and Chairman of
the Board
                                       15
<PAGE>
                                  EXHIBIT INDEX
                                       TO
                          RENT-A-WRECK of AMERICA, INC.
              FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997




EXHIBIT NO.           DESCRIPTION
-----------           -----------


    27                Financial Data Schedule                    Filed herewith.
                                       16