================================================================================

                     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, 2001

[ ]  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 of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


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


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


     Check  whether  the issuer  (1) has filed all  reports  required  to be fby
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:4,310,496 shares as of November
7, 2001.

     Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]

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<PAGE>
                  RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES

                       FORM 10-QSB - SEPTEMBER 30, 2001

                                      INDEX

                                                                          Page
                                                                          ----
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

        Consolidated Balance Sheets as of March 31, 2001 and
          September 30, 2001 (Unaudited)                                   2-3

        Consolidated Statements of Earnings for the Three and
          Six Month periods ended September 30, 2000 and
          2001 (Unaudited)                                                  4

        Consolidated Statements of Cash Flows for the Six
         Months ended September 30, 2000 and 2001 (Unaudited)               5

        Notes to Consolidated Financial Statements (Unaudited)             6-9

Item 2. Management's Discussion and Analysis or Plan of Operation         10-14

PART II. OTHER INFORMATION

Selected Financial Data                                                     15

Item 5. Other Information                                                   16

Item 6. Exhibits and Reports on Form 8-K                                    16

        Signatures                                                          16
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                             March 31,        September 30,
                                                               2001               2001
                                                            -----------       ------------
                                                                              (Unaudited)
<S>                                                         <C>                <C>
CURRENT ASSETS:
 Cash and Cash Equivalents ...............................  $   554,181        $   683,995
 Restricted Cash .........................................      892,061            786,343
 Accounts Receivable, net of allowance for doubtful
  accounts of $854,423 and $940,803 at March 31, 2001
  and September 30, 2001, respectively:
   Continuing License Fees and Advertising Fees ..........      417,513            517,385
   Current Portion of Notes Receivable ...................      415,829            634,987
   Current Portion of Direct Financing Leases ............       15,321              5,049
   Insurance Premiums Receivable .........................        5,384             36,150
   Vehicle Rental Operation ..............................        1,971             43,964
   Other .................................................       81,359            212,574
 Prepaid Expenses and Other ..............................      165,811            182,040
 Prepaid Income Tax Expense ..............................      524,155             45,690
 Deferred Tax ............................................      341,983            359,314
                                                            -----------        -----------

     TOTAL CURRENT ASSETS ................................    3,415,568          3,507,491
                                                            -----------        -----------
PROPERTY AND EQUIPMENT:
 Furniture ...............................................       95,837             96,794
 Computer Hardware and Software ..........................      470,153            555,051
 Machinery and Equipment .................................       65,644             70,470
 Leasehold Improvements ..................................       23,767             23,767
 Vehicles ................................................      398,111          1,012,324
                                                            -----------        -----------
                                                              1,053,512          1,758,406
 Less: Accumulated Depreciation and Amortization .........     (363,075)          (456,290)
                                                            -----------        -----------

     NET PROPERTY AND EQUIPMENT ..........................      690,437          1,302,116
                                                            -----------        -----------
OTHER ASSETS:
 Intangible Assets, net of accumulated amortization of
  $152,770 and $164,185 at March 31, 2001 and
  September 30, 2001, respectively .......................      194,192            182,985
 Long-term Portion of Notes and Direct Financing Lease
  Receivables, net of allowance of $0 and $169,259 at
  March 31, 2001 and September 30, 2001, respectively ....       73,536             75,251
                                                            -----------        -----------

                                                                267,728            258,236
                                                            -----------        -----------

     TOTAL ASSETS ........................................  $ 4,373,733        $ 5,067,843
                                                            ===========        ===========
</TABLE>

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

                                        2
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                     March 31,      September 30,
                                                                       2001              2001
                                                                    ----------      ------------
                                                                                     (Unaudited)
<S>                                                                 <C>              <C>
CURRENT LIABILITIES:
  Accounts Payable and Accrued Expenses .........................   $  942,965       $  807,778
  Dividends Payable .............................................       22,100           22,100
  Insurance Financing Payable ...................................           --          273,855
  Insurance Loss Reserves .......................................      510,327          508,924
                                                                    ----------       ----------

    TOTAL CURRENT LIABILITIES ...................................    1,475,392        1,612,657
                                                                    ----------       ----------

LONG-TERM LIABILITIES:
  Deferred Tax Liability ........................................       35,514           35,514
                                                                    ----------       ----------

    TOTAL LONG-TERM LIABILITIES .................................       35,514           35,514
                                                                    ----------       ----------

    TOTAL LIABILITIES ...........................................    1,510,906        1,648,171
                                                                    ----------       ----------

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 at March 31, 2001 and at September 30, 2001
   (aggregate liquidation preference $884,000 at March 31, 2001
   and September 30, 2001) ......................................       11,050           11,050
  Common Stock, $.01 par value; authorized 25,000,000 shares;
   issued and outstanding 4,385,496 shares at March 31, 2001 and
   4,310,496 at September 30, 2001 ..............................       43,855           43,105
  Additional Paid-In Capital ....................................    2,267,709        2,118,461
  Retained Earnings .............................................      540,213        1,247,056
                                                                    ----------       ----------

    TOTAL SHAREHOLDERS' EQUITY ..................................    2,862,827        3,419,672
                                                                    ----------       ----------

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................   $4,373,733       $5,067,843
                                                                    ==========       ==========
</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,
                                                         --------------------------       --------------------------
                                                             2000           2001              2000           2001
                                                         -----------    -----------       -----------    -----------
<S>                                                      <C>            <C>               <C>            <C>
REVENUES:
  Initial License Fees                                   $   422,952    $   219,500       $   791,452    $   724,001
  Continuing License Fees                                  1,009,025      1,074,874         1,824,419      1,954,409
  Advertising Fees                                           304,645        340,332           546,123        576,031
  Insurance Premiums                                         322,880        320,633           580,249        670,725
  Vehicle Rental Operations                                    8,791         75,455            20,743        128,185
  Other                                                       36,697         49,008            71,681         74,336
                                                         -----------    -----------       -----------    -----------
                                                           2,104,990      2,079,802         3,834,667      4,127,687
                                                         -----------    -----------       -----------    -----------
EXPENSES:
  Salaries, Consulting Fees and Employee Benefits            221,928        301,875           485,643        573,229
  Advertising and Promotion                                  386,518        431,974           752,676        817,460
  Sales and Marketing Expenses                                91,999        202,271           179,607        352,629
  Direct Expenses-Rental Operations                            3,879         16,917             1,080         33,751
  General and Administrative Expenses                        306,999        335,189           567,301        654,017
  Repurchase of Options                                    1,234,560             --         1,234,560             --
  Underwriting Expenses                                      303,654        221,620           589,744        458,695
  Depreciation & Amortization                                 51,760         65,071            80,086        111,058
                                                         -----------    -----------       -----------    -----------
                                                           2,601,297      1,574,917         3,890,697      3,000,839
                                                         -----------    -----------       -----------    -----------

    OPERATING (LOSS) INCOME                                 (496,307)       504,885           (56,030)     1,126,848

OTHER INCOME (EXPENSE)
  Interest Income                                             39,305         74,195            81,937        108,190
  Interest Expense                                            (6,927)        (5,644)          (13,854)       (11,841)
                                                         -----------    -----------       -----------    -----------
                                                              32,378         68,551            68,083         96,349
                                                         -----------    -----------       -----------    -----------
    (LOSS) INCOME BEFORE INCOME TAX BENEFIT (EXPENSE)       (463,929)       573,436            12,053      1,223,197

INCOME TAX BENEFIT (EXPENSE)                                 328,427       (221,346)          145,177       (472,154)
                                                         -----------    -----------       -----------    -----------

    NET (LOSS) INCOME                                    $  (135,502)   $   352,090       $   157,230    $   751,043

DIVIDENDS ON CONVERTIBLE CUMULATIVE PREFERRED STOCK           22,100         22,100            44,200         44,200
                                                         -----------    -----------       -----------    -----------
NET (LOSS) INCOME APPLICABLE TO COMMON AND COMMON
 EQUIVALENT SHARES                                       $  (157,602)   $   329,990       $   113,030    $   706,843
                                                         -----------    -----------       -----------    -----------
(LOSS) EARNINGS PER COMMON SHARE
  Basic                                                  $      (.04)   $       .08       $       .03    $       .16
                                                         -----------    -----------       -----------    -----------
Weighted average common shares                             3,824,186      4,356,311         3,696,901      4,370,824
                                                         ===========    ===========       ===========    ===========
  Diluted                                                $      (.04)   $       .06       $       .03    $       .14
                                                         -----------    -----------       -----------    -----------
Weighted average common shares plus convertible
 preferred stock, options and warrants                     3,824,186      5,463,354         5,411,681      5,476,295
                                                         ===========    ===========       ===========    ===========
</TABLE>

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

                                       4
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               Six Months
                                                                           Ended September 30,
                                                                      ----------------------------
                                                                          2000             2001
                                                                      -----------      -----------
<S>                                                                   <C>              <C>
Increase (decrease) in cash and cash equivalents

Cash flows from operating activities:
  Net income ......................................................   $   157,230      $   751,043
  Adjustments to reconcile net income to net cash (used in)
   provided by operating activities:
    Depreciation and amortization .................................        80,086          111,058
    Deferred income taxes .........................................       241,000          (17,331)
    Gain on disposal of property and equipment ....................        (7,944)            (901)
    Provision for doubtful accounts ...............................        19,216          355,639
  Changes in assets and liabilities:
    Accounts and notes receivable .................................        19,164         (870,086)
    Prepaid expenses and other ....................................        (6,611)         (16,229)
    Prepaid income tax ............................................            --          478,465
    Income taxes recoverable ......................................      (683,097)              --
    Accounts payable and accrued expenses .........................      (377,505)        (135,187)
    Income taxes payable ..........................................      (338,550)              --
    Insurance loss reserves .......................................       129,070           (1,403)
                                                                      -----------      -----------
          Net cash (used in) provided by operating activities .....      (767,941)         655,068
                                                                      -----------      -----------
Cash flows from investing activities:
  Increase (decrease) in restricted cash ..........................      (192,659)         105,718
  Proceeds from sale of property and equipment ....................        32,575           11,400
  Acquisition of property and equipment and intangible assets .....      (276,494)        (722,027)
                                                                      -----------      -----------
          Net cash used in investing activities ...................      (436,578)        (604,909)
                                                                      -----------      -----------
Cash flow from financing activities:
  Increase in insurance financing payable .........................       297,226          273,855
  Net proceeds from exercise of stock options and warrants ........       896,866               --
  Retirement of common stock ......................................            --         (150,000)
  Preferred dividends paid ........................................       (44,200)         (44,200)
                                                                      -----------      -----------
          Net cash provided by financing activities ...............     1,149,892           79,655
                                                                      -----------      -----------

          Net increase in cash and cash equivalents ...............       (54,627)         129,814

Cash and cash equivalents at beginning of period ..................       701,808          554,181
                                                                      -----------      -----------
Cash and cash equivalents at end of period ........................   $   647,181      $   683,995
                                                                      -----------      -----------
Supplemental disclosure of cash flow information:
  Interest paid ...................................................   $    13,854      $    11,841
  Taxes paid ......................................................   $   634,629      $    11,020
</TABLE>

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

                                       5
<PAGE>
                 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001


1.   CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated financial statements presented herein include the accounts
of  Rent-A-Wreck  of  America,   Inc.  (the  "Company")  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  intercompany   accounts  and  transactions  have  been  eliminated  in
consolidation.   In  the  opinion  of  the  Company's  management,  the  interim
consolidated  financial  statements include all adjustments,  consisting of only
normal recurring  adjustments,  necessary for a fair presentation of the results
for the interim periods.  Certain information and footnote  disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles  in the United  States of America have been  condensed or
omitted.  The  interim  consolidated  financial  statements  should  be  read in
conjunction with the Company's March 31, 2001 audited financial statements filed
with  the  Securities  and  Exchange  Commission  on Form  10-KSB.  The  interim
operating  results are not necessarily  indicative of the operating  results for
the full fiscal year.

2.   RECENT ACCOUNTING PRONOUNCEMENTS

     On July 20, 2001, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No. 142 (SFAS  142),  "Goodwill  and Other
Intangible  Assets".  SFAS 142 is  effective  for fiscal years  beginning  after
December  15, 2001;  however,  certain  provisions  of this  Statement  apply to
goodwill  and other  intangible  assets  acquired  between  July 1, 2001 and the
effective  date of  SFAS  142.  This  Statement,  when  adopted,  requires  that
goodwill,  as well as intangible  assets with indefinite  lives,  acquired after
June 30, 2001,  will not be amortized.  Effective  April 1, 2002, all previously
recognized  goodwill and intangible  assets with indefinite lives will no longer
be subject to amortization.  Effective January 1, 2002,  goodwill and intangible
assets with indefinite lives will be tested for impairment annually and whenever
there is an  impairment  indicator.  All acquired  goodwill  must be assigned to
reporting  units for  purposes of  impairment  testing  and  segment  reporting.
Although  the  Company is still  reviewing  the  provisions  of this  Statement,
management's  preliminary  assessment  is that  this  Statement  will not have a
material impact on the Company's financial position or results of operations.

3.   STOCKHOLDERS EQUITY

     PREFERRED STOCK

     A  quarterly  preferred  dividend  of $22,100  was  declared  for the first
quarter ended June 30, 2001 and it was paid on August 13, 2001.  For the quarter
ended  September 30, 2001, the Company  declared  preferred  dividends  totaling
$22,100  which are expected to be paid during the third quarter of the Company's
2002 fiscal year.

     COMMON STOCK

     In August 2001,  the Company  repurchased  and retired 75,000 shares of its
common stock for a total purchase price of $150,000.

                                        6
<PAGE>
4.   EARNINGS PER SHARE

     A  reconciliation  of  the  numerators  and  denominators  utilized  in the
computation of basic and diluted  earnings per share for the three and six month
periods ended September 30, 2000 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                              Three Months                   Six Months
                                                          Ended September 30,            Ended September 30,
                                                      --------------------------     -------------------------
                                                          2000           2001            2000          2001
                                                      -----------    -----------     -----------   -----------
<S>                                                   <C>            <C>             <C>           <C>
BASIC EPS COMPUTATION
Net (loss) income applicable to common and common
 equivalent shares                                    $  (157,602)   $   329,990     $   113,030   $   706,843
Weighted average common shares - Basic                  3,824,186      4,356,311       3,696,901     4,370,824
                                                      -----------    -----------     -----------   -----------
Basic EPS                                             $      (.04)   $       .08     $       .03   $       .16
                                                      ===========    ===========     ===========   ===========
DILUTED EPS COMPUTATION
Net (loss) income applicable to common and common
 equivalent shares                                     $ (157,602)   $   329,990     $   113,030   $   706,843
Dividends on convertible preferred stock                   22,100         22,100          44,200        44,200
                                                      -----------    -----------     -----------   -----------
                                                         (135,502)       352,090         157,230       751,043
                                                      -----------    -----------     -----------   -----------

Weighted average common shares - Basic                  3,824,186      4,356,311       3,696,901     4,370,824
Weighted average convertible preferred stock                   --      1,105,000       1,105,000     1,105,000
Weighted average options and warrants                          --          2,043         609,780           471
Weighted average common shares - Diluted                3,824,186      5,463,354       5,411,681     5,476,295
                                                      -----------    -----------     -----------   -----------

Diluted EPS                                           $      (.04)           .06     $       .03           .14
                                                      ===========    ===========     ===========   ===========
</TABLE>

     The incremental  shares from assumed  conversions of preferred stock, which
amount to  1,105,000  for the three  months  ended  September  30,  2000 are not
included in  computing  the diluted per share  amounts  since  inclusion of such
shares would be anti-dilutive.

5.   GEOGRAPHIC AND INDUSTRY SEGMENTS

     The Company currently  operates in two principal  segments:  Vehicle Rental
Franchise Programs and Insurance  Coverage for its franchisees.  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 includes  revenues based upon
customer locations and assets based on physical locations.

     The Company's foreign  operations are presently  conducted by CAR Insurance
in Bermuda.

                                       7
<PAGE>
     Information by geographic area and industry segment is as follows:

                                                        Six Months Ended
                                                          September 30,
                                                   --------------------------
                                                       2000           2001
                                                   -----------    -----------
Net revenues from external customers
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)     $ 2,998,051    $ 2,917,661
 Vehicle Rental Franchises-Pricele$$-(U.S.)            237,915        410,816
 Vehicle Rental Operations-(U.S.)                       20,744        128,185
 Corporate-(U.S.)                                        1,550            300
 Insurance-(U.S.)                                      576,407        670,725
 Insurance-(Bermuda)                                        --             --
                                                   -----------    -----------
                                                   $ 3,834,667    $ 4,127,687
                                                   ===========    ===========
Segment operating income
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)     $   419,490    $ 1,122,572
 Vehicle Rental Franchises-Pricele$$-(U.S.)           (275,584)        (4,323)
 Vehicle Rental Operations-(U.S.)                     (100,512)      (138,765)
 Corporate-(U.S.)                                      (46,620)       (20,561)
 Insurance-(U.S.)                                      (52,804)       167,925
 Insurance-(Bermuda)                                        --             --
                                                   -----------    -----------
                                                   $   (56,030)   $ 1,126,848
                                                   ===========    ===========
Expenditures for segment assets
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)     $        --    $        --
 Vehicle Rental Franchises-Pricele$$-(U.S.)             10,107            208
 Vehicle Rental Operations-(U.S.)                       94,464        631,535
 Corporate-(U.S.)                                      171,923         90,284
 Insurance-(U.S.)                                           --             --
 Insurance-(Bermuda)                                        --             --
                                                   -----------    -----------
                                                   $   276,494    $   722,027
                                                   ===========    ===========
Depreciation and amortization
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)     $     8,944    $     9,056
 Vehicle Rental Franchises-Pricele$$-(U.S.)              1,177          2,358
 Vehicle Rental Operations-(U.S.)                       20,843         59,554
 Corporate-(U.S.)                                       49,122         40,090
 Insurance-(U.S.)                                           --             --
 Insurance-(Bermuda)                                        --             --
                                                   -----------    -----------
                                                   $    80,086    $   111,058
                                                   ===========    ===========
Interest income
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)       $   36,675    $   72,493
 Vehicle Rental Franchises-Pricele$$-(U.S.)               4,314        12,587
 Vehicle Rental Operations-(U.S.)                            --            --
 Corporate-(U.S.)                                         5,612         2,829
 Insurance-(U.S.)                                        35,336        20,199
 Insurance-(Bermuda)                                         --            82
                                                     ----------    ----------
                                                     $   81,937    $  108,190
                                                     ==========    ==========
Interest expense
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)       $       --    $       --
 Vehicle Rental Franchises-Pricele$$-(U.S.)                  12            --
 Vehicle Rental Operations-(U.S.)                            --            --
 Corporate-(U.S.)                                            --            --
 Insurance-(U.S.)                                        13,842        11,841
 Insurance- (Bermuda)                                        --            --
                                                     ----------    ----------
                                                     $   13,854    $   11,841
                                                     ==========    ==========

                                       8
<PAGE>

                                                         Six Months Ended
                                                           September 30,
                                                     ------------------------
                                                        2000          2001
                                                     ----------    ----------
Income tax benefit (expense)
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)       $  145,177    $ (433,677)
 Vehicle Rental Franchises-Pricele$$-(U.S.)                  --        (3,189)
 Vehicle Rental Operations-(U.S.)                            --            --
 Corporate-(U.S.)                                            --            --
 Insurance-(U.S.)                                            --       (35,288)
 Insurance-(Bermuda)                                         --            --
                                                     ----------    ----------
                                                     $  145,177    $ (472,154)
                                                     ==========    ==========

                                                       Year        Six Months
                                                       Ended         Ended
                                                      March 31,   September 30,
                                                        2001          2001
                                                     ----------   ------------
Segment assets
 Vehicle Rental Franchises-Rent-A-Wreck-(U.S.)       $2,351,100    $2,178,805
 Vehicle Rental Franchises-Pricele$$-(U.S.)             268,587       408,675
 Vehicle Rental Operations-(U.S.)                       305,786       941,943
 Corporate-(U.S.)                                       384,141       331,520
 Insurance-(U.S.)                                     1,055,877     1,198,575
 Insurance-(Bermuda)                                      8,242         8,325
                                                     ----------    ----------
                                                     $4,373,733    $5,067,843
                                                     ==========    ==========

6.   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 have a material  adverse  affect on the
consolidated results of operations or financial position of the Company.

     In December 2000, the Company and certain employees were named in a lawsuit
seeking declaratory and injunctive relief,  rescission,  and monetary damages in
the sum of $5 million. This lawsuit alleges similar claims to a lawsuit that was
previously  dismissed,  and the Company  believes the claims are without  merit.
They will be vigorously defended.

7.   SUBSEQUENT EVENTS

     In October 2001, the Company finalized a line of credit for $1,500,000 with
Merrill Lynch. The purpose of this line of credit is to provide additional funds
for purchasing vehicles in connection with the Company's Rental Operations,  and
to provide  security for the  reinsurance  arrangement  with AIG. This letter of
credit has replaced the letter of credit with Bank of America.

                                       9
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000

     The Company operates in three principal segments:  Vehicle Rental Franchise
Programs  (Franchising),  Insurance  Coverage  (Insurance)  and  Vehicle  Rental
Operations (Rental Operations).

     For the quarter ended September 30, 2001, initial license fees,  continuing
license fees and  advertising  fees decreased by $101,916 (6%).  Initial license
fees decreased by $203,452 (48%),  continuing  license fees increased by $65,849
(6%), and advertising  fees increased by $35,687 (12%).  The decrease in initial
license fees  resulted  primarily  from the timing of closings of new  franchise
sales,  each  of  which  is for a  relatively  large  amount  of  revenue  which
contributes to periodic  increases or decreases in reported  results  throughout
the year.  While there can be no assurances,  management  does not believe these
short-term  variations  are  indicative  of longer term trends.  The increase in
continuing  license fees and  advertising  fees  resulted  from  confessions  of
judgment from 11  franchisees  for past due fees which had not  previously  been
recorded as  revenues  since the  Company  did not  believe  collectability  was
probable at that time.  The Company has initiated  lawsuits to pursue claims for
past due fees from another 14 franchisees.

     Revenues from  insurance  premiums  decreased by $2,247 (1%) due to a lower
number of vehicles in the Company's CAR Insurance program.  This lower number is
a direct consequence of the Company's new underwriting  standards policy,  which
is designed to tighten the number of candidates who meet such suitable criteria.

     Revenues from vehicle rental operations  increased by $66,664 (758%) due to
more Company-owned cars being added to the Rental Operations fleet.

     On September 21, 2000, the Company  entered into an agreement to repurchase
957,721 options for $1,234,560.  These options were held by related parties.  If
the  repurchase  of options  had not  impacted  the  consolidated  statement  of
operations  for the three months ended  September 30, 2000,  operating  expenses
would have been $1,366,737 instead of $2,601,297.

     Excluding the  repurchase  of these options in the quarter ended  September
30, 2000, total operating  expenses for all segments increased by $208,180 (15%)
for the  three-month  period ended  September 30, 2001.  Salary  expense for all
segments  increased  by $79,947  (36%),  which  resulted  primarily  from hiring
additional  employees in the Company's  Rental  Operations  segment and hiring a
subrogation  expert in connection  with the Insurance  segment.  Advertising and
promotion  expenses increased by $45,456 (12%), which resulted primarily from an
increase in national  advertising  expense to promote the Company and its brand.
Sales and  marketing  expenses  increased  by $110,272  (120%),  which  resulted
primarily  from  an  increase  in  reserves  for  bad  debt  expense  due to the
confessions of judgment referred to above.  General and administrative  expenses
for all three segments  increased by $28,190 (9%), which resulted primarily from
an increase in professional fees.

                                       10
<PAGE>
     Insurance  underwriting  expenses  decreased  by  $82,034  (27%)  due  to a
decrease  in paid  losses  and loss  reserves  for  unsettled  claims due to the
Company's improved underwriting and subrogation efforts.

     Depreciation and amortization expense increased by $13,311 (26%), which was
primarily  due to  additional  depreciation  associated  with  the  purchase  of
vehicles  in the  Company's  Rental  Operations  and  additional  investment  in
computer software and hardware.

     If the repurchase of options had not impacted the consolidated statement of
operations for the three months ended  September 30, 2000 (in which case it also
would have  produced no partially  offsetting  reduction in income tax expense),
operating  income  would  have been  $738,253  instead of an  operating  loss of
$496,307, net income would have been $515,023 instead of a net loss of $135,502,
basic  earnings  per share would have been $.13  instead of ($.04),  and diluted
earnings per share would have been $.10 instead of ($.04).

     Excluding the  repurchase  of these options in the quarter ended  September
30, 2000, the Company realized  operating  income of $738,253,  before taxes and
interest,  for the  three-month  period ended  September  30, 2000,  compared to
$504,885 for the  three-month  period  ended  September  30, 2001,  reflecting a
decrease of $233,368 (32%),  which resulted primarily from a decrease in initial
license fees and an increase in Rental Operations expenses,  partially offset by
a decrease in underwriting expenses.

     Excluding the  repurchase  of these options in the quarter ended  September
30, 2000, net income was $515,023 for the three months ended  September 30, 2000
compared to net income of $352,090  for the three  months  ended  September  30,
2001, reflecting a decrease of $162,933 (32%).

     Net  interest  income  increased  by  $36,173  (112%).  This  increase  was
primarily  due  to  recording  some  interest  income  in  connection  with  the
confessions of judgment referred to above.

     For the quarter  ended  September  30, 2000,  the Company had an income tax
benefit of $328,427  primarily due to the income tax benefit associated with the
Company's repurchase of 957,721 options and the exercise of warrants and options
for 927,279  shares of common stock.  Excluding the repurchase of these options,
the income tax  expense  would have been  $255,607  for the three  months  ended
September  30, 2000  compared to $221,346 for the quarter  ended  September  30,
2001.

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

     The Company operates in three principal segments:  Vehicle Rental Franchise
Programs  (Franchising),  Insurance  Coverage  (Insurance)  and  Vehicle  Rental
Operations  (Rental  Operations).  For the six months ended  September 30, 2001,
franchising  operations comprised 81% of consolidated net revenues (84% in 2000)
and 99% of consolidated operating income (257% in 2000).

     Net revenues  increased  by $293,020  (8%) for the  six-month  period ended
September 30, 2001 compared to the same period in the prior year.  This increase
occurred due to a  $129,990(7%)  increase in continuing  license fees, a $29,908
(5%)increase  in  advertising  fees, a $90,476 (15%)  increase in premium income
associated with the Insurance segment,  and a $107,442 (518%) increase in Rental
Operations,  offset  by  a  $67,451  (8%)  decrease  in  initial  license  fees.
Generally,  these  increases and this decrease  occurred for the same reasons as
those for the three-month period stated above.

                                       11
<PAGE>
     If the repurchase of options had not impacted the consolidated statement of
operations for the six months ended September 30, 2000, operating expenses would
have been $2,656,137 instead of $3,890,697.

     Excluding  the  repurchase  of options in 2000,  total  operating  expenses
increased  by $344,702  (13%) in this period  compared to the same period in the
prior year. Salary expense increased by $87,586 (18%),  which resulted primarily
from  additional  hiring for the  Company's  Rental  Operations  and hiring of a
subrogation   expert  in  connection  with  the  Company's   Insurance  segment.
Advertising  and promotion  expenses  increased by $64,784 (9%),  which resulted
primarily  from an  increase  in  national  advertising  expenses to promote the
Company.  Sales and  marketing  expenses  increased  by  $173,022  (96%),  which
resulted  primarily from an increase in reserves for bad debt expense due to the
confessions  of judgment  referred to above.  Direct  expenses for the Company's
Rental  Operations  increased by $32,671  (302%),  due to addition of personnel,
vehicles  and  facilities.  General and  administrative  expenses  increased  by
$86,716 (15%),  which resulted  primarily from an increase in professional fees.
Underwriting  expenses  decreased  by  $131,049  (22%) in paid  losses  and loss
reserves for unsettled  claims due to the Company's  improved  underwriting  and
subrogation efforts.

     Depreciation and amortization  expense increased by $30,972 (39%) which was
primarily  due to  additional  depreciation  associated  with  the  purchase  of
vehicles for the  Company's  Rental  Operations  and  additional  investment  in
computer software and hardware.

     If the repurchase of options had not impacted the Consolidated Statement of
Earnings  for the six months  ended  September  30,  2000 (in which case it also
would have  produced no partially  offsetting  reduction in income tax expense),
operating income would have been $1,178,530 in 2000 instead of an operating loss
of $56,030.  Net income  would have been  $807,276  instead of  $157,230,  basic
earnings  per share would have been $.21 instead of $.03,  and diluted  earnings
per share would have been $.15 instead of $.03.

     Excluding the repurchase of options,  the Company realized operating income
of  $1,178,530,  before  taxes and  interest,  for the  six-month  period  ended
September  30, 2000 as compared to operating  income of  $1,126,848  for the six
month period ended  September  30, 2001,  reflecting a decrease of $51,682 (4%).
This decrease resulted  primarily from a decrease in initial license fees and an
increase in the Company's  Rental  Operations  expenses,  partially offset by an
increase in insurance premiums as well as a decrease in underwriting expenses.

     Net income  was  $751,043  for the six  months  ended  September  30,  2001
compared  to net  income of  $807,276  for the same  period  in the prior  year,
reflecting a decrease of $56,233 (7%).

                                       12
<PAGE>
     Income tax expense for the six-month period ended September 30, 2000 was an
income tax benefit of $145,177 due to the income tax benefit associated with the
Company's repurchase of 957,721 options and the exercise of warrants and options
for 927,279  shares of common stock.  Excluding the repurchase of these options,
the  income  tax  expense  would have been  $439,337  for the six  months  ended
September 30, 2000  compared to $472,154 for the six months ended  September 30,
2001.

LIQUIDITY AND CAPITAL RESOURCES

     At  September  30,  2001,  the Company had  working  capital of  $1,894,834
compared to  $1,940,176  at March 31, 2001.  This  decrease of $45,342  resulted
primarily from cash of $150,000 paid by the Company to buy back 75,000 shares of
its common stock, as well as the payment of preferred stock dividends, offset by
the net profit earned during the six-month period ended September 30, 2001.

     In March 2000, the Company obtained a $1,000,000 letter of credit from Bank
of America in  connection  with the  Company's  CAR  Insurance  subsidiary,  and
canceled  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 5% on November  7,  2001).  For the  quarter  ended
September  30,  2001,  AIG did not draw any funds from the letter of credit.  In
October 2001, the letter of credit from Bank of America was replaced by a letter
of credit from Merrill Lynch.

     Property and equipment  increased by $704,894  (67%) from March 31, 2001 to
September 30, 2001. This increase  occurred  primarily due to the purchase of 56
vehicles in  connection  with the Company's  Rental  Operations  and  additional
investment in computer software and hardware.

     Cash provided by operations was $655,068,  resulting from net income before
depreciation  plus the decrease in prepaid income tax expense,  partially offset
by the increase in accounts and notes  receivable  and prepaid  expenses and the
decrease in insurance  loss  reserves  and the decrease in accounts  payable and
accrued expenses. Prepaid income tax decreased due to the income tax expense for
the six months ended September 30, 2001. Accounts and notes receivable increased
primarily due to the timing differences  between funds paid to and received from
AIG in connection  with the  reinsurance  program.  Prepaid  expenses  increased
primarily due to the interest paid on insurance financing in connection with the
reinsurance  program  and  additional  promotional  materials.   Insurance  loss
reserves  decreased  primarily  due to a decrease in paid  losses and  unsettled
claims associated with the CAR Insurance  program.  Accounts payable and accrued
expenses decreased  primarily due to a decrease in accrued national  advertising
expenses.

                                       13
<PAGE>
     Cash used in  investing  activities  of $604,909  related  primarily to the
acquisition of vehicles, computer software and hardware, offset by a decrease in
restricted  cash due to additional  national  advertising  expenses and proceeds
from the sale of three vehicles.

     Cash provided by financing  activities  during the same period was $79,655,
resulting from an increase in insurance financing payable in connection with the
CAR insurance program,  offset by the buyback of common stock and the payment of
preferred dividends.

     The  Company  believes  it has  sufficient  working  capital to support its
business plan through fiscal 2002.

FORWARD LOOKING STATEMENTS

     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 rto 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 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, 2001.
All forward-looking  statements should be considered in light of these risks and
uncertainties.

                                       14
<PAGE>
                             SELECTED FINANCIAL DATA

     Set  forth  below  are  selected   financial   data  with  respect  to  the
consolidated  statements of operations of the Company and its  subsidiaries  for
the six month periods ended  September 30, 2000 and 2001 and with respect to the
balance sheets at September 30, 2000 and 2001.

     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,
                                     --------------------   -------------------
                                       2000        2001       2000       2001
                                     --------    --------   --------   --------
                                           (in thousands except per share
                                              and number of franchises)
                                                    (Unaudited)
FRANCHISEES' RESULTS (UNAUDITED)
Franchisees' Revenue (1)              $16,817    $17,915    $30,407    $32,573
Number of Franchised locations            669        688        669        688

COMPANY'S RESULTS OF OPERATIONS
Total Revenue                         $ 2,105    $ 2,079    $ 3,835    $ 4,128
Operating expenses                      2,601      1,575      3,891      3,001
(Loss) income before income taxes     $  (464)   $   573    $    12    $ 1,223
Net (loss) income                        (136)       352        157        751

(Loss) earnings per common share

Basic                                 $  (.04)   $   .08    $   .03    $   .16
Weighted average common shares          3,824      4,356      3,697      4,371

Diluted                               $  (.04)   $   .06    $   .03    $   .14
Weighted average common shares
 plus convertible preferred stock,
 options and warrants                   3,824      5,463      5,412      5,476

EBITDA (2)                                839        644      1,351      1,346

                                           September 30,
                                       -----------------
                                        2000       2001
                                       ------     ------
                                          (Unaudited)
BALANCE SHEET DATA
Working capital                        $2,092     $1,895
Total assets                           $4,700     $5,068
Shareholders' equity                   $2,845     $3,420

----------
(1)  The  franchisees'  revenue  data has been derived  from  unaudited  reports
     provided by franchisees in paying license fees.
(2)  "EBITDA" is earnings before interest expense,  depreciation,  amortization,
     taxes and  repurchase  of options.  EBITDA 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.

                                       15
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

     During the quarter ended September 30, 2001, the Company bought back 75,000
shares of its  common  stock  reducing  total  outstanding  common  shares  from
4,385,496 to 4,310,496.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     See exhibit index.

                                       16
<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)


Date: November 19, 2001             By: /s/ Mitra Ghahramanlou
                                        -------------------------------
                                        Mitra Ghahramanlou
                                        Chief Accounting Officer


Date: November 19, 2001             By: /s/ Kenneth L. Blum, Sr.
                                        -------------------------------
                                        Kenneth L. Blum, Sr.
                                        CEO and Chairman of the Board

                                       17
<PAGE>
                                  EXHIBIT INDEX
                                       TO
                          RENT-A-WRECK of AMERICA, INC.

              FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 2001


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

  10.1           Unconditional Guaranty                      Filed herewith

  10.2           Unconditional Guaranty                      Filed herewith

  10.3           Unconditional Guaranty                      Filed herewith

  10.4           Loan and Security Agreement                 Filed herewith

  10.5           Security Agreement                          Filed herewith

  10.6           Security Agreement                          Filed herewith

  10.7           Loan and Security Agreement                 Filed herewith

  10.8           Letter of Credit Amendment                  Filed herewith

  10.9           Irrevocable Letter of Credit                Filed herewith