<PAGE>   1

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

                                   -----------


                                    FORM 10-K

(MARK ONE)

  X     Annual Report Pursuant to Section 13 or 15(d) of the Securities
-----                        Exchange Act of 1934
                  For the fiscal year ended January 31, 2000

                                       OR

        Transition Report Pursuant to Section 13 or 15(d) of the Securities
-----                          Exchange Act of 1934
             For the Transition Period from __________ to __________


                         Commission file number 1-11601

                           NATIONAL AUTO CREDIT, INC.
             (Exact name of registrant as specified in its charter)


                Delaware                                 34-1816760
        (State of incorporation)            (I.R.S. Employer Identification No.)


  30000 Aurora Road, Solon, Ohio                            44139
(Address of principal executive offices)                  (Zip code)


       Registrant's telephone number, including area code: (440) 349-1000


           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

     Title of each class
     -------------------
     Common Stock, par value $.05 per share


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes No  X
                         ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy of this Form 10-K or any
amendment to this Form 10-K. ( )

As of May 1, 2000, 34,761,518 shares of Common Stock of National Auto Credit,
Inc. were outstanding.

Aggregate market value of the registrant's Common Stock held by nonaffiliates at
May 1, 2000, was approximately $7,456,675. (Based on the closing price of the
registrant's common stock on the OTC Bulletin Board on May 1, 2000).

                       DOCUMENTS INCORPORATED BY REFERENCE

None.
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                                TABLE OF CONTENTS

Part I                                                                     Page
------                                                                     ----

Item       1.   Business ...............................................     1
           2.   Properties .............................................    10
           3.   Legal Proceedings ......................................    10
           4.   Submission of Matters to a Vote of Security Holders ....    11


Part II
-------

Item       5.   Market for Registrant's Common Equity and Related
                  Stockholder Matters ..................................    12
           6.   Selected Financial Data ................................    13
           7.   Management's Discussion and Analysis of Financial
                  Condition And Results of Operations ..................    14
           7a.  Quantitative and Qualitative Disclosures About
                  Market Risk ..........................................    24
           8.   Financial Statements and Supplementary Data ............    25
           9.   Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure ..................    50


Part III
--------

Item      10.   Directors and Executive Officers of the Registrant .....    51
          11.   Executive Compensation .................................    55
          12.   Security Ownership of Certain Beneficial Owners and
                  Management ...........................................    59
          13.   Certain Relationships and Related Transactions .........    60


Part IV
-------

Item      14.   Exhibits, Financial Statement Schedules and Reports on
                  Form 8-K .............................................    60
<PAGE>   3

                                     PART I

Item 1. Business
----------------

OVERVIEW
--------

         On March 17, 2000, National Auto Credit, Inc. (the "Company"), acting
through its NAC, Inc. subsidiary ("NAC"), sold to Crescent Bank & Trust
substantially all of the automobile retail installment loans remaining in the
Company's active portfolio for $17.9 million. In prior transactions in March
2000, NAC sold to First Southwestern Financial Services, for $2.7 million,
certain automobile retail installment loans held in the Company's active
portfolio and to Ameristar Financial Servicing Company, L.L.C., for $2.2
million, certain automobile retail installment loans held in the Company's
portfolio of charged-off accounts (representing approximately one-third of the
charged-off portfolio). The transactions above resulted in an aggregate loss of
approximately $2.1 million, which the Company will report in the quarter ending
April 30, 2000. In each of the three transactions, the buyer was an independent
party that did not have a material relationship with the Company, any affiliate
of the Company, any director or officer of the Company or any associate of any
officer or director of the Company. In each case, the selling price was
determined based upon arm's length negotiations between the parties and was paid
in cash at closing.

         Following its disposition of these automobile installment loans, the
Company's assets consisted principally of money market funds, commercial paper,
government securities and other short-term, highly liquid investments.

         On April 5, 2000, the Company purchased a 50% membership interest in
Angelika Film Center, LLC ("AFC"). AFC is the owner and operator of the Angelika
Film Center, which is a multiplex cinema and cafe complex in the Soho District
of Manhattan in New York City (see "ANGELIKA FILM CENTER" below). The 50%
membership interest was purchased from Reading Entertainment, Inc. ("Reading")
for 8,999,900 shares of the Company's common stock and 100 shares of Series A
Preferred Stock (representing 100% of the Class of Series A Convertible
Preferred Stock outstanding). As a result of the transfer, AFC is now owned 50%
by the Company, 33.33% by Reading and 16.67% by Sutton Hill Associates. The
Angelika Film Center will continue to be managed by Sutton Hill Associates as a
part of its City Cinemas Chain. The articles and bylaws of AFC provide that for
all matters subject to a vote of the members, a majority is required, except
that in the event of a tie vote, the Chairman of Reading shall cast the deciding
vote.

         The Series A Convertible Preferred Stock is convertible into shares of
the Company's common stock on a one for one basis, subject to antidilution
adjustment; it votes share for share with the Common Stock as a single class,
provided that as a class the Series A Preferred must separately approve any
amendments to the Company's charter or bylaws; it has a liquidation value of
$1.50 per share; and is entitled to a dividend preference equal to any dividends
declared on the Company's common stock (determined on a per share basis).

         The Company also purchased from Reading two separate and independent
options to acquire additional cinema assets owned by Reading in the United
States. Under the first option, the Company has the right to acquire the
remaining 33.33% membership interest in AFC owned by Reading in exchange for the
issuance of an additional six million shares of the Company's common stock. To
the extent authorized but unissued shares of the Company's common stock are not
available for such purpose, the Company has the right to substitute cash for
such shares at the rate of $1.50 per share. The option can be exercised for a
period of 45 days, through and including May 20, 2000. The remaining 16.67%
interest would continue to be owned by Sutton Hill Associates, and the Angelika
Film Center would continue to be managed as a part of the City Cinemas Chain.

         Under the second option, which is independent of the first option, the
Company has the right to acquire the remainder of Reading's domestic cinema
exhibition assets for cash (including Reading's rights to acquire the City
Cinemas Chain of cinemas and related real estate in Manhattan), and, if the
Company has not previously exercised its option to acquire Reading's 33.33%
interest in AFC for stock, Reading's remaining interest in AFC. If the Company
exercises this right, it is required to give to Reading's affiliate, Citadel
Holding Corporation, a right to participate in such transaction on a 50/50 basis
with the Company. The option can be exercised for a period of 60 days, through
and including June 5, 2000. The Company paid to Reading $500,000 in
consideration of this option. The Company has the right to extend the option for
two 30-day periods by payment of an additional $100,000 for each such 30-day
extension period. The purchase price would be based

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on a value of $27,000,000 for AFC and the lower of the historical cost or fair
value for the remainder of Reading's assets. The decision whether or not to
proceed with the exercise of either or both of such options rests with the
Company and not with Reading.

         As discussed below, on April 13, 2000 Sam J. Frankino, the former
Chairman of the Company's Board of Directors and its largest stockholder,
commenced certain litigation in the Delaware Chancery Court to enforce his claim
that on April 7, 2000 he and other stockholders validly took certain actions by
consent. In the event Mr. Frankino is successful in that litigation, he may seek
to set aside the Company's purchase of the interest in AFC and the two options.
See Item 3 -- Legal Proceedings.

         During fiscal 2000 the Company reduced its staffing levels, from
approximately 250 employees at January 31, 1999 to approximately 100 employees
at January 31, 2000, and to approximately 50 at April 30, 2000. As the size of
its operations decrease, the Company will continue those staffing reductions to
eliminate the personnel no longer required as the result of the sale of
substantially all of the loan portfolio and the resulting cessation of loan
underwriting, processing and collection operations.

         The Company's Board of Directors is considering various additional
strategic business alternatives, including, but not limited to, the purchase of
one or more existing operating businesses or the entry into one or more
businesses. However, the Board presently may not consummate any such transaction
due to an Order Maintaining Status Quo entered in the Delaware Chancery Court in
connection with the litigation Mr. Frankino filed in April 2000. See Item 3 -
Legal Proceedings.

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

         The Company began operations in 1969 and was incorporated in Delaware
in 1971. The Company's name was changed to National Auto Credit, Inc., effective
August 15, 1994, and was formerly known as Agency Rent-A-Car, Inc. From October
1995 through March 2000, the Company's principal business activity was to invest
in sub-prime used automobile consumer loans, which take the form of installment
loans collateralized by the related vehicle. The Company, through NAC, a
wholly-owned subsidiary of the Company, purchased such loans, or interests in
pools of such loans (collectively "loan investments"), from used car dealerships
("member dealers") that participated in the Company's loan purchase program. The
Company performed the underwriting and collection functions for all loans it
purchased in whole, and also performed such functions where the member dealer
had sold to the Company, and retained for itself, interests in a pool of loans.
The Company's operations enabled member dealers to provide used car purchase
financing to customers who had limited access to more traditional consumer
credit sources and, as a result, might otherwise be unable to obtain financing.
As of January 31, 2000 the Company had a network of approximately 600 dealers
located throughout the United States.

         Prior to fiscal 1997 the Company also engaged in the automobile rental
business, including the subsequent sale of cars when retired from its rental
fleet. The automobile rental operations, conducted under the names Agency
Rent-A-Car, Altra Auto Rental and Automate Auto Rental, rented vehicles
principally on a short-term basis to the insurance replacement market. National
Motors was a company owned dealership that sold vehicles retired from the rental
fleet. The Company sold the automobile rental operations in fiscal 1996, and in
fiscal 1997 discontinued the operations of National Motors.

         The Company's principal executive offices are located at 30000 Aurora
Road, Solon, Ohio. Its telephone number is 440-349-1000.

         The Company uses a January 31 year-end for financial reporting
purposes, and references herein to a year or fiscal year as used here are to the
fiscal year ended on January 31 of that year. The term the "Company" as used
herein refers to National Auto Credit, Inc. together with its subsidiaries
unless the context otherwise requires.

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SIGNIFICANT DEVELOPMENTS
------------------------

         In addition to the sale of substantially all of the Company's loan
portfolio and its purchase of the interest in AFC described above, the following
additional significant developments took place during or subsequent to fiscal
2000:

a)       On June 7, 1999, Sam J. Frankino instituted two separate civil actions
         against the Company in the Delaware Court of Chancery. The first of
         these actions sought to compel the Company to hold an annual meeting of
         stockholders for the election of directors. The second of these actions
         sought to inspect the Company's stockholder list materials and other of
         its books and records in connection with such annual meeting.
         On June 21, 1999, the Company resolved both of these actions by
         stipulation, agreeing to hold an annual meeting of stockholders on
         September 15, 1999 and agreeing to make available to Mr. Frankino the
         stockholder list and other materials he had requested. On August 30,
         1999, Mr. Frankino instituted a civil action against the Company and
         its then current Board of Directors in the Delaware Court of Chancery,
         seeking a declaratory judgment confirming that the Company's existing
         bylaw not permitting stockholders to act by written consent was not
         valid and that he validly elected seven designees to the Company's
         Board of Directors. On September 17, 1999, the plaintiff moved for
         summary judgment regarding his claims for a declaration that he
         (i) validly amended the Company's bylaws to expand the number of
         directors from six to thirteen and (ii) duly elected seven of his
         nominees to fill these newly-created seats on the Board. On that date,
         the plaintiff also moved for a protective order regarding defendants'
         discovery requests and for an order striking the defendants'
         affirmative defenses. On September 28, 1999, the Company and the other
         defendants cross-moved for summary judgment and opposed all motions
         filed by the plaintiff. On November 5, 1999, the Court of Chancery
         granted plaintiff's motion for summary judgment and denied the cross
         motion for summary judgment filed by the Company and the other
         defendants. On November 12, 1999, the Court of Chancery denied the
         defendants' motion for a stay pending appeal. Plaintiff's nominees were
         seated as directors. Certain individual director defendants appealed
         the Court of Chancery's summary judgment rulings on an expedited basis.
         On December 3, 1999, the parties to the appeal agreed to the dismissal
         of the Company as a party-appellant. On December 6, 1999, Messrs. Cohen
         and Rice agreed to dismiss their participation in the appeal. On
         December 9, 1999, the Delaware Supreme Court affirmed the judgment of
         the Delaware Court of Chancery.

b)       On April 5, 2000, the Company's Board of Directors amended the
         Company's bylaws to establish procedures for actions by written consent
         without a meeting of stockholders. Generally, the amendment provides
         that a stockholder wishing to take action by written consent must
         request a record date, after which time the Board of Directors has five
         business days to set a record date, which may be no later than five
         business days after the Board acts. The amendment also requires that
         the request for a record date contain certain information about the
         proposed action by consent. If the Board does not set a record date,
         then the record date is the date upon which the consent is delivered to
         the Company, absent prior action of the Board as may be required by
         Delaware law. To be valid, a written consent action must be signed by
         holders of outstanding stock representing not less than the minimum
         number of votes necessary to take the corporate action at a meeting at
         which all shares are present and voted. The Board of Directors also
         adopted a bylaw requiring an affirmative vote of eighty percent (80%)
         of outstanding shares of each class of voting stock in order to alter,
         add, amend or repeal the Company's bylaws.

c)       On April 6, 2000, the Company filed a complaint in the Delaware Court
         of Chancery captioned National Auto Credit, Inc. v. Sam J. Frankino,
         Civil Action No. 17973-NC. The complaint, as amended on May 3, 2000,
         seeks injunctive and monetary relief against defendant Frankino for
         alleged breaches of fiduciary duty in his capacity as a director of the
         Company. On May 8, 2000, Mr. Frankino filed a motion to extend the time
         in which Mr. Frankino may respond to the Company's complaint from May
         18, 2000 to June 9, 2000. See Item 3 - Legal Proceedings.

d)       On April 7, 2000, Sam J. Frankino delivered to the Company a written
         consent purportedly representing the holders of a majority of the
         outstanding shares of the Company's common stock. The consent action
         purports to (a) rescind any and all amendments to the Company's bylaws
         made on or after March 1, 2000 (including those made on April 5, 2000
         and described above); (b) declassify the Board of Directors of the
         Company; and (c) remove the following directors from the Board: John
         Gleason, David Huber, Donald Jasensky, William Marshall, James
         McNamara, Philip Sauder, Henry Toh, and Peter Zackaroff. Messrs. Huber,
         Jasensky, Sauder



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<PAGE>   6

         and Zackaroff were previously elected to serve on the Board of
         Directors by Mr. Frankino. The Company has taken the position that the
         consent is invalid, because, among other things (i) the consent does
         not appear to represent the holders of a majority of the Company's
         outstanding stock, (ii) the consent was not preceded by a request for a
         record date as required by the Company's bylaws, and (iii) the consent
         does not purport to represent an action by the holders of eighty
         percent (80%) of each class of the Company's outstanding voting stock,
         as required for an amendment to the Company's bylaws. Following the
         Company's determination that the consent delivered by Mr. Frankino was
         invalid, on April 13, 2000, Mr. Frankino filed a complaint in the
         Delaware Court of Chancery captioned Sam J. Frankino v. David L. Huber,
         Donald Jasensky, James J. McNamara, Philip A. Sauder, Henry Y.L. Toh,
         Peter T. Zackaroff, John A. Gleason, William S. Marshall, and National
         Auto Credit, Inc., Civil Action No. 17984- NC, along with a motion to
         expedite. The complaint, as amended on April 19, 2000, seeks an order
         of declaratory judgment confirming that the individual defendants were
         validly removed from the Company's Board of Directors by way of Mr.
         Frankino's April 7, 2000 written consent. On April 17, 2000, the
         Company and the individual defendants filed a motion to dismiss the
         complaint and to stay discovery. In response to the Company's April 17
         motion, Mr. Frankino filed an amended complaint on April 19. On April
         24, 2000, the Company and the individual defendants responded with a
         motion to dismiss Mr. Frankino's amended complaint and to stay
         discovery. On May 3, 2000, the Company filed its answer and affirmative
         defenses to the amended complaint. Pending entry of the Court's final
         judgment in this action, an Order Maintaining Status Quo provides that
         (i) the Board of Directors shall take no actions which are outside the
         routine day-to-day operations of the Company in the ordinary course of
         business, (ii) Mr. Frankino is required to give the Company five days
         notice prior to acquiring, directly or indirectly, any additional stock
         of the Company, soliciting proxies or written consents from
         stockholders of the Company, or attempting to take action by consent
         without a meeting of stockholders, and (iii) Ms. Dodero and Messrs.
         Dodero, Frankino, Huber, Jasensky, Maund, McNamara, Sauder, Toh, Upton
         and Zackaroff shall constitute the Board of Directors of the Company.

         On April 12, 2000, Sam J. Frankino filed a complaint in the Delaware
         Court of Chancery captioned Sam J. Frankino v. National Auto Credit,
         Inc., Civil Action No. 17985-NC. The complaint seeks an order directing
         the Company to permit the inspection and copying of certain of its
         books and records. The Company has made the books and records
         available.

         See Item 3 - Legal Proceedings.

e)       On April 12, 2000, the Company announced that it had reached an
         agreement in principle to settle the class action securities litigation
         filed against it and certain of its current and former officers and
         directors in the United States District Court for the Northern District
         of Ohio. Under the terms agreed upon, the Company will pay to the
         plaintiffs' class $6.5 million in consideration for, among other
         things, the release of all defendants from liability. The settlement is
         not an admission of liability by any party. The settlement is subject
         to preparation and execution of final documentation and court approval.
         See Item 3 - Legal Proceedings.


FINANCIAL SERVICES
------------------

GENERAL

         The Company began financing operations in October 1992, to capitalize
on management's knowledge of the used car market, accumulated over 25 years of
operating a rental car business. Historically, the Company invested in sub-prime
used automobile consumer loans, which take the form of installment loans
collateralized by the related vehicle, by purchasing such loans, or interests in
pools of such loans, from member dealers. The Company performed the underwriting
and collection functions for all loans it purchased in whole, and also performed
such functions where the member dealers sold to the Company, and retained for
itself, interests in a pool of loans. The Company's operations enabled member
dealers to provide used car purchase financing to customers who had limited
access to more traditional consumer credit sources. As of January 31, 2000, the
Company had a network of approximately 600 dealers located throughout the United
States. Unless otherwise specifically stated, all descriptions of the Company's
Financial Services business relate to such business as it existed during fiscal
2000.

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         The loans in which the Company invests are high risk, in that the
borrowers are individuals with below average credit quality, and the collateral
is subject to loss, damage, significant declines in value and difficulties of
repossession. Accordingly, each individual loan has a significant risk of not
performing in accordance with its contractual terms. The business in which the
Company participates relies on mitigating this risk by acquiring large numbers
of loans, thus reducing the exposure to the risk of the default on any one
particular loan, and on reasonably estimating the credit losses to be incurred
and setting loan purchase prices accordingly. An inability to reasonably predict
the future performance of loans being purchased, or to set loan purchase prices
that properly reflect those estimates, can significantly increase the risk of
material losses from the business of investing in sub-prime used automobile
loans.

         During fiscal 1999, the Company revised the manner in which it
conducted its loan investment operations in light of the level of credit losses
the Company experienced in fiscal 1997 through fiscal 1999. Those losses were
caused by both the manner in which the Company enrolled dealers and underwrote
loans, and overall trends that developed in the sub-prime used car loan industry
during those years. In particular, the Company developed a dealer scoring model
to allow it to evaluate the historical performance of its dealers and
selectively market its new programs to a smaller number of dealers viewed as
more likely to be the source of higher quality loans, and the Company ceased
purchasing loans from 70% of the dealers that had been enrolled in the Company's
program through January 31, 1998. Additionally, the allegations made and
uncertainties about the Company following the January 1998, resignation of the
Company's former independent auditors, Deloitte & Touche, LLP ("Deloitte &
Touche") (see Item 3 - Legal Proceedings) caused some dealers to cease to do
business with the Company, and the Company's lack of external financing during
fiscal 1999 and 2000 limited its ability to purchase new loans to the cash
available from the collections from its existing loan portfolio after the use of
those cash flows to pay operating expenses and existing liabilities. These
factors led to an overall decrease in the number of dealers enrolled in the
Company's program, from 900 at January 31, 1999 to 600 at January 31, 2000, and
to a decline in the number of loans purchased in each of the last three years,
as follows:

             Year Ended January 31,               Loans Purchased
             ----------------------               ---------------

                      1998                            30,000
                      1999                             6,000
                      2000                             2,900

         No individual dealer has been the source of more than 4% of the
Company's loan investments. From time to time certain states represent the
source of significant portions of the Company's loan investments. In fiscal
2000, 47% of the loans purchased by the Company originated from Texas, Illinois,
Maryland and Ohio, and as of January 31, 2000, 14.7% and 10.3% of the Company's
loan investments relate to consumers in Texas and North Carolina. The Company's
realization of its loan investments, and interest income therefrom, has been
dependent on the ability of the customers to pay the installment notes. Economic
conditions in the geographic area in which a customer resides can affect
repayment. The Company has attempted to mitigate its credit risk by retaining a
security interest in the vehicle financed by the loan; however, the used cars
that collateralize the loans are subject to loss, damage, significant declines
in value and difficulties of repossession and, accordingly, the Company's
security interest does not always effectively protect against credit losses.


SALES AND MARKETING

         The Company sourced loans for purchase through its relationships with
member dealers, who refer loans to the Company for underwriting and purchase.

         The Company employs sales and marketing personnel at the corporate
offices and in the field to enroll new dealers and provide services to existing
member dealers. Field personnel are responsible for identifying qualified dealer
leads and promoting the benefits of membership in the NAC program. Field Area
Managers provide training, consulting and product knowledge to the dealers to
increase dealers' knowledge of, and therefore their use of, the Company's
programs. During fiscal year 2000, there were approximately 15 Field Area
Managers and District Managers located in 11 states.



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<PAGE>   8

         Management seeks to enroll quality dealers by following written
enrollment guidelines and a due diligence process. Initially, a Field Area
Manager visits the dealership, explains the Company's financing program and
becomes familiar with the dealer's operation. If both parties wish to pursue a
business relationship, an application is completed. Trade and bank references,
and valid current operating licenses are obtained and verified. In addition,
background checks are performed on both the dealership and its principals.

         Dealers meeting Company standards sign a dealership agreement that the
Company has the right to terminate in the event of default or misrepresentation.
The Company ceased charging dealers an enrollment fee in fiscal 1998.


CENTRALIZED LOAN PROCESSING

         The Company operates one centralized loan processing center. Loan files
are centrally located, providing control and ease of access. The Company uses a
document imaging and retrieval system that provides various departments' access
to critical loan documents without having to remove the original file from the
document storage area.

         Each credit application is reviewed for approval prior to contract
acceptance to ensure that the Company's minimum underwriting criteria are met.
Credit applicants are approved or rejected on individual merit by analyzing the
three major areas that the industry considers important: stability (length of
time at residence and employment), ability (payment and debt to income ratios),
and down payment (commitment to vehicle purchase). The credit application is
entered into an automated credit evaluation system developed by Fair, Isaac and
Company, Inc. for initial credit analysis. Concurrently, residency and
employment are verified by credit support personnel. The application is then
forwarded to the assigned Account Executive for final review. Experienced
Account Executives (credit analysts) review the system-generated statistics
along with the specifics of each credit application and contact the member
dealer to discuss the credit review decision. This personal call to the dealer
enables the Account Executive to make recommendations as to how the terms and
conditions of the loan can be improved. In addition to the credit review
process, Account Executives are responsible for maintaining an ongoing
relationship with assigned member dealers.

         Contracts are entered into a tracking database, matched with the
initial credit application and reviewed for adherence to the terms and
conditions set forth in the approval process. Contracts are reviewed for
compliance with federal and state regulations as well as completeness of all the
Company's required documentation including written verification of residency and
employment and phone verification of the terms of the contract with the customer
in accordance with the Company's policy.

         If the customer's application meets the Company's established credit
criteria, the Company purchases the loan. The Company purchases its loans at a
discount from the face or contractual amount. That discount reflects both (i) an
element of interest income that the Company seeks to earn on its investment in
the loans, and (ii) the Company's assessment that, due to the sub-prime nature
of the loans, a portion of the loans it purchases are impaired in that the loans
will not be repaid in accordance with their contractual terms.

         Prior to mid-1999, the majority of the Company's loan investments took
the form of the Company's purchase of interests in pools of loans, rather than
whole loans, which were made under the Dealers Acceptance Program. That program
represented a sharing agreement between the Company and individual dealers. In
general the sharing agreement provided that the dealer would receive an initial
payment ("the dealer advance") from the Company of a percentage of the
contractual principal in return for which the Company would be entitled to
retain (i) 20% of all collections from that dealer's loans, and (ii) the
remaining 80% of the collections from that dealer's loans until the Company had
recovered from such 80% the dealer advance, computed on an aggregate basis for
all loans covered by the sharing agreement with that dealer.

         In fiscal 1999 the Company discontinued the Dealers Acceptance Program,
and began to purchase whole loans under the Dealers Choice Program. Under this
program, the Company makes a single payment to the dealer, which generally
ranges from 60% to 75% of the face or contractual amount of the loan being
purchased, and acquired the whole loan. Under the Dealers Choice Program, the
dealer may also receive a bonus payment if the customer pays six monthly
payments within seven months of the first payment due date.

                                        6

<PAGE>   9

COLLECTION

         At the time of the loan origination, each customer is mailed a payment
book. Additionally, each new customer receives a call from a member of the
Company's collection staff ten days before the first payment due date to review
payment arrangements, payment options and the terms of the loan contract. The
coupon payment books, direct payments to retail lockboxes in Denver, Colorado
and Richmond, Virginia. The Company offers several payment options to customers.
Currently, the majority of the payments are mailed in the traditional manner to
one of the Company's two lockboxes. The Company also offers the customer the
opportunity to pay via Western Union Quick Collect (wired funds) or pay by phone
programs. During fiscal year 1999, the Company installed the capability for the
customer to pay either with a credit or bank debit card. NAC receives
approximately 35% of payments from these non-traditional methods.

         The Company employs collection staff that is compensated under plans
that include performance incentive elements. The collection function is
performed at the Company's corporate headquarters in Solon, Ohio. Collection
personnel work staggered schedules generally from 8:00 a.m. to 8:00 p.m.,
depending on the region of the country to which they are assigned. The
collection efforts of the staff are aided by a computerized on-line receivables
system and call management system with a predictive dialing feature. The
Company's system also includes a voice response unit that allows customers
calling the Company to access account information and communicate payment
arrangements on a 24-hour basis.

         Accounts that become delinquent by one day are assigned to the
collection staff. Additionally, late notices are mailed at three and twenty days
after the missed payment date. If the loans are not collected the Company
assigns out the task of attempting the repossession and sale of the collateral
not later than 35 days after default on the first payment, or not later than 65
days after other defaults. The repossession and collateral sales are conducted
by approximately 250 independent repossession agents and 100 automobile auctions
with which the Company maintains working agreements. However, the used cars that
collateralize the loans are subject to loss, damage, significant declines in
value and difficulties of repossession. To the extent the sale of the collateral
does not satisfy the loan balance, the Company uses in-house recovery collectors
to attempt to collect the remaining balance. Balances that cannot be collected
in this manner are forwarded to outside collection agencies. Finally, the
Company may attempt to sell any remaining unpaid accounts in the secondary
market. However, the Company has generally not been able to obtain significant
recoveries after the sale of the repossessed car.

         The payment history and status of all customer loans is reported
monthly to three major credit reporting agencies.


INTEREST INCOME AND ALLOWANCE FOR CREDIT LOSSES

         The Company's loan investments result from purchases of installment
loans at discounts from the face or contractual amount. Those discounts reflect
both (i) an element of interest income that the Company seeks to earn on its
investment in the loans, and (ii) the Company's assessment, at the time of
purchase, that a portion of the loans it purchases are impaired in that the
loans will not be repaid in accordance with their contractual terms.

         At the time of purchase, the Company groups loans into loan pools that
it believes will have common future cash flow characteristics, on the basis of
possessing similar contractual and risk characteristics. Loans are initially
recorded at the cost to purchase the loans, adjusted for any net loan
origination fees and related direct incremental loan origination costs. At the
time of purchase, the Company's net initial investment in the loans is recorded
by establishing as the "gross finance receivable" the contractual cash flows
(including contractual interest) to which the Company is entitled, which is
offset by the difference between the gross finance receivable and the net
initial investment, which is segregated into two components; (i) unearned
income, which represents the difference between the net initial investment and
the Company's estimate of the future cash flows from the gross finance
receivable and (ii) a credit loss discount, which represents the difference
between the Company's estimate of the future cash flows from the gross finance
receivable and its contractual cash flows.

         Prior to mid-1999, the majority of the Company's loan investments took
the form of the Company's purchase of interests in pools of loans, rather than
whole loans, which were made under the Dealers Acceptance Program. That



                                        7

<PAGE>   10

program represented a sharing agreement between the Company and individual
dealers. In general the sharing agreements provided that the dealer would
receive an initial payment ("the dealer advance") from the Company of a
percentage of the contractual principal in return for which the Company would be
entitled to retain, after collection costs, (i) 20% of all collections from that
dealer's loans, and (ii) the remaining 80% of the collections from that dealer's
loans until the Company had recovered from such 80% the dealer advance, computed
on an aggregate basis for all loans covered by the sharing agreement with that
dealer. The dealer advance represented the Company's net initial investment,
which was recorded in the manner described in the preceding paragraph based on
the portion of the pool of loans the Company was entitled to under such sharing
agreements (i.e. contractual cash flows from the gross loans in force net of the
contractual cash flows to which the dealer would be entitled).

         Unearned income is recognized in income over the life of the loans on
the interest method, using for each pool of loans the interest rate that
reflects the difference between the Company's net investment in the loans and
its estimate of the future cash flows therefrom, determined at the time of the
loan purchase. The Company's net investment in each loan pool includes its net
initial investment, any interest income recognized but not yet collected,
reduced by collections and any previously recorded allowance for credit losses.

         Effective February 1, 1997, the Company refined its methodology for
determining the allowance for credit losses to group loans into pools with
similar characteristics and to assess the recoverability of its loan investments
on the basis of the present value of the expected future cash flows, as
discussed in Statement of Financial Accounting Standards ("SFAS") 114 (as
amended by SFAS 118), "Accounting by Creditors for Impairment of a Loan." On a
continual basis the Company reviews its estimates of future cash flows for its
loan pools. Such estimates are revised to reflect changes in historical
collection rates, charge-off rates, loan delinquencies and other economic
indicators that serve as the basis for predicting future loan performance. The
Company's net investment in each loan pool is compared to the present value of
the revised estimate of future cash flows, discounted using the rate at which
the Company is recognizing interest income on that pool of loans. Where the
estimated cash flows have been revised downward and as a result such a
comparison reflects an excess of the investment over the present value of the
future cash flows, the Company records an allowance for credit losses by a
charge to expense. The Company also reduces unearned income by a
reclassification to the credit loss discount so that future interest income will
reflect the same original annual interest income rate on the net investment in
the loan pool. In those instances where a revised estimate of future cash flows
indicates an increase in estimated cash flows over the previous estimate, the
Company first reverses into income any previously recorded provision for credit
losses and then increases the rate at which future interest income is recognized
by a reclassification from the credit loss discount to unearned income.

         Prior to the Company's February 1, 1997 refinement of its method of
determining the allowance for credit losses described above, the Company
evaluated the adequacy of its allowance for credit losses using a methodology
generally similar to that described above, except that the estimated future cash
flows were compared to the Company's net investment on an undiscounted basis.
The effect of utilizing discounting consistent with SFAS 114 was $41,667,000,
which is included in the provision for credit losses recorded in fiscal 1998.

         The Company's policy is to charge-off loans as uncollectible at the
earlier of (i) the repossession of the collateral, or (ii) a loan becoming 180
days contractually past due (270 days past due on a recency basis prior to
November 1, 1998). Loan charge-offs are recorded by eliminating the remaining
gross finance receivable against the allowance for credit losses and the credit
loss discount on a pro-rata basis.


COMPETITION

         The business in which the Company operates is extremely competitive,
and although many participants have exited the sub-prime market in recent years,
the Company continues to face direct competition from a number of national,
regional and local finance companies that specialize in the used automobile
sub-prime market. The Company does not consider itself, at this time, to be in
direct competition with banks, credit unions and captive finance companies.
However, traditional lending institutions are entering the sub-prime market in
increasing numbers and will continue to increase the competition in the
Company's business. In addition, many dealers are financing their own programs.



                                        8

<PAGE>   11

REGULATION

         The Company's business is subject to various state and federal laws and
regulations which require licensing and qualification, and the Company is
generally required to obtain a license, which is revocable for cause, in those
states in which it does business. The federal and state laws and regulations to
which the Company is subject, which include the consumer protection laws, limit
interest rates, fees and other charges associated with the installment loans
purchased by the Company, require specified disclosures by automobile dealers to
consumers, govern the sale and terms of the ancillary products and define a
lender's rights to repossess and sell collateral. The failure to comply with
these laws or regulations could have a material adverse effect on the Company
by, among other things, limiting the states in which the Company may operate,
restricting the Company's ability to realize the value of the collateral
securing its loan investments, or imposing on the Company potential liability
related to loans purchased from dealers.

         Within the past two years, certain federal and state agencies have
expressed interest in the issue of the interest rates and other terms contained
in loans such as those purchased by the Company. The Company is unable to
predict whether, or if, such interest will result in new or revised laws or
regulations that could affect the Company's business. Significant new laws or
regulations affecting the interest rates or other terms contained in loans such
as those purchased by the Company could have a material adverse affect on the
Company's operations.

         State and federal laws and regulations also can affect the supply of
used automobiles. For example, environmental protection regulations governing
emissions or fuel consumption could restrict the ability of dealers to market
certain makes or models of used automobiles. To the extent the supply of used
automobiles was restricted by such laws or regulations, the Company could be
adversely affected.


ANGELIKA FILM CENTER
--------------------

         AFC is the owner of the Angelika Film Center, which it holds under a
long term lease having a remaining term of approximately 26 years. AFC is owned
50% by the Company, 33.33% by Reading and 16.67% by Sutton Hill Associates,
which manages the Angelika Film Center as a part of its City Cinemas Chain. Each
of the owners of AFC are entitled to a proportionate share of the cash
distributions that are paid quarterly by AFC.

         The Angelika Film Center is a 17,000 square foot, six screen multiplex
theater and cafe that focuses on the exhibition of art and specialty films. The
exhibition of art and specialty films, while seasonal in nature, is less so than
the film exhibition business in general. Art and specialty films tend to be
released more evenly over the course of the year and, if successful, tend to
enjoy a longer run than wide release films. Art and specialty films are obtained
from a number of sources ranging from divisions of the larger film distributors
specializing in specialty films to individuals that have acquired domestic
rights to one film. Generally film payment terms are based on an agreed upon
percentage of the box office receipts.

         On April 13, 2000, Sam J. Frankino commenced certain litigation in the
Delaware Chancery Court to enforce his claim that on April 7, 2000 he and other
stockholders validly took certain actions by consent. In the event Mr. Frankino
is successful in that litigation, he may seek to set aside the Company's
purchase of the interest in AFC and the two options. See Item 3 -- Legal
Proceedings.


DISCONTINUED OPERATIONS

         Prior to fiscal 1997 the Company also engaged in the automobile rental
business, including the subsequent sale of cars when retired from its rental
fleet.

         The automobile rental operations, conducted under the names Agency
Rent-A-Car, Altra Auto Rental, and Automate Auto Rental, rented vehicles
principally on a short-term basis to the insurance replacement market. The
Company disposed of its rental fleet and these operations in fiscal 1996 through
the sale of certain assets and through certain leases to a national car rental
company. All liabilities related to the discontinued rental business,
principally self-insurance claims, were retained by the Company.



                                        9
<PAGE>   12

         National Motors was a Company owned dealership which sold vehicles
retired from the rental fleet. The Company discontinued the operations of
National Motors in fiscal 1997. See Note L of Notes to Consolidated Financial
Statements.


EMPLOYEES
---------

         As of January 31, 2000, the Company employed approximately 100 people,
none of which were covered by a collective bargaining agreement. The Company
believes it maintains good relations with its employees.


Item 2.  Properties
-------  ----------

         The Company's corporate headquarters, executive offices and centralized
operating center are located in two four-story, 55,000 square feet office
buildings owned by the Company in Solon, Ohio, a southeast suburb of Cleveland.
The Company also owns a facility in Delran, New Jersey (12,000 square feet),
which was previously used to house and repair repossessed cars, and is now
listed for sale. The Company sold its Beach City, Ohio (9,000 square feet)
facility in November 1999.

         The Company believes that its operational facilities and other
properties are well maintained. Due to excess office capacity, portions of one
of the buildings located in Solon, Ohio are leased to various tenants.


Item 3.  Legal Proceedings
-------  -----------------

         The Company and certain of its former and current officers and
directors have been named as defendants in eleven purported class action
lawsuits which were filed in the United States District Court for the Northern
District of Ohio subsequent to the January 1998 resignation of the Company's
former independent auditors, Deloitte & Touche. The actions, which were
consolidated, allege fraud and other violations of the federal securities laws
and seeks money damages as the result of various alleged frauds and violations
of the Securities Exchange Act of 1934, including misrepresentations about the
adequacy of the Company's allowance for credit losses and its loan underwriting
practices.

         The actions were consolidated on October 16, 1998, and discovery was
stayed pending the court's rulings on various outstanding motions. On October
12, 1999, the Honorable Patricia Hemann, United States Magistrate, issued a
report and recommendation (the "Report") to the Honorable Solomon Oliver, United
States District Judge, recommending that the motions to dismiss filed by the
Company and the other defendants be granted. Plaintiffs filed an objection to
the Magistrate's Report with the District Court and the Company responded to
this objection.

         In April 2000, the Company and the class action plaintiff's
representatives reached an agreement in principle to settle the class action
securities litigation. Under the terms agreed upon, the Company will pay to the
plaintiffs' class $6.5 million in consideration for, among other things, the
release of all defendants from liability. The settlement is not an admission of
liability by any party. The settlement is subject to preparation and execution
of final documentation and court approval. The Company believes that it is
probable that the settlement will be approved by the court and completed on the
terms agreed to in principle. However, there can be no assurance that the
settlement will be approved and completed. In the event the settlement is not
completed, the Company intends to vigorously defend itself; however, absent such
settlement, the Company cannot currently predict the ultimate outcome of this
matter, and an unfavorable resolution of these actions could have a material
adverse effect on the Company's financial position, results of operations and
liquidity.

         On April 6, 2000, the Company filed a complaint in the Delaware Court
of Chancery captioned National Auto Credit, Inc. v. Sam J. Frankino, Civil
Action No. 17973-NC. The complaint, as amended on May 3, 2000, seeks injunctive
and monetary relief against defendant Frankino for alleged breaches of fiduciary
duty in his capacity as a director of the Company. On May 8, 2000, Mr. Frankino
filed a motion to extend the time in which Mr. Frankino may respond to the
Company's complaint from May 18, 2000 to June 9, 2000.



                                       10
<PAGE>   13

         On April 7, 2000, Sam J. Frankino delivered to the Company a written
consent purportedly representing the holders of a majority of the outstanding
shares of the Company's common stock. The consent action purports to (a) rescind
any and all amendments to the Company's bylaws made on or after March 1, 2000
(including those made on April 5, 2000 and described above); (b) declassify the
Board of Directors of the Company; and (c) remove the following directors from
the Board: John Gleason, David Huber, Donald Jasensky, William Marshall, James
McNamara, Philip Sauder, Henry Toh, and Peter Zackaroff. Messrs. Huber,
Jasensky, Sauder and Zackaroff were previously elected to serve on the Board of
Directors by Mr. Frankino. The Company has taken the position that the consent
is invalid, because, among other things (i) the consent does not appear to
represent the holders of a majority of the Company's outstanding stock, (ii) the
consent was not preceded by a request for a record date as required by the
Company's bylaws, and (iii) the consent does not purport to represent an action
by the holders of eighty percent (80%) of each class of the Company's
outstanding voting stock, as required for an amendment to the Company's bylaws.
As a result of the Company's determination that the consent delivered by Mr.
Frankino was invalid, on April 13, 2000, Mr. Frankino filed a complaint in the
Delaware Court of Chancery captioned Sam J. Frankino v. David L. Huber, Donald
Jasensky, James J. McNamara, Philip A. Sauder, Henry Y.L. Toh, Peter T.
Zackaroff, John A. Gleason, William S. Marshall, and National Auto Credit, Inc.,
Civil Action No. 17984- NC, along with a motion to expedite. The complaint, as
amended on April 19, 2000, seeks an order of declaratory judgment confirming
that the individual defendants were validly removed from the Company's Board of
Directors by way of Mr. Frankino's April 7, 2000 written consent. On April 17,
2000, the Company and the individual defendants filed a motion to dismiss the
complaint and to stay discovery. In response to the Company's April 17 motion,
Mr. Frankino filed an amended complaint on April 19. On April 24, 2000, the
Company and the individual defendants responded with a motion to dismiss Mr.
Frankino's amended complaint and to stay discovery. On May 3, 2000, the Company
filed its answer and affirmative defenses to the amended complaint. Pending
entry of the Court's final judgment in this action, an Order Maintaining Status
Quo provides that (i) the Board of Directors shall take no actions which are
outside the routine day-to-day operations of the Company in the ordinary course
of business, (ii) Mr. Frankino is required to give the Company five days notice
prior to acquiring, directly or indirectly, any additional stock of the Company,
soliciting proxies or written consents from stockholders of the Company, or
attempting to take action by consent without a meeting of stockholders, and
(iii) Ms. Dodero and Messrs. Dodero, Frankino, Huber, Jasensky, Maund, McNamara,
Sauder, Toh, Upton and Zackaroff shall constitute the Board of Directors of the
Company.

         On April 12, 2000, Sam J. Frankino filed a complaint in the Delaware
Court of Chancery captioned Sam J. Frankino v. National Auto Credit, Inc., Civil
Action No. 17985-NC. The complaint seeks an order directing the Company to
permit the inspection and copying of certain of its books and records. The
Company has made the books and records available.

         The Securities and Exchange Commission, the United States Attorney for
the Northern District of Ohio and the Federal Bureau of Investigation are
investigating the issues raised as the result of the resignation of Deloitte &
Touche. The Company is cooperating fully with the investigations. The ultimate
outcome of these investigations on the Company cannot presently be predicted. An
unfavorable resolution of any of these investigations could have a material
adverse effect on the Company's financial position, results of operations and
liquidity.

         The Company was self-insured for claims relating to bodily injury or
property damage from accidents involving the vehicles rented to customers by its
discontinued automobile rental operations. In connection therewith the Company
establishes certain reserves in its financial statements for the estimated cost
of satisfying those claims. See Note L of Notes to Consolidated Financial
Statements.

         In the normal course of its business, the Company is named as defendant
in legal proceedings. It is the Company's policy to vigorously defend litigation
and/or enter into settlements of claims where management deems appropriate.

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

         None.



                                       11
<PAGE>   14

                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters
-------  ---------------------------------------------------------------------

MARKET INFORMATION

         The Company's common stock, $.05 par value, has been trading on the OTC
Bulletin Board operated by the National Association of Securities Dealers, Inc.
since March 23, 1998 under the ticker symbol NAKD. Prior to that date the
Company's common stock was traded on the New York Stock Exchange under the
symbol NAK.

         The following table reflects the high and low prices for the Company's
common stock during the periods indicated as reported by the National Quotation
Bureau, Inc. for the periods for which the Company's common stock has been
traded on the OTC Bulletin Board, and prior thereto as reported by the New York
Stock Exchange Composite Tape.

                                                           High           Low
                                                           ----           ---
Year ended January 31, 1999
First Quarter (February 1 - April 30) .................   $ 3.38         $  .75
Second Quarter (May 1 - July 31) ......................     2.06            .69
Third Quarter (August 1 - October 31) .................     1.70            .75
Fourth Quarter (November 1 - January 31) ..............     1.66            .88

Year ended January 31, 2000
First Quarter (February 1 - April 30) .................   $ 1.52         $ 1.03
Second Quarter (May 1 - July 31) ......................     1.23            .80
Third Quarter (August 1 - October 31) .................     1.04            .73
Fourth Quarter (November 1 - January 31) ..............      .97            .50

         With respect to prices reported by the OTC Bulletin Board, such prices
reflect inter-dealer bid prices, may not represent actual transactions, and do
not reflect dealer mark-ups and mark-downs.


STOCKHOLDERS

         At May 1, 2000 there were 1,260 stockholders of record of the Company's
common stock based upon a securities position listing furnished to the Company.


DIVIDENDS

         It has been the Company's policy to retain any earnings to finance the
growth of its business and reduce outstanding debt and other liabilities;
accordingly the Company has generally not issued a cash dividend. However, the
Company does from time to time reassess its cash dividend policy and may issue
cash dividends in the future if circumstances warrant. No cash dividends were
declared for the fiscal years ended January 31, 2000 and 1999.



                                       12
<PAGE>   15

Item 6.  Selected Financial Data
-------  -----------------------

         The following sets forth certain selected financial data appearing in
or derived from the Company's historical financial statements. The selected
financial data should be read in conjunction with the consolidated financial
statements appearing elsewhere herein, and with Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations (thousands of
dollars, except per share amounts):

<TABLE>
<CAPTION>
INCOME STATEMENT DATA                                               Years Ended January 31,
---------------------                               -------------------------------------------------------
                                                      2000       1999        1998       1997       1996
                                                    ---------- ---------- ----------- ---------- ----------
<S>                                                 <C>        <C>        <C>         <C>        <C>
REVENUE                                              $  7,476   $ 16,279    $ 36,396   $ 63,872   $ 43,511
COSTS AND EXPENSES                                   $ 24,818   $ 32,344    $149,265   $ 54,236   $ 14,797
(LOSS) INCOME FROM CONTINUING OPERATIONS             $(14,056)  $(16,065)   $(85,711)   $ 7,568   $ 18,196
DISCONTINUED OPERATIONS, NET OF TAX(1)                    741        450      (5,973)      (397)   (13,590)
                                                    ---------- ---------- ----------- ---------- ----------
NET (LOSS) INCOME                                    $(13,315)  $(15,615)   $(91,684)   $ 7,171   $  4,606
                                                    ========== ========== =========== ========== ==========

BASIC AND DILUTED (LOSS) EARNINGS PER SHARE
  Continuing operations                              $   (.50)  $   (.56)   $  (3.00)   $   .26   $    .64
  Discontinued operations                                 .03        .01        (.21)      (.01)      (.48)
                                                    ---------- ---------- ----------- ---------- ----------
    Total                                            $   (.47)  $   (.55)   $  (3.21)   $   .25   $    .16
                                                    ========== ========== =========== ========== ==========

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING(2)
  Basic                                                28,169     28,609      28,542     28,501     28,361
                                                    ========== ========== =========== ========== ==========
  Diluted                                              28,169     28,609      28,542     28,621     28,539
                                                    ========== ========== =========== ========== ==========

                                                                       As of January 31,
                                                    -------------------------------------------------------
                                                       2000       1999        1998       1997       1996
                                                    ---------- ---------- ----------- ---------- ----------
BALANCE SHEET DATA
------------------

GROSS FINANCE RECEIVABLE(4)                          $ 50,847   $115,473    $269,690   $419,280   $299,215
TOTAL ASSETS                                          103,962    127,292     234,114    332,475    270,083
NOTES PAYABLE                                            -          -         83,838     80,200     16,900
TOTAL STOCKHOLDERS' EQUITY                             83,879     99,776     115,290    206,985    199,105

OTHER DATA
----------

GROSS LOANS IN FORCE(3),(4)                          $ 51,175   $124,314    $347,776   $494,247   $351,312
PERCENT OF NOTES PAYABLE
   TO STOCKHOLDERS' EQUITY                               -          -           72.7%      38.7%       8.5%
NUMBER OF EMPLOYEES                                       100        250         300        400        350
</TABLE>


(1) See Note L of Notes to Consolidated Financial Statements for further
    discussion of discontinued operations.

(2) The weighted average number of shares outstanding has been adjusted to
    reflect a 10% stock dividend issued in April 1996.

(3) Gross loans in force represents the total contractual payments (including
    payments representing future interest) receivable from the installment loans
    which the Company owns, or in which the Company owns an interest through the
    purchase of an interest under sharing arrangements with dealers. The amount
    includes payments that, if collected, will be remitted to the dealers under
    these sharing arrangements (see Note B of Notes to Consolidated Financial
    Statements). While not a measure of the Company's loan assets under
    generally accepted accounting principles, the Company views gross loans in
    force as a measure of the level of its activities and the activities of its
    competitors.

(4) Subsequent to January 31, 2000 the Company sold substantially all of the
    automobile retail installment loans remaining in the Company's loan
    investments. See Note N of Notes to Consolidated Financial Statements.



                                       13
<PAGE>   16

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

GENERAL
-------

         On March 17, 2000, the Company, acting through NAC, sold to Crescent
Bank & Trust substantially all of the automobile retail installment loans
remaining in the Company's active portfolio for $17.9 million. In prior
transactions in March 2000, NAC had sold to First Southwestern Financial
Services, for $2.7 million, certain automobile retail installment loans held in
the Company's active portfolio and to Ameristar Financial Servicing Company,
L.L.C., for $2.2 million, certain automobile retail installment loans held in
the Company's portfolio of charged-off accounts (representing approximately
one-third of the charged-off portfolio). The transactions above resulted in an
aggregate loss of approximately $2.1 million, which the Company will report in
the quarter ending April 30, 2000. In each of the three transactions, the buyer
was an independent party that did not have a material relationship with the
Company, any affiliate of the Company, any director or officer of the Company or
any associate of any officer or director of the Company. In each case, the
selling price was determined based upon arm's length negotiations between the
parties and was paid in cash at closing.

         Following its disposition of these automobile installment loans, the
Company's assets consisted principally of money market funds, commercial paper,
government securities and other short-term, highly liquid investments.

         On April 5, 2000, the Company purchased a 50% membership interest in
AFC. AFC is the owner and operator of the Angelika Film Center, which is a
multiplex cinema and cafe complex in the Soho District of Manhattan in New York
City. The 50% membership interest was purchased from Reading for 8,999,900
shares of the Company's common stock and 100 shares of Series A Preferred Stock
(representing 100% of the Class of Series A Convertible Preferred Stock
outstanding). As a result of the transfer, AFC is now owned 50% by the Company,
33.33% by Reading and 16.67% by Sutton Hill Associates. The Angelika Film Center
will continue to be managed by Sutton Hill Associates as a part of its City
Cinemas Chain. The articles and bylaws of AFC provide that for all matters
subject to a vote of the members, a majority is required, except that in the
event of a tie vote, the Chairman of Reading shall cast the deciding vote.

         The Series A Convertible Preferred Stock is convertible into shares of
the Company's common stock on a one for one basis, subject to traditional
antidilution adjustment; it votes share for share with the Common Stock as a
single class, provided that as a class the Series A Preferred must separately
approve any amendments to the Company's charter or bylaws; it has a liquidation
value of $1.50 per share; and is entitled to a dividend preference equal to any
dividends declared on the Company's common stock (determined on a per share
basis).

         The Company also purchased from Reading two separate and independent
options to acquire additional cinema assets owned by Reading in the United
States. Under the first option, the Company has the right to acquire the
remaining 33.33% membership interest in AFC owned by Reading in exchange for the
issuance of an additional six million shares of the Company's common stock. To
the extent authorized but unissued shares of the Company's common stock are not
available for such purpose, the Company has the right to substitute cash for
such shares at the rate of $1.50 per share. The option can be exercised for a
period of 45 days, through and including May 20, 2000. The remaining 16.67%
interest would continue to be owned by Sutton Hill Associates, and the Angelika
Film Center would continue to be managed as a part of the City Cinemas Chain.

         Under the second option, which is independent of the first option, the
Company has the right to acquire the remainder of Reading's domestic cinema
exhibition assets for cash (including Reading's rights to acquire the City
Cinemas Chain of cinemas and related real estate in Manhattan), and, if the
Company has not previously exercised its option to acquire Reading's 33.33%
interest in AFC for stock, Reading's remaining interest in AFC. If the Company
exercises this right, it is required to give to Reading's affiliate, Citadel
Holding Corporation, a right to participate in such transaction on a 50/50 basis
with the Company. The option can be exercised for a period of 60 days, through
and including June 5, 2000. The Company paid to Reading $500,000 in
consideration of this option. The Company has the right to extend the option for
two 30-day periods by payment of an additional $100,000 for each such 30-day
extension period. The purchase price would be based on a value of $27,000,000
for AFC and the lower of the historical cost or fair



                                       14
<PAGE>   17

value for the remainder of Reading's assets. The decision whether or not to
proceed with the exercise of either or both of such options rests with the
Company and not with Reading.

         On April 13, 2000, Sam J. Frankino commenced certain litigation in the
Delaware Chancery Court to enforce his claim that on April 7, 2000 he and other
stockholders validly took certain actions by consent. In the event Mr. Frankino
is successful in that litigation, he may seek to set aside the Company's
purchase in the interest in AFC and the two options. See Item 3 -- Legal
Proceedings.

         AFC holds the Angelika Film Center under a long term lease having a
remaining term of approximately 26 years. The Angelika Film Center is a six
screen multiplex theater and cafe that focuses on the exhibition of art and
specialty films. The following sets forth the unaudited condensed operating
results for AFC for the year ended December 31, 1999 (in thousands):

               Revenues                                   $ 7,376

               Film rental expenses                         1,909
               Concession and cafe costs                      330
               Other operating expenses                     3,383
               Other                                           28
                                                          -------
                                                            5,650
                                                         --------
               Net income                                 $ 1,726
                                                          =======

         The following sets forth the pro forma condensed consolidated balance
sheet of the Company as of January 31, 2000, prepared assuming the sales of the
loans and the purchase of the interest in AFC described above had taken place on
that date (in thousands):

<TABLE>
<CAPTION>
          Assets                                             Liabilities and Stockholders' Equity
---------------------------                                  ------------------------------------
<S>                                  <C>                   <C>                                                 <C>
Cash and cash equivalents            $  81,567             Self-insurance claims                               $  4,089
Property and equipment, net              7,677             Accrued income taxes                                   2,926
Investment in AFC                       11,078             Other liabilities                                     13,051
Assets held for sale                     6,861
Other                                    5,609             Stockholders' equity                                  92,726
                                     ---------                                                                 --------
Total Assets                         $ 112,792             Total Liabilities and Stockholders' Equity          $112,792
                                     =========                                                                 ========
</TABLE>

         Also see Note N of Notes to Consolidated Financial Statements.

         During fiscal 2000 the Company reduced its staffing levels, from
approximately 250 employees at January 31, 1999 to approximately 100 employees
at January 31, 2000, and to approximately 50 employees at April 30, 2000. As the
size of its operations decrease, the Company will continue those staffing
reductions to eliminate the personnel no longer required as the result of the
sale of substantially all of the loan portfolio and the resulting cessation of
loan underwriting, processing and collection operations. The Company anticipates
that those eliminations will be completed in June 2000, at which point the
Company will have remaining approximately 30 administrative and executive
employees, occupancy costs, and general and administrative recurring costs
estimated to be approximately $400,000 per month. The Company plans to fund
these expenses from the interest earned on its money market, commercial paper
and government securities investments, which currently are invested at a
weighted average yield of approximately 6%.

         The Company's Board of Directors is considering various additional
strategic business alternatives, including, but not limited to, the purchase of
one or more existing operating businesses or the entry into one or more
businesses. However, the Board presently may not consummate any such transaction
due to an Order Maintaining Status Quo entered in the Delaware Chancery Court in
connection with the litigation Mr. Frankino filed in April 2000. See Item 3 -
Legal Proceedings. In addition, the Company's current lack of external financing
sources, as discussed below, may limit its ability to pursue such alternatives.



                                       15
<PAGE>   18
         The Company, through NAC, a wholly-owned subsidiary, invests in
sub-prime used automobile consumer loans, which take the form of installment
loans collateralized by the related vehicle. The Company purchases such loans,
or interests in pools of such loans (collectively "loan investments"), from
member dealers. The Company performs the underwriting and collection functions
for all loans it purchases in whole, and also performs such functions where the
member dealer had sold to the Company, and retained for itself, interests in a
pool of loans. The Company's operations enable member dealers to provide used
car purchase financing to customers who have limited access to more traditional
consumer credit sources that might otherwise be unable to obtain financing. As
of January 31, 2000 the Company had a network of approximately 600 dealers
located throughout the United States.

         The loans in which the Company invests are high risk, in that the
borrowers are individuals with below average credit quality, and the collateral
is subject to loss, damage, significant declines in value and difficulties of
repossession. Accordingly, each individual loan has a significant risk of not
performing in accordance with its contractual terms. The business in which the
Company participates relies on mitigating this risk by acquiring large numbers
of loans, thus reducing the exposure to the risk of the default on any one
particular loan, and on reasonably estimating the credit losses to be incurred
and setting loan purchase prices accordingly. An inability to reasonably predict
the future performance of loans being purchased, or to set loan purchase prices
that properly reflect those estimates, can significantly increase the risk of
material losses from the business of investing in sub-prime used automobile
loans.

         For the year ended January 31, 2000, the Company incurred a loss from
continuing operations of $14,056,000, and a net loss of $13,315,000 primarily as
the result of a 54.1% decline in revenues to $7,476,000 and the incurrence of
costs of $18,198,000 associated with certain litigation and non-recurring
charges, the write-down of assets held for sale, and the repurchase of shares of
the Company's common stock, as discussed below. The decline in revenues was
principally due to the reduction of the size of the Company's loan portfolio.
During fiscal 1999 the Company revised the manner in which it conducted its loan
investment operations in light of the level of credit losses the Company
experienced in fiscal 1997 through fiscal 1999. These losses were caused by both
the manner in which the Company enrolled dealers and underwrote loans, and
overall trends that developed in the sub-prime used car loan industry during
those years. In particular, the Company developed a dealer scoring model to
allow it to evaluate its dealers and selectively market its new programs to a
smaller number of dealers viewed as more likely to be the source of higher
quality loans, and the Company ceased purchasing loans from 70% of the dealers
that had been enrolled in the Company's program through January 31, 1998.
Additionally, the allegations made and uncertainties about the Company following
the January, 1998 resignation of the Company's former independent auditors,
Deloitte & Touche (see Item 3 - Legal Proceedings), caused some dealers to cease
to do business with the Company. The Company's lack of external financing
sources during fiscal 1999 and 2000 limited its ability to purchase new loans to
the cash available from the collections from its existing loan portfolio after
the use of those cash flows to pay operating expenses and existing liabilities.
These factors led to a decline in the number of dealers enrolled in the
Company's program and to a decline in the number of loans added.

         For the year ended January 31, 1999, the Company incurred a loss from
continuing operations of $16,065,000, and a net loss of $15,615,000 primarily as
the result of a 55.3% decline in revenues to $16,279,000 and the incurrence of
costs of $9,585,000 associated with certain litigation and non-recurring
charges. The decline in revenues was principally due to the reduction of the
size of the Company's loan portfolio.

         During fiscal 1998 and 1999, the Company was from time to time in
default of the covenants in its bank group and senior note debt agreements. In
the fourth quarter of fiscal 1998 and continuing through the third quarter of
fiscal 1999 the Company entered into a series of amendments to those agreements
to waive the defaults while the Company repaid the outstanding borrowings. The
Company completed the repayment of the borrowings under the bank group facility
and the redemption of the senior notes in November 1998 using the proceeds of
its income tax refund.

         The Company obtained no new debt financing during fiscal 1999 or 2000,
and operated on internally generated cash flows, which resulted from an excess
of collections on installment loans over the investment in new loans as the
Company reduced the size of its operations. As of January 31, 2000 the Company
has no external source of financing and the Company's pending litigation and
regulatory investigations may limit its ability to obtain external financing.



                                       16
<PAGE>   19

         The Securities and Exchange Commission, the United States Attorney for
the Northern District of Ohio and the Federal Bureau of Investigation are
investigating the issues raised as the result of the resignation of Deloitte &
Touche. The Company is fully cooperating with the investigations. Although the
Company has accrued certain costs it expects to incur in responding to the
investigations, the ultimate outcome of these investigations cannot presently be
predicted and the Company has not recorded any provision for any monetary
penalties that may result from civil or criminal proceedings that might be
commenced at the conclusion of such investigations. The Company's liquidity will
be adversely affected as it incurs costs to respond to the investigations. An
unfavorable resolution of any of these investigations could have a material
adverse effect on the Company's financial position, results of operations and
liquidity.

         In addition, the Company and certain of its former and current officers
and directors have been named as defendants in eleven purported class action
lawsuits which were filed in the United States District Court for the Northern
District of Ohio subsequent to the January 1998 resignation of the Company's
former independent auditors, Deloitte & Touche. The actions, which were
consolidated, allege fraud and other violations of the federal securities laws
and seeks monetary damages as the result of various alleged frauds and
violations of the Securities Exchange Act of 1934, including misrepresentations
about the adequacy of the Company's allowance for credit losses and its loan
underwriting practices. In April 2000, the Company and the class action
plaintiff's representatives reached an agreement in principle to settle the
class action securities litigation. Under the terms agreed upon, the Company
will pay to the plaintiffs' class $6.5 million in consideration for, among other
things, the release of all defendants from liability. The settlement is not an
admission of liability by any party. The settlement is subject to preparation
and execution of final documentation and court approval. The Company believes
that it is probable that the settlement will be approved by the court and
completed on the terms agreed to in principle, and accordingly at January 31,
2000 has accrued the $6.5 million settlement amount together with an estimate of
the legal fees that will be incurred in completing the settlement. However,
there can be no assurance that the settlement will be approved and completed. In
the event the settlement is not completed, the Company intends to vigorously
defend itself; however, absent such settlement, the Company cannot currently
predict the ultimate outcome of this matter, and an unfavorable resolution of
these actions could have a material adverse effect on the Company's financial
position, results of operations and liquidity.

         The Company's Board of Directors is considering various additional
strategic business alternatives, including but not limited to, the purchase of
one or more existing operating businesses or the entry into one or more
businesses. However, the Board presently may not consummate any such transaction
due to an Order Maintaining Status Quo entered in the Delaware Chancery Court in
connection with the litigation Mr. Frankino filed in April 2000. See Item 3 -
Legal Proceedings. In addition, the Company's current lack of external financing
sources may limit its ability to pursue such alternatives. In the interim, the
Company will use the income from the investment of its cash, together with the
cash and cash equivalents itself, to pay operating expenses and existing
liabilities. The Company has cash and cash equivalents of approximately
$77,000,000 at May 1, 2000, and it believes that such cash and cash equivalents
and the investment income therefrom will be sufficient to pay operating expenses
and existing liabilities.


RESULTS OF OPERATIONS

         INTEREST INCOME: The Company's loan investments result from purchases
of installment loans at discounts from the face or contractual amount. Those
discounts reflect both (i) an element of interest income that the Company seeks
to earn on its investment in the loans, and (ii) the Company's assessment, at
the time of purchase, that a portion of the loans it purchases are impaired in
that the loans will not be repaid in accordance with their contractual terms.

         At the time of purchase, the Company groups loans into loan pools that
it believes will have common future cash flow characteristics, on the basis of
possessing similar contractual and risk characteristics. Loans are initially
recorded at the cost to purchase the loans, adjusted for any net loan
origination fees and related direct incremental loan origination costs. At the
time of purchase, the Company's net initial investment in the loans is recorded
by establishing as the "gross finance receivable" the contractual cash flows
(including contractual interest) to which the Company is entitled, which is
offset by the difference between the gross finance receivable and the net
initial investment, which is segregated into two components: (i) unearned
income, which represents the difference between the net initial investment and
the Company's estimate of the future cash flows from the gross finance
receivable and (ii) a credit loss discount, which represents the



                                       17
<PAGE>   20

difference between the Company's estimate of the future cash flows from the
gross finance receivable and its contractual cash flows.

         Unearned income is recognized as income over the life of the loans on
the interest method, using for each pool of loans the interest rate that
reflects the difference between the Company's net investment in the loans and
its estimate of the future cash flows therefrom as determined at the time of the
loan purchase. The Company's net investment in each loan pool includes its net
initial investment, any interest income recognized but not yet collected,
reduced by collections and any previously recorded allowance for credit losses.

         The following sets forth certain information concerning the Company's
investments in and purchases of loans for fiscal 1996 through fiscal 2000:

<TABLE>
<CAPTION>
                                                                                                              Number of
                        Installment    Gross Loans In       Number of        Enrolled          Average        Contracts
   Balance as of        Loans, Net        Force(1)          Contracts        Number of        Contract        Purchased
    January 31,        (In Millions)   (In Millions)       Outstanding        Dealers         Purchased      During Year
    -----------         -----------     -----------        -----------        -------         ---------      -----------
<S>                     <C>             <C>                <C>               <C>              <C>            <C>
        1996              $222.1            $351.3            53,000           2,300           $8,500           35,900
        1997              $283.5            $494.2            70,000           3,100           $9,900           38,000
        1998              $152.4            $347.8            52,000           3,000           $8,600           30,000
        1999              $ 70.4            $124.3            24,000             900           $8,900            6,000
        2000              $ 29.3            $ 51.2            12,200             600           $9,200            2,900
</TABLE>

(1) Gross loans in force represents the total contractual payments (including
    payments representing future interest) receivable from the installment loans
    which the Company owns, or in which the Company owns an interest through the
    purchase of an interest under sharing arrangements with dealers. The amount
    includes payments that, if collected, will be remitted to the dealers under
    these sharing arrangements (see Note B of Notes to Consolidated Financial
    Statements). While not a measure of the Company's loan assets under
    generally accepted accounting principles, the Company views gross loans in
    force as a measure of the level of its activities and the activities of its
    competitors.

         Interest income declined to $7,331,000 in fiscal 2000 from $15,322,000
in fiscal 1999, representing a decline of 52.2%. The decline is principally
attributable to the 58.4% decrease in the size of the Company's total net loan
investments, (i.e., the gross finance receivables less the unearned income,
credit loss discount and allowance for credit losses) from $70,401,000 at
January 31, 1999 to $29,306,000 at January 31, 2000. Interest income declined at
a rate less than the decline in the size of the Company's total loan investment
as a result in an increase in the Company's effective yield on its loans. The
Company's effective yield on its loans, calculated as interest income as a
percentage of the total net investments in loans, increased from 13.8% for
fiscal 1999 to 14.7% for fiscal 2000. The effective yield increased in fiscal
2000 because of an increase in expected cash flows over original estimates for
certain loan pools. The higher than estimated collections affected the yield of
certain pools because the additional cash flows were high enough to completely
eliminate previously recorded loan loss allowances for those pools, after which
additional increases in expected collections are accounted for as yield
adjustments. At January 31, 2000, the Company's total net loan investment of
$29,306,000 has a weighted-average yield of 13.6%.

         Interest income declined to $15,322,000 in fiscal 1999 from $35,304,000
in fiscal 1998, representing a decline of 56.6%. The decline is principally
attributable to the 53.8% decrease in the size of the Company's total net loan
investments, from $152,447,000 at January 31, 1998 to $70,401,000 at January 31,
1999. Interest income declined at a rate slightly greater than the decline in
the size of the Company's total loan investment as a result in a decline in the
Company's effective yield on its loans, calculated as interest income as a
percentage of the total net investments in loans, from 16.2% for fiscal 1998 to
13.8% for fiscal 1999. The effective yield declined in 1999 because of the
Company's more selective approach to loan underwriting, which meant paying
generally higher percentages of the loans' face or contractual amount for higher
quality loans, and the use of more conservative estimates of future loan cash
flows, reflecting the deterioration in the collection history experienced in
1998. Each of these factors reduced the amount of the initial loan discount
attributed to unearned income, and thus the interest yield.

         FEES AND OTHER INCOME: Fees and other income include fees from the sale
of warranty contracts, fees earned for collection services, floorplanning and
enrollment and maintenance fees charged to dealers. The Company discontinued
floorplanning in fiscal 1999 as well as, selling warranty contracts and
recording fee income from collection services in



                                       18
<PAGE>   21

fiscal 1998, as a result of which fees and other income declined from $1,092,000
in fiscal 1998 to $957,000 in fiscal 1999, and to $145,000 in fiscal 2000.

         PROVISION FOR CREDIT LOSSES: Effective February 1, 1997, the Company
refined its methodology for determining the allowance for credit losses to group
loans into pools with similar characteristics and to assess the recoverability
of its loan investments on the basis of the present value of the expected future
cash flows, as discussed in Statement of Financial Accounting Standards ("SFAS")
114 (as amended by SFAS 118), "Accounting by Creditors for Impairment of a
Loan." On a continual basis the Company reviews its estimates of future cash
flows for its loan pools. Such estimates are revised to reflect changes in
historical collection rates, charge-off rates, loan delinquencies and other
economic indicators that serve as the basis for predicting future loan
performance. The Company's net investment in each loan pool is compared to the
present value of the revised estimate of future cash flows, discounted using the
rate at which the Company is recognizing interest income on that pool of loans.
Where the estimated cash flows have been revised downward and, as a result, such
a comparison reflects an excess of the investment over the present value of the
future cash flows, the Company records an allowance for credit losses by a
charge to expense, and also reduces unearned income by a reclassification to the
credit loss discount so that future interest income will reflect the same
original annual interest rate on the net investment in the loan pool. In those
instances where a revised estimate of future cash flows indicates an increase in
estimated cash flows over the previous estimate, the Company first reverses into
income any previously recorded provision for credit losses, and then increases
the rate at which future interest income is recognized by a reclassification
from the credit loss discount to unearned income.

         Prior to the Company's February 1, 1997 refinement of its method of
determining the allowance for credit losses described above, the Company
evaluated the adequacy of its allowance for credit losses using a method
generally similar to that described previously, except that the estimated cash
flows were compared to the Company's net investment on an undiscounted basis.
Information concerning the changes in the allowance for credit losses, and the
provision for credit losses charged to expense, is set forth in Note B of Notes
to the Consolidated Financial Statements.

         The provision for credit losses for fiscal 2000 reflect negative
provisions, or reductions in the allowance for credit losses, of $6,118,000.
During fiscal 1999, the provision for credit losses was $2,961,000. The
reduction in the allowance for credit losses recorded in fiscal 2000 is
principally the result of cash flows from loan collections during that period
which exceeded the amounts projected that was used in establishing the allowance
for credit losses at January 31, 1999. The higher than estimated collections
came principally from certain of the Company's older, larger loan pools, and
reflect both improvements in the Company's collection procedures and the effect
of the revisions to the future collection estimates made in fiscal 1999. In
determining the allowance for credit losses, the Company uses weighted average
estimates of the future cash flows from its loans, expressed as a percentage of
the contractual amounts receivable. Although the fiscal 2000 excess collections
resulted in reductions in the allowance for credit losses, the Company did not
significantly change its estimates of remaining cash flows from the collection
of loan pools, and as a result, the negative credit loss provisions reflect
principally the actual cash collections in excess of estimated amounts. The
weighted average estimate of future cash flows from loans, expressed as a
percentage of the contractual amounts receivable, was 58.0% at January 31, 2000,
as compared to 57.3% at January 31, 1999. At January 31, 2000, the allowance for
credit losses was 8.3% of the Company's net investment in loans, before the
allowance, as compared to 19.3% at January 31, 1999. This decrease is due to the
charge-off of loans from certain of the Company's older, larger pools, as well
as the affect of purchasing higher quality loans in fiscal 1999 and 2000 (which
through January 31, 2000 have not required the recording of any significant loan
loss allowances).

         The provision for credit losses was $2,961,000 for fiscal 1999 as
compared to $116,049,000 for fiscal 1998. The fiscal 1998 provision included
$41,667,000 resulting from the Company's February 1, 1997 refinement of its
method of determining the allowance for credit losses, as described above. The
remaining provision of $74,382,000 reflects the downward revisions in the
Company's estimates of the future cash flows from its loans which reflects both
(i) deterioration in collections experienced by the Company in 1998, in
particular with respect to loans purchased in fiscal 1997, and (ii) the
Company's use of more detailed historical collection information, which became
available in 1998 as the result of enhancements in the Company's information
systems. The weighted average estimates of future cash flows from its loans,
expressed as a percentage of the allowance, was 57.3% at January 31, 1999 and
57.4% at January 31, 1998. At January 31, 1999, the allowance for credit losses
was 19.3% of the Company's net investment in loans as compared to 28.8% at
January 31, 1998. This percentage decrease was the result of the changes in the
Company charge-



                                       19
<PAGE>   22

off policy. Effective November 1, 1998, the Company revised its charge-off
policy to charge-off loans as uncollectible at the earlier of (i) the
repossession of the collateral, or (ii) a loan becoming 180 days contractually
past due. Previously the Company's policy was to charge-off loans when they
became 270 days past due on a recency basis.

         OPERATING EXPENSES: Operating expenses include sales and marketing
costs, collection costs and other operating costs. Operating expenses declined
to $10,272,000 for fiscal 2000 from $11,078,000 for fiscal 1999, but increased
as a percentage of revenues, due to the decline in revenues, from 68.1% of
revenues in fiscal 1999 to 137.4% in fiscal 2000. Operating expenses were
$13,527,000 or 37.2% of revenues in 1998.

         The majority of the costs that comprise operating expenses are variable
in nature and will increase and decrease with the level of the Company's loan
purchase and collection activities. However, changes in the size of the
Company's loan portfolio will not immediately allow personnel reductions in
certain functions. Accordingly, operating expenses fell at a rate less than the
decline in revenues in fiscal 2000, and the magnitude and timing of reductions
in operating expenses will generally be less, and later, than declines in
revenues. Although the Company did substantially reduce the number of personnel
during fiscal 2000, from approximately 250 at January 31, 1999 to approximately
100 at January 31, 2000, those reductions took place mainly in the third and
fourth quarters of fiscal 2000. The effect of these reductions on operating
expenses was accordingly reduced. Additionally, the overall reduction in
operating expenses of $806,000 is net of the effect of increases in expenses
associated with the installation and development of upgraded computer and
information systems.

         GENERAL AND ADMINISTRATIVE: General and administrative expenses include
costs of executive, accounting, and legal personnel, occupancy, legal,
professional, insurance, and other general corporate overhead costs. General and
administrative expenses are more fixed in nature than operating expenses and are
not expected to vary as directly with revenues. General and administrative
expenses decreased to $4,750,000 for fiscal 2000 from $4,994,000 for fiscal
1999, and increased as a percentage of revenues, due to the decline in revenues,
from 30.7% in fiscal 1999 to 63.5% in fiscal 2000. General and administrative
expenses were $5,746,000 or 15.8% of revenues in 1998.

         The slight decrease in general and administrative expenses in fiscal
2000, as compared to fiscal 1999, was due to lower personnel and occupancy
costs, and the reversal of certain prior state property, franchise and
installment paper tax liabilities to reflect the settlement of those liabilities
for amounts less than previously estimated. These were partially offset by an
increase in professional fees.

         The decrease in general and administrative costs in 1999, as compared
to 1998, was due to lower personnel and occupancy costs offset by an increase in
professional services.

         LITIGATION AND NON-RECURRING CHARGES: Following the resignation of
Deloitte & Touche, the Company instituted investigations of its previous
financial reporting, and underwent changes in management. In fiscal 1998 the
Company accrued initial estimates of certain resulting litigation and
non-recurring costs and additional costs in excess of those initial estimates
are being expensed as incurred or as such estimates are revised. At January 31,
2000 the Company has accrued an aggregate of $7,125,000, representing (i) the
accrual of the costs of the settlement of the class action litigation, as
discussed above, and (ii) an estimate of the legal costs to be incurred in
responding to the investigations described above (see Notes E and K of Notes to
Consolidated Financial Statements).



                                       20
<PAGE>   23

         Included in the results of operations for fiscal 2000, 1999, and 1998,
respectively, are the following costs related to the litigation, investigations
and management changes (in thousands):

<TABLE>
<CAPTION>
                                                                        Years Ended January 31,
                                                                ---------------------------------------
                                                                  2000            1999           1998
                                                                --------         -------        -------
<S>                                                             <C>              <C>            <C>
Legal and settlement costs relating to litigation matters        $ 7,037         $ 2,545        $ 3,152
Crisis management consulting                                       3,063           3,898             58
Financing, loan waiver and prepayment fees                           408           1,483          3,815
Fees for special independent audits                                  523             845            305
Costs of special investigations                                      273             654            250
Other                                                                  4             160             65
                                                                --------         -------        -------
                                                                $ 11,308         $ 9,585        $ 7,645
                                                                ========         =======        =======
</TABLE>


         WRITE-DOWN OF ASSETS HELD FOR SALE: The Company has certain investments
in affordable housing projects which previously the Company had been holding for
realization through the receipt of distributions from the operations of the
projects and the use of the tax credits generated by the investments. In the
fourth quarter of fiscal 2000, the Company committed to a plan to sell the
investments. As a result, the Company recorded in that quarter, a write-down of
$4,666,000 to reduce the carrying amount of the investments to their fair value
less estimated costs to sell. The Company expects to complete the sale by the
end of the second quarter of fiscal 2001 and future operating results could be
affected by revisions of the estimates of the fair value or selling costs for
the investments, which changes could be material due to the uncertainties
inherent in the estimation process.

         During the fourth quarter of fiscal 2000, the Company also committed to
plans to sell certain real estate investments. The carrying amounts of such
properties was less than their fair value less estimated costs to sell, and
accordingly no write-down was required in connection with the reclassification
of these properties to assets held for sale.

         See Note C of Notes to Consolidated Financial Statements.

         COST RELATED TO PURCHASE OF SHARES: On May 10, 1999, the Company
entered into an Option Agreement with an unaffiliated stockholder to purchase
2,849,630 shares of the Company's common stock at a price of $1.50 per share.
The Company acquired the option by paying the stockholder $1,000,000, which was
paid on May 12, 1999, all of which was to be credited toward the aggregate
exercise price payable by the Company upon any exercise of its option. On June
24, 1999 the Company exercised its right under the Option Agreement to extend
the period of the option ("the First Extension") for 45 days, until August 8,
1999, by paying the stockholder an additional $500,000, of which $250,000 was to
be credited towards the aggregate exercise price payable upon any exercise of
the option. On August 8, 1999, the Company and the unaffiliated stockholder
agreed to an additional extension ("the Second Extension") of the option, for
120 days, for which the Company paid the stockholder an additional $1,000,000,
of which $750,000 was to be credited towards the aggregate exercise price
payable upon any exercise of the option.

         The Company accounted for the initial option purchase, and the
extension payments, by initially determining the fair value of the option or
option extension to be de minimis. In determining the fair value of the option
or extension, the Company considered the period over which the option or
extension was exercisable, the option exercise price, the market price of the
Company's stock and the portion of the payments creditable to the payment due
upon any exercise of the option. The excess of the option or extension payments
over the market value of the underlying common stock was charged to expense. An
aggregate of $2,224,000 was charged to expense in fiscal 2000, which represented
the total of the $1,000,000 payment made to obtain the initial option and
$1,224,000 of the payments made to obtain the First Extension and the Second
Extension.

         On December 2, 1999, the Company exercised the option and paid the
unaffiliated stockholder an additional $2,274,000 for the 2,849,630 shares
subject to the option, which amount equals the product of 2,849,630 and the
$1.50 per share exercise price, less the $2,000,000 in aggregate credits to
which the Company became entitled under the Option Agreement, the First
Extension and the Second Extension. The Company recorded the 2,849,630
repurchased shares at a



                                       21
<PAGE>   24

price of $.895 per share, or an aggregate of approximately $2,551,000,
representing the market price of the common stock at the date the Second
Extension was agreed to.

         INTEREST (INCOME) EXPENSE: Interest expense decreased to zero in fiscal
2000 from $4,361,000 in fiscal 1999, as a result of the Company's fiscal 1999
repayment of all of its outstanding interest bearing debt. During fiscal 2000,
the Company invested its cash balances in short term marketable securities to
generate income of $2,284,000, net of bank charges, as compared to $635,000 in
fiscal 1999.

         In fiscal 1999, interest expense decreased to $4,361,000 from
$6,298,000 in fiscal 1998, principally as a result of the decline in the
Company's level of outstanding debt, which declined from an average of
$86,338,000 in fiscal 1998 to an average of $45,370,000 in fiscal 1999. The
Company's debt was reduced with the cash flow from the net realization in the
size of its loan portfolio and the receipt of an income tax refund. The effect
of the lower level of outstanding debt was partially offset by an increase in
the Company's average interest rate, which increased to 9.5% in fiscal 1999 from
6.8% in fiscal 1998. Fiscal 1999 interest expense was also reduced by $635,000
in interest income net of bank charges.

         INCOME TAXES: For the year ended January 31, 2000 the Company recorded
an income tax benefit of $3,286,000. The income tax benefit represented (i)
adjustments that increased the previously estimated amount of net operating
losses eligible to be carried back against prior years' taxable income, and (ii)
adjustments to revise (reduce) previous estimates of certain income taxes. At
January 31, 2000 the Company has claims for tax refunds in the amount of
$3,664,000.

         For the year ended January 31, 1998, the Company recorded an income tax
benefit of $27,158,000 for the carryback of the fiscal 1998 operating losses
against prior years' taxable income. The Company received substantially all of
the resulting refund in fiscal 1999.

         The Company has available net operating loss carryforwards totaling
approximately $45,059,000, of which $23,348,000 will expire in fiscal 2019 and
$21,711,000 will expire in fiscal 2020. Additionally, the Company has available
$443,000 in foreign tax credits that expire in fiscal 2001 if not utilized, and
$3,004,000 of minimum tax credits that can be carried forward indefinitely. The
Company also has approximately $4,195,000 of low income housing credits, of
which $1,395,000 will expire in fiscal 2013 and approximately $1,400,000 will
expire in each of fiscal years 2019 and 2020, if not utilized. A valuation
allowance for all of the Company's net operating loss carryforwards and other
deferred tax assets has been provided as the Company is unable to determine, at
this time, that the generation of future taxable income against which the net
operating loss and tax credit carryforwards could be used can be predicted to be
more likely than not.

         See Note F of Notes to Consolidated Financial Statements.

         DISCONTINUED OPERATIONS: Prior to fiscal 1997 the Company also engaged
in the automobile rental business, including the subsequent sale of cars when
retired from its rental fleet. The automobile rental operations, conducted under
the names Agency Rent-A-Car, Altra Auto Rental and Automate Auto Rental, rented
vehicles principally on a short-term basis to the insurance replacement market.
The Company disposed of its rental fleet and this operation in fiscal 1996
through the sale of certain assets and through certain leases to a national car
rental company. All liabilities related to the discontinued rental business,
principally self-insurance claims, were retained by the Company. National Motors
was a Company owned dealership which sold vehicles retired from the rental
fleet. The Company discontinued the operations of National Motors in fiscal
1997.

         The fiscal 2000 income of $741,000 represents the effects of negative
operating expenses of $207,000, an income tax benefit of $562,000, and a
revision of the loss on the disposal of the discontinued operation of $28,000,
net of tax. The negative operating expenses reflect the reversal of previously
accrued state taxes (other than income taxes) as the result of the settlement of
certain tax liabilities at amounts less than previously estimated and the
expiration of the statute of limitations with respect to certain other state
taxes, offset by a provision of $600,000 for self-insured liabilities. The
income tax benefit reflects the reversal of previously accrued income taxes as
the result of similar settlements and expiration of statute of limitation as
described above. See Note L of Notes to Consolidated Financial Statements.



                                       22
<PAGE>   25

         The fiscal 1999 income of $450,000 represents the effects of refunds
from a funded workers' compensation partnership related to the discontinued
operations.

         The fiscal 1998 loss from discontinued operations of $5,973,000
primarily reflects the effect of the Company's recording in that year of
additional self-insurance losses and the accrual of $2,720,000 payable under the
Company's settlement with the U.S. Department of Labor (see Note K of Notes to
Consolidated Financial Statements). The fiscal 1998 loss included income tax
expense of $2,690,000.

         On an ongoing basis the Company's results of operations and liquidity
are unlikely to be affected by these discontinued operations except for the
effects of the payment of self-insurance claims on the Company's liquidity, and
the effects on the results of operations of any additional revisions to the
Company's estimates for its self-insurance liabilities. The Company's aggregate
self-insurance claims liability of $4,089,000 as of January 31, 2000 is subject
to further revision as new information is available, and such revisions may be
material due to the uncertainties inherent in the estimation process.


LIQUIDITY AND CAPITAL RESOURCES

         During fiscal 2000, the Company's operations used $18,925,000 of cash
flows. The cash flows from interest income declined due to the declining
portfolio balance and were exceeded by the Company's payments for operating,
general and administrative and litigation and non-recurring expenses together
with $2,224,000 (the portion charged to expense) of the total of $4,774,000
expended to repurchase shares of the Company's common stock. The Company
generated $43,731,000 in cash flows from investing activities principally as the
result of $45,839,000 of cash flows from the net reduction in the size of its
loan portfolio. The Company used $2,582,000 of cash flows from financing
activities primarily as the result of the purchase of the treasury stock. The
net cash flows generated by these sources were used to finance the negative
operating cash flows and retain a cash balance of $54,333,000 at January 31,
2000.

         During fiscal year 1999, the Company generated $33,402,000 in cash
flows from operations, and generated $79,734,000 of cash flows from the net
reduction in the size of its loan portfolio. The $33,402,000 of cash flows from
operations included the benefit of a net refund of $52,079,000 of previously
paid income taxes generated by the carryback of the Company's 1998 losses. The
cash flows generated by these sources were used in 1999 to repay $83,838,000 of
debt outstanding under the Company's bank group facility and senior notes, and
to retain a cash balance of $32,109,000 at January 31, 1999. During fiscal 1998
and 1999, the Company was from time to time in default of the covenants in its
bank group and senior note debt agreements. In the fourth quarter of fiscal 1998
continuing through the third quarter of fiscal 1999 the Company entered into a
series of amendments to those agreements to waive the defaults while the Company
repaid the outstanding borrowings. The Company completed the repayment of the
borrowings under the bank group facility and the redemption of the senior notes
in November 1998.

         In fiscal 1998, the Company generated $1,759,000 in cash flow from
operations, which was offset by $1,973,000 in investing cash outflows, primarily
due to the payments on affordable housing investments. The Company increased its
cash position from January 31, 1997 to January 31, 1998 by $2,926,000,
principally as the result of net financing cash flows from borrowings of
$3,140,000.


YEAR 2000

         The "Year 2000" issue involves the ability of computer systems to
properly recognize date sensitive information when the year changes to 2000.
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. During calendar year 1999 the Company took steps
to prepare its computer systems for the Year 2000, and through the date of this
report the Company has not experienced any material Year 2000 problems. Although
the Company believes that all of its material computer systems, and those of its
significant providers of goods and services, have now been tested through actual
use, there can be no assurance that latent Year 2000 problems remain
undiscovered. Such latent Year 2000 problems, if they exist, could have a
material adverse impact on the Company.



                                       23
<PAGE>   26

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities" (as amended by
SFAS 137). SFAS 133 must first be applied in the first quarter of fiscal years
that begin after June 15, 2000 (the first quarter of fiscal 2002 for the
Company) and in general requires that entities recognize all derivative
financial instruments as assets or liabilities, measured at fair value, and
include in earnings the changes in the fair value of such assets and
liabilities. SFAS 133 also provides that changes in the fair value of assets or
liabilities being hedged with recognized derivative instruments be recognized
and included in earnings. The Company does not presently utilize derivative
instruments, either for hedging or other purposes, and therefore anticipates
that the adoption of the requirements of SFAS 133 will not have a material
affect on its financial statements.


OTHER

         The Company's exposure to the risks of inflation is generally limited
to the potential impact of inflation on the operating and general and
administrative expenses. To date inflation has not had a material adverse impact
on the Company.

         The Company does not utilize futures, options or other derivative
financial instruments.


FORWARD-LOOKING STATEMENTS

         Various statements made in this Item 7 and elsewhere in this Annual
Report on Form 10-K concerning the manner in which the Company intends to
conduct its future operations, and potential trends that may impact its future
results of operations, are forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company may be unable to
realize its plan and objectives due to various important factors, including, but
not limited to, the failure of the court to approve the class action settlement
proposed to be entered into by the Company, the failure of the Board of
Directors to promptly determine what strategic business plan the Company should
pursue, the failure of the Company to implement any such plan due to its
inability to identify suitable acquisition candidates or its inability to obtain
the financing necessary to complete any desired acquisitions, the uncertainties
created by the ongoing litigation with Sam J. Frankino that limit the Board's
ability to make decisions, or any adverse action taken by the Securities and
Exchange Commission that impedes the ability of the Company to pursue any
desired plan of action.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------- ----------------------------------------------------------

         Like virtually all commercial enterprises, the Company can be exposed
to the risk ("market risk") that the cash flows to be received or paid relating
to certain financial instruments could change as a result of changes in interest
rate, exchange rates, commodity prices, equity prices and other market changes.

         The Company does not engage in trading activities and does not utilize
interest rate swaps or other derivative financial instruments or buy or sell
foreign currency, commodity or stock indexed futures or options. Accordingly,
the Company is not exposed to market risk from these sources.

         The Company invests in money market instruments, commercial paper, U.S.
Treasury bills, and certificate of deposits, all with initial maturities three
months or less. These instruments are classified as cash or cash equivalents
for financial reporting purposes and have minimal or no interest rate risk.

         The Company's loan portfolio is comprised of fixed rate financing
agreements with high credit risk consumers. The rates on these loan agreements
cannot be increased for changes in market conditions, and accordingly these
loans are not subject to market risk.

         As of January 31, 2000 the Company has no interest bearing debt, and
accordingly no market risk associated with increases in interest costs resulting
from changes in market rates.



                                       24
<PAGE>   27

Item 8.  Financial Statements and Supplementary Data
-------  -------------------------------------------

REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
National Auto Credit, Inc. and Subsidiaries
Solon, Ohio


         We have audited the accompanying consolidated balance sheets of
National Auto Credit, Inc. and Subsidiaries as of January 31, 2000 and 1999 and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended January 31, 2000. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of National
Auto Credit, Inc. and Subsidiaries as of January 31, 2000 and 1999 and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 2000 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects,
the information set forth therein.

/s/Grant Thornton LLP
Cleveland, Ohio

April 28, 2000 (except for the seventh and eighth paragraphs of Note K as to
               which the dates are May 8, 2000 and May 3, 2000, respectively)



                                       25
<PAGE>   28

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


                                                               January 31,
                                                         ----------------------
                                                           2000         1999
                                                         ---------    ---------

ASSETS
Cash and cash equivalents                                $  54,333    $  32,109
Installment loans, net (Note B)                             29,306       70,401
Property and equipment, net of accumulated
  depreciation of $5,219 and $5,262, respectively            7,677        8,558
Assets held for sale (Note C)                                6,861           --
Affordable housing investments (Note C)                         --       10,270
Income taxes refundable                                      3,664        3,295
Other assets                                                 2,121        2,659
                                                         ---------    ---------
TOTAL ASSETS                                             $ 103,962    $ 127,292
                                                         =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
  Self-insurance claims (Note L)                         $   4,089    $   4,880
  Accrued income taxes (Note F)                              2,926        6,510
  Other liabilities (Note E)                                13,068       16,126
                                                         ---------    ---------
                                                            20,083       27,516

COMMITMENTS AND CONTINGENCIES (Note K)                          --           --

STOCKHOLDERS' EQUITY (Notes G and H)
  Preferred stock - $.05 par value,
    authorized 2,000,000 shares,
    none issued                                                 --           --
  Common stock - $.05 par value,
    authorized 40,000,000 shares, issued
    29,963,301 and 29,982,512 shares, respectively           1,498        1,500
  Additional paid-in capital                               166,139      166,168
  Retained deficit                                         (69,104)     (55,789)
  Treasury stock, at cost, 4,195,598 and 1,345,968
    shares, respectively                                   (14,654)     (12,103)
                                                         ---------    ---------
                                                            83,879       99,776
                                                         ---------    ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $ 103,962    $ 127,292
                                                         =========    =========


See notes to consolidated financial statements.



                                       26
<PAGE>   29

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                            Years Ended January 31,
                                                               ---------------------------------------------------
                                                                 2000                 1999                 1998
                                                               --------             --------             ---------
<S>                                                            <C>                  <C>                  <C>
REVENUE
  Interest income                                              $  7,331             $ 15,322             $  35,304
  Fees and other income                                             145                  957                 1,092
                                                               --------             --------             ---------
    Total                                                         7,476               16,279                36,396

COSTS AND EXPENSES
  Provision for credit losses                                    (6,118)               2,961               116,049
  Operating                                                      10,272               11,078                13,527
  General and administrative                                      4,750                4,994                 5,746
  Litigation and non-recurring charges (Note K)                  11,308                9,585                 7,645
  Write-down of assets held for sale (Note C)                     4,666                   --                    --
  Cost related to purchase of shares (Note G)                     2,224                   --                    --
  Interest (income) expense                                      (2,284)               3,726                 6,298
                                                               --------             --------             ---------
    Total                                                        24,818               32,344               149,265
                                                               --------             --------             ---------
LOSS FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES                                           (17,342)             (16,065)             (112,869)

Benefit for income taxes (Note F)                                (3,286)                  --               (27,158)
                                                               --------             --------             ---------

LOSS FROM CONTINUING OPERATIONS                                 (14,056)             (16,065)              (85,711)

DISCONTINUED OPERATIONS, NET OF TAX  (Note L)                       741                  450                (5,973)
                                                               --------             --------             ---------
NET LOSS                                                       $(13,315)            $(15,615)            $ (91,684)
                                                               ========             ========             =========
BASIC AND DILUTED (LOSS) EARNINGS PER SHARE
  Continuing operations                                        $   (.50)            $   (.56)            $   (3.00)
  Discontinued operations                                           .03                  .01                  (.21)
                                                               --------             --------             ---------
    Net loss per share                                         $   (.47)            $   (.55)            $   (3.21)
                                                               ========             ========             =========
WEIGHTED AVERAGE NUMBER OF SHARES
  OUTSTANDING (000's)
    Basic and diluted                                            28,169               28,609                28,542
                                                               ========             ========             =========
</TABLE>


See notes to consolidated financial statements.



                                       27
<PAGE>   30

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                       Common Stock
                                 ------------------------         Additional        Retained
                                                  Par              Paid-In           Earnings        Treasury
                                  Shares          Value            Capital          (Deficit)         Stock            Total
                                 -------         --------         ---------         --------         --------         --------
<S>                              <C>             <C>              <C>               <C>              <C>              <C>
BALANCE,
JANUARY 31, 1997                  29,846         $  1,492         $ 165,605         $ 51,510         $(11,622)        $206,985

Net loss                                                                             (91,684)                          (91,684)
Stock issued under
  benefit plans                       60                3               467                                                470
Treasury stock
  purchases                                                                                              (481)            (481)
                                 -------         --------         ---------         --------         --------         --------
BALANCE,
JANUARY 31, 1998                  29,906            1,495           166,072          (40,174)         (12,103)         115,290

Net loss                                                                             (15,615)                          (15,615)
Stock issued under
  benefit plans                       77                5                96                                                101
                                 -------         --------         ---------         --------         --------         --------
BALANCE,
JANUARY 31, 1999                  29,983            1,500           166,168          (55,789)         (12,103)          99,776

Net loss                                                                             (13,315)                          (13,315)
Stock cancelled under
  benefit plans                      (20)              (2)              (29)                                               (31)
Treasury stock
  purchases                                                                                            (2,551)          (2,551)
                                 -------         --------         ---------         --------         --------         --------
BALANCE,
JANUARY 31, 2000                  29,963         $  1,498         $ 166,139         $(69,104)        $(14,654)        $ 83,879
                                 =======         ========         =========         ========         ========         ========
</TABLE>


See notes to consolidated financial statements.



                                       28
<PAGE>   31

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                       Years Ended January 31,
                                                                             --------------------------------------------
                                                                               2000             1999              1998
                                                                             --------         ---------         ---------
<S>                                                                          <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss                                                                     $(13,315)        $ (15,615)        $ (91,684)
Adjustments to reconcile net loss to net cash
  (used in) provided by operating activities:
    Depreciation and amortization                                               1,396             1,296             1,897
    Provision for credit losses                                                (6,118)            2,961           116,049
    Loss on disposal of rental operations                                          28                88             1,126
    Loss recorded on write-down of assets held for sale                         4,666                --                --
    Deferred income taxes                                                          --                --            23,675
    Changes in operating assets and liabilities:
      Accrued income tax/refundable                                            (3,953)           52,137           (54,979)
      Other liabilities                                                        (1,116)           (4,722)            7,395
      Self-insurance claims                                                      (819)           (4,352)          (10,427)
      Other operating assets and liabilities, net                                 306             1,609             8,707
                                                                             --------         ---------         ---------
    Net cash (used in) provided by operating activities                       (18,925)           33,402             1,759
                                                                             --------         ---------         ---------
CASH FLOWS FROM INVESTING ACTIVITIES
     Principal collected on gross finance receivable                           61,155           105,950           131,283
     Purchase of loans                                                        (15,316)          (26,216)         (130,753)
     Purchase of other property and equipment                                  (1,091)             (833)             (940)
     Purchase of affordable housing investments                                (1,017)           (1,219)           (1,622)
     Other investing activities, net                                               --                80                59
                                                                             --------         ---------         ---------
     Net cash provided by (used in) investing activities                       43,731            77,762            (1,973)
                                                                             --------         ---------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES
     Net borrowings (payments) on operating debt and notes payable                 --           (83,838)            3,638
     Payments to acquire treasury stock                                        (2,551)               --              (481)
     Stock (cancelled) issued under benefit plans                                 (31)              101               470
     Other financing activities, net                                               --                --              (487)
                                                                             --------         ---------         ---------
     Net cash (used in) provided by financing activities                       (2,582)          (83,737)            3,140
                                                                             --------         ---------         ---------
Increase in cash and cash equivalents                                          22,224            27,427             2,926
Cash and cash equivalents at beginning of year                                 32,109             4,682             1,756
                                                                             --------         ---------         ---------
Cash and cash equivalents at end of year                                     $ 54,333         $  32,109         $   4,682
                                                                             ========         =========         =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
     Interest paid                                                           $     67         $   5,646         $   5,506
                                                                             ========         =========         =========
     Income taxes paid (refunded)                                            $    105         $ (52,079)        $   6,508
                                                                             ========         =========         =========

</TABLE>


See notes to consolidated financial statements.


                                       29
<PAGE>   32


                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998


NOTE A - Summary of Significant Accounting Policies
---------------------------------------------------

NATURE OF OPERATIONS AND CONCENTRATIONS:

         National Auto Credit, Inc. (the "Company"), a financial services
company, began operations in 1969. Since October 1992, the Company has operated
as an alternative-financing source for independent automobile dealerships
throughout the United States. The primary business of the Company is to invest
in sub-prime used automobile consumer loans, which take the form of installment
loans collateralized by the related vehicle. The Company purchases such loans,
or interests in pools of such loans (collectively "loan investments") from
member dealerships. The Company performs the underwriting and collections
functions for all loans it purchases in whole, and also performs such functions
where the member dealer had sold to the Company, and retained for itself,
interests in a pool of loans. The Company's operations enable member dealers to
provide used car purchase financing to customers who have limited access to more
traditional consumer credit sources and as a result might otherwise be unable to
obtain financing.

         The Company's realization of its investments in loan investments, and
interest income therefrom, is dependent on the ability of the customers to repay
the installment notes. Economic conditions in the geographic area in which a
customer resides can affect repayment. Loans and interest in pools of loans are
purchased from dealers throughout the United States. No individual dealer is the
source of more than 4% of the Company's loan investments. From time to time
certain states represent a source of significant portions of the Company's loan
investments, and thus geographical concentrations of credit risk. As of January
31, 2000, 14.7% and 10.3% of the Company's loan investments relate to consumers
in Texas and North Carolina. The Company attempts to mitigate its credit risk by
retaining a security interest in the vehicle financed by the loan.

         Subsequent to January 31, 2000, the Company sold substantially all of
the automobile installment loans remaining in the Company's loan investments.
See Note N.


PRINCIPLES OF CONSOLIDATION:

         The consolidated financial statements include the amounts of the
Company and its wholly-owned subsidiaries. All material intercompany accounts
and transactions have been eliminated in consolidation.


ESTIMATES:

         The preparation of financial statements and the accompanying notes
thereto, in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the respective reporting periods. Actual results could differ
from those estimates.


CASH EQUIVALENTS:

         All highly liquid investments, such as commercial paper, U.S. Treasury
bills and certificates of deposits with initial maturities of three months or
less are considered to be cash equivalents. Cash equivalents are stated at cost,
which approximates the market value. The Company also has restricted cash of
$300,000 held in a "Rabbi Trust" pursuant to the Company's employment agreement
with Allen Rice, its former President and Director.


INSTALLMENT LOANS, INTEREST INCOME AND ALLOWANCE FOR CREDIT LOSSES:

         The Company's loan investments result from purchases of installment
loans at discounts from the face or contractual amount. Those discounts reflect
both (i) an element of interest income that the Company seeks to earn on its
investment in the loans, and (ii) the Company's assessment, at the time of
purchase, that a portion of the loans it purchases are impaired in that the
loans will not be repaid in accordance with their contractual terms.



                                       30
<PAGE>   33

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998


NOTE A - Summary of Significant Accounting Policies (cont.)
         ------------------------------------------

         At the time of purchase, the Company groups loans into loan pools that
it believes will have common future cash flow characteristics, on the basis of
possessing similar contractual and risk characteristics. Loans are initially
recorded at the cost to purchase the loans, adjusted for any net loan
origination fees and related direct incremental loan origination costs. At the
time of purchase, the components of the Company's net initial investment in the
loans is recorded by establishing as the "gross finance receivable" the
contractual cash flows (including contractual interest) to which the Company is
entitled, which is offset by the difference between the gross finance receivable
and the net initial investment, which is segregated into two components; (i)
unearned income, which represents the difference between the net initial
investment and the Company's estimate of the future cash flows from the gross
finance receivable, and (ii) a credit loss discount, which represents the
difference between the Company's estimate of the future cash flows from the
gross finance receivable and its contractual cash flows.

         Prior to mid-1999, the majority of the Company's loan investments took
the form of the Company's purchase of interests in pools of loans, which were
made under sharing agreements between the Company and individual dealers, rather
than the current program whereby the Company is purchasing whole loans. In
general, the sharing agreements provided that the dealer would receive an
initial payment ("the dealer advance") from the Company of a percentage of the
contractual principal in return for which the Company would be entitled to
retain, after collection costs, (i) 20% of all collections from that dealer's
loans, and (ii) the remaining 80% of the collections from that dealer's loans
until the Company recovered all of that dealer's advances, computed on an
aggregate basis for all loans covered by the sharing agreement with that dealer.
The dealer advance represented the Company's net initial investment, which was
recorded in the manner described in the preceding paragraph based on the portion
of the pools of loans the Company was entitled to under such sharing agreements
(i.e., contractual cash flows from the loans net of the contractual cash flows
to which the dealer would be entitled).

         Unearned income is recognized in income over the life of the loans on
the interest method, using for each pool of loans the interest rate that
reflects the difference between the Company's net investment in the loans and
its estimate of the future cash flows therefrom, as determined at the time of
the loan purchase. The Company's net investment in each loan pool includes its
net initial investment, any interest income recognized but not yet collected,
reduced by collections and any previously recorded allowance for credit losses.

         Effective February 1, 1997, the Company refined its methodology for
estimating the allowance for credit losses to group loans into pools with
similar characteristics and to assess the recoverability of its loan investments
on the basis of the present value of the expected future cash flows, as
discussed in Statement of Financial Accounting Standards ("SFAS") 114 (as
amended by SFAS 118), "Accounting by Creditors for Impairment of a Loan." On a
continual basis, the Company reviews its estimates of future cash flows for its
loan pools. Such estimates are revised to reflect changes in historical
collection rates, charge-off rates, loan delinquencies and other economic
indicators that serve as the basis for predicting future loan performance. The
Company's net investment in each loan pool is compared to the present value of
the revised estimate of future cash flows, discounted using the rate at which
the Company is recognizing interest income on that pool of loans. Where the
estimated cash flows have been revised downward and as a result such a
comparison reflects an excess of the investment over the present value of the
future cash flows, the Company records an allowance for credit losses by a
charge to expense. The Company also reduces unearned income by a
reclassification to the credit loss discount so that future interest income will
reflect the original annual interest income rate on the net investment in the
loan pool. In those instances where a revised estimate of future cash flows
indicates an increase in estimated cash flows over the previous estimate, the
Company first reverses into income any previously recorded allowance for credit
losses, and then increases the rate at which future interest income is
recognized by a reclassification from the credit loss discount to unearned
income.



                                       31
<PAGE>   34

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998


NOTE A - Summary of Significant Accounting Policies (cont.)
         ------------------------------------------

         Prior to the Company's February 1, 1997 refinement of its method of
determining the allowance for credit losses described above, the Company
evaluated the adequacy of its allowance for credit losses using a method
generally similar to that described above, except that the estimated cash flows
were compared to the Company's net investment on an undiscounted basis. The
effect of utilizing discounting consistent with SFAS 114 was $41,667,000, which
was included in the provision for credit losses recorded in fiscal 1998.

         The Company's policy, effective November 1, 1998, is to charge-off
loans as uncollectible at the earlier of (i) the repossession of the collateral,
or (ii) a loan becoming 180 days contractually past due. From November 1, 1997
until October 31, 1998, loans were charged-off once they became 270 days past
due on a recency basis. Prior to November 1, 1997, loans were charged-off once
they became one year contractually past due. Loan charge-offs are recorded by
eliminating the remaining gross finance receivable against the allowance for
credit losses and the credit loss discount on a pro-rata basis. The changes in
the Company's charge-off policy did not have any material affect on net loss.

         Also see Note B.


FEES AND OTHER INCOME:

         Fees and other income includes non-refundable enrollment fees which,
prior to fiscal 1999, the Company charged each dealer upon its acceptance into
the Company's program, and annual maintenance fees charged to the member
dealers. Such fees were deferred, as were any incremental direct costs
associated with the initial enrollment of the dealer, and recognized in income
on a straight-line basis over twelve months.

         Fees and other income also include fees earned on collections, sale of
warranty contracts and floorplanning. The Company had discontinued floorplanning
by the end of fiscal 1999 and discontinued fees earned on collections, and the
sale of warranty contracts, in fiscal 1998.


PROPERTY AND EQUIPMENT:

         Property and equipment is stated at cost, and is depreciated using the
straight-line method over its estimated useful life. The most significant
components of property and equipment are buildings and computer equipment, which
are generally depreciated over 30 and 5 years, respectively.


INCOME TAXES:

         Deferred income taxes are provided for all temporary differences
between the book and tax basis of assets and liabilities. Deferred income taxes
are adjusted to reflect new tax rates when they are enacted into law. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance is
recognized if it is anticipated that some or all of a net deferred tax asset may
not be realized. See Note F.


ACCOUNTING FOR STOCK-BASED COMPENSATION:

         The Company accounts for stock options and awards in accordance with
SFAS 123, "Accounting for Stock-Based Compensation," which allows companies to
continue to recognize compensation expense for grants to employees pursuant to
Accounting Principles Board Opinion No. 25, ("APB 25"), "Accounting for Stock
Issued to Employees" but requires companies to disclose the effect on net income
(loss) and earnings (loss) per share had the Company adopted the provisions of
SFAS 123 requiring the recognition of compensation expense based on the fair
value of the options or awards. See Note H.



                                       32
<PAGE>   35

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998


NOTE A - Summary of Significant Accounting Policies (cont.)
         ------------------------------------------

EARNINGS PER SHARE:

         The Company adopted the requirements of SFAS 128, "Earnings Per Share,"
effective with the fourth quarter of fiscal 1998. As required by SFAS 128,
previously reported earnings per share amounts have been restated.

         Basic earnings per share is computed by dividing net income (loss) by
the weighted-average number of common shares outstanding for the year. Dilutive
earnings per share for all years presented is the same as basic earnings per
share because the inclusion of common stock equivalents (stock options) would
have an antidilutive effect on loss per share for fiscal 2000, 1999 and 1998.


COMPREHENSIVE INCOME:

         During fiscal 1999, the Company adopted SFAS 130, "Reporting
Comprehensive Income." SFAS 130 established standards for reporting and
displaying comprehensive income and its components in a full set of financial
statements. During the years presented, the Company had no components of Other
Comprehensive Income. Accordingly, the Company has not presented a separate
statement of comprehensive income.


NEW ACCOUNTING PRONOUNCEMENTS:

         In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities"(as amended by
SFAS 137). SFAS 133 must first be applied in the first quarter of fiscal years
that begin after June 15, 2000 (the first quarter of fiscal 2002 for the
Company) and in general requires that entities recognize all derivative
financial instruments as assets or liabilities, measured at fair value, and
include in earnings the changes in the fair value of such assets and
liabilities. SFAS 133 also provides that changes in the fair value of assets or
liabilities being hedged with recognized derivative instruments be recognized
and included in earnings. The Company does not presently utilize derivative
instruments, either for hedging or other purposes, and therefore anticipates
that the adoption of the requirements of SFAS 133 will not have a material
affect on its financial statements.

RECLASSIFICATIONS:

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



                                       33
<PAGE>   36

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998


NOTE B - Installment Loans, Net
         ----------------------

         The following table sets forth the components of and changes in the
gross finance receivable, unearned income, credit loss discount and allowance
for credit losses of the Company's net installment loans as of and for the years
ended January 31, 1998, 1999 and 2000 (in thousands):

<TABLE>
<CAPTION>
                                                   Gross                               Credit          Allowance        Installment
                                                  Finance             Unearned          Loss           for Credit          Loans,
                                                 Receivable            Income          Discount          Losses             Net
                                                -------------         --------         --------         ---------       ------------
<S>                                             <C>                   <C>              <C>              <C>
Balance, January 31, 1997                           $ 419,280         $(43,665)        $(28,810)        $ (63,307)        $ 283,498
   Purchases                                          177,449          (31,838)         (20,383)               --           125,228
   Cash collected                                    (166,216)              --               --                --          (166,216)
   Charge-offs                                       (160,823)              --           33,938           126,885                --
   Provision for credit losses1                            --               --               --          (116,049)         (116,049)
   Interest income                                         --           35,304               --                --            35,304
   Reclassification                                        --           19,665          (19,665)               --                --
   Dealer fees charged                                     --               --               --            (9,318)           (9,318)
                                                    ---------         --------         --------         ---------         ---------

Balance, January 31, 1998                             269,690          (20,534)         (34,920)          (61,789)          152,447
   Purchases                                           44,349           (1,840)         (15,316)               --            27,193
   Cash collected                                    (120,934)              --               --                --          (120,934)
   Charge-offs                                        (77,632)              --           29,046            48,586                --
   Provision for credit losses                             --               --               --            (2,961)           (2,961)
   Interest income                                         --           15,322               --                --            15,322
   Reclassification                                        --               --               --                --                --
   Dealer fees charged                                     --               --               --              (666)             (666)
                                                    ---------         --------         --------         ---------         ---------

Balance, January 31, 1999                             115,473           (7,052)         (21,190)          (16,830)           70,401
   Purchases                                           27,061           (1,972)         (11,375)               --            13,714
   Cash collected                                     (68,258)              --               --                --           (68,258)
   Charge-offs                                        (23,429)              --           15,353             8,076                --
   Provision for credit losses                             --               --               --             6,118             6,118
   Interest income                                         --            7,331               --                --             7,331
   Reclassification                                        --             (953)             953                --                --
   Dealer fees charged                                     --               --               --                --                --
                                                    ---------         --------         --------         ---------         ---------

Balance, January 31, 2000                           $  50,847         $ (2,646)        $(16,259)        $  (2,636)        $  29,306
                                                    =========         ========         ========         =========         =========
</TABLE>

(1) Includes $ 41,667,000 attributable to the effects of utilizing discounting
    as of February 1, 1997 in the determination of the allowance for credit
    losses. See Note A.



                                       34

<PAGE>   37
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998




NOTE B - Installment Loans, Net (cont.)
         ----------------------

         The balances at January 31, 1999 and 2000 include amounts related to
whole loans purchased by the Company, and to loan interests purchased under
sharing agreements with dealers, as follows (in thousands):
<TABLE>
<CAPTION>

                                  Gross                                 Credit            Allowance       Installment
                                  Finance          Unearned             Loss             for Credit          Loans,
                                Receivable           Income            Discount            Losses              Net
                                ----------          --------           --------          ----------         --------

<S>                              <C>               <C>                <C>                <C>                <C>
January 31, 1999
   Whole loans                   $ 22,142          $ (1,132)          $(11,248)          $   --             $  9,762
   Loan interests                  93,331            (5,920)            (9,942)           (16,830)            60,639
                                 --------          --------           --------           --------           --------
   Total                         $115,473          $ (7,052)          $(21,190)          $(16,830)          $ 70,401
                                 ========          ========           ========           ========           ========

January 31, 2000
   Whole loans                   $ 26,455          $ (1,308)          $(10,578)          $   (615)          $ 13,954
   Loan interests                  24,392            (1,338)            (5,681)            (2,021)            15,352
                                 --------          --------           --------           --------           --------
   Total                         $ 50,847          $ (2,646)          $(16,259)          $ (2,636)          $ 29,306
                                 ========          ========           ========           ========           ========
</TABLE>



         The whole loans and the loans underlying the loan interests,
outstanding at January 31, 2000, generally have initial terms ranging from 24 to
48 months, with average initial terms and amounts of 40 months and $10,300,
respectively. At January 31, 2000 and 1999 the average remaining term was 16 and
20 months, respectively, and the percentage of loans which were greater than 120
days past due were 6.7% and 6.5%, respectively.

         Contractual maturities of the loan receivables by year have not been
presented because in March 2000 the Company sold substantially all of the loans
remaining in the Company's loan investments. See Note N.


NOTE C - Assets Held for Sale
         --------------------

         Assets held for sale are as follows (in thousands):

                                                                January 31,
                                                           ---------------------
                                                              2000       1999
                                                           ---------   ---------

Affordable housing investments                              $  5,605      $  --
Developed real estate leased to commercial tenant                616         --
Undeveloped real estate subject to a ground lease                640         --
                                                            --------        ---
   Total                                                    $  6,861      $  --
                                                            ========      =====


               The limited partner investments on affordable housing projects
were, until the fourth quarter of fiscal 2000, held for the generation of
benefits in the form of tax credits as well as the receipt of cash distributions
from the operations of the projects. During the fourth quarter of fiscal 2000
the Company committed to a plan to sell the investments. As a result, the
Company recorded, in that quarter, a write-down of $4,666,000 to reduce the
carrying amount of the investments to their fair





                                       35

<PAGE>   38

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE C - Assets Held for Sale (cont.)
         --------------------

value less estimated costs to sell. As a limited partner in the affordable
housing projects, the Company is required as of January 31, 2000 to make future
contributions of $1,639,000, plus interest at an average rate of 8.9% per annum,
in varying amounts during the fiscal years ended January 31, 2001, 2002 and 2003
of $593,000, $614,000 and $432,000, respectively. See Note E.

         During the fourth quarter of fiscal 2000, the Company also committed to
plans to sell certain real estate investments. The carrying amounts of such
properties was less than their fair value less estimated costs to sell, and
accordingly no write-down was required in connection with the reclassification
of these properties to assets held for sale.


NOTE D -  Notes Payable
          -------------

         Notes payable was zero as of January 31, 2000 and 1999.

         During fiscal 1999 the Company was from time to time in default of the
covenants in its bank group and senior note debt agreements. In the fourth
quarter of fiscal 1998 through the third quarter of fiscal 1999 the Company
entered into a series of amendments to those agreements to waive the defaults
while the Company repaid the outstanding borrowings. The Company completed the
repayment of the borrowings under the bank group facility and the redemption of
the senior notes in November 1998 using the proceeds of its income tax refund
(see Note F). In connection with the redemption of the senior notes the Company
paid an amendment fee of $500,000, and a prepayment penalty of $2,939,000, of
which $1,039,000 and $2,400,000 were charged to expense in fiscal years 1999 and
1998, respectively.


NOTE E - Other Liabilities
         -----------------

         Other liabilities are as follows (in thousands):

                                                                January 31,
                                                           ---------------------
                                                             2000         1999
                                                           -------       -------

Accounts payable                                           $   632       $ 3,139
Accrued state and local taxes                                1,232         2,700
Accrued litigation expenses (Note K)                         7,125         3,000
Accrued expenses                                             2,440         5,082
Deferred capital contributions (Note C)                      1,639         2,205
                                                           -------       -------
   Total                                                   $13,068       $16,126
                                                           =======       =======







                                       36

<PAGE>   39




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE F - Income Taxes
         ------------

         The components of the provision (benefit) for income taxes in the
consolidated statement of operations are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                 Years Ended January 31,
                                                  -----------------------------------------------------
                                                   2000                   1999                   1998
                                                  -------               --------               --------

Current
<S>                                               <C>                   <C>                    <C>
  Federal                                         $(2,848)              $   --                 $(49,885)
  State                                            (1,000)                  --                    1,236
                                                  -------               --------               --------
                                                   (3,848)                  --                  (48,649)
Deferred
  Federal                                            --                     --                   22,562
  State                                              --                     --                    1,619
                                                  -------               --------               --------
                                                     --                     --                   24,181
                                                  -------               --------               --------

Total                                              (3,848)                  --                  (24,468)

Allocated to discontinued operations                 (562)                  --                    2,690
                                                  -------               --------               --------

Continuing operations                             $(3,286)              $   --                 $(27,158)
                                                  =======               ========               ========
</TABLE>




         The Company has available net operating loss carryforwards totaling
approximately $45,059,000, of which $23,348,000 will expire in fiscal 2019 and
$21,711,000 will expire in fiscal 2020. Additionally, the Company has available
$443,000 in foreign tax credits that expire in fiscal 2001 if not utilized, and
$3,004,000 of minimum tax credits that can be carried forward indefinitely. The
Company also has approximately $4,195,000 of low income housing credits, of
which $1,395,000 will expire in fiscal 2013 and approximately $1,400,000 will
expire in each of fiscal years 2019 and 2020, if not utilized.




                                       37

<PAGE>   40




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE F - Income Taxes (cont.)
         ------------

         The components of the net deferred tax asset (liability) are as follows
(in thousands):
<TABLE>
<CAPTION>

                                                                                       January 31,
                                                                           ---------------------------------
                                                                              2000                   1999
                                                                            --------               --------

<S>                                                                         <C>                    <C>
Deferred tax assets:
  Self-insurance claims                                                     $  1,420               $  1,654
  Allowance for credit losses                                                    923                  5,890
  State income taxes                                                             551                   --
  Accrued liabilities                                                          3,888                  3,312
  Tax credits carryforwards                                                    7,655                  8,131
  Net operating loss carryforward                                             15,771                  9,532
  Other                                                                          221                    955
                                                                            --------               --------
  Total deferred tax assets                                                   30,429                 29,474
                                                                            --------               --------

Deferred tax liabilities:
  Depreciation                                                                  (726)                  (718)
  State income taxes                                                            --                     (322)
  Limited partnership investments                                             (1,821)                (3,068)
  Mark-to-market valuation and related income adjustments                        (76)                (1,434)
  Other                                                                         (376)                (2,721)
                                                                            --------               --------
  Total deferred tax liabilities                                              (2,999)                (8,263)
                                                                            --------               --------


Net deferred tax asset before valuation allowance                             27,430                 21,211
Less: valuation allowance                                                    (27,430)               (21,211)
                                                                            --------               --------
Net deferred tax asset                                                      $   --                 $   --
                                                                            ========               ========
</TABLE>





         A valuation allowance for all of the Company's net deferred tax assets
has been provided as the Company is unable to determine, at this time, that the
generation of future taxable income against which the net operating loss and tax
credit carryforwards could be used can be predicted to be more likely than not.
The net change in the valuation allowance for the years ended January 31, 2000,
1999 and 1998 was $6,219,000, $4,618,000, and $16,593,000, respectively.

         The Company was able to carryback its fiscal 1998, net operating loss
and received a refund of approximately $47,000,000 in 1999 of previously paid
taxes (reflected as a refund receivable at January 31, 1998). In addition, the
Company has claims for tax refunds in the amount of $3,664,000 at January 31,
2000.

         Reconciliations of the federal statutory tax rate to the effective tax
rate for continuing operations are as follows:
<TABLE>
<CAPTION>


                                                                                   Years Ended January 31,
                                                                        ----------------------------------------------
                                                                         2000              1999                1998
                                                                        -------          ---------        ------------
<S>                                                                     <C>                <C>                <C>
Statutory rate                                                          (35.0)%            (35.0)%            (35.0)%
State income taxes, net of federal tax benefit                           (5.0)               9.4                1.3
Deferred tax valuation allowance                                         35.8               28.7                9.6
Tax credits                                                               2.7               (9.4)              (3.3)
Adjustment to prior year carryback estimates                            (18.9)                --                 --
Other                                                                     1.5                6.3                3.3
                                                                       ------               ----               ----
  Effective Tax Rate                                                    (18.9)%               .0%             (24.1)%
                                                                       ======               ====               ====
</TABLE>



                                       38
<PAGE>   41






                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE F - Income Taxes (cont.)
         ------------

         The Company has elected to be treated as a dealer in securities under
section 475 of the Internal Revenue Code effective for fiscal year 1998.
Pursuant to this election, the Company must recognize as taxable income or loss
the difference between the fair market value of its receivables, and the income
tax basis of its receivables (mark-to-market valuation). This election has no
impact on the recognition of pre-tax income for financial reporting purposes.


NOTE G - Stockholders' Equity
         --------------------

         On May 10, 1999, the Company entered into an Option Agreement with an
unaffiliated stockholder to purchase 2,849,630 shares of the Company's common
stock at a price of $1.50 per share. The Company acquired the option by paying
the stockholder $1,000,000, which was paid on May 12, 1999, all of which was to
be credited toward the aggregate exercise price payable by the Company upon any
exercise of its option. On June 24, 1999, the Company exercised its right under
the Option Agreement to extend the period of the option ("the First Extension")
for 45 days, until August 8, 1999, by paying the stockholder an additional
$500,000, of which $250,000 was to be credited towards the aggregate exercise
price payable upon any exercise of the option. On August 8, 1999, the Company
and the unaffiliated stockholder agreed to an additional extension ("the Second
Extension") of the option, for 120 days, for which the Company paid the
stockholder an additional $1,000,000, of which $750,000 was to be credited
towards the aggregate exercise price payable upon any exercise of the option.

         The Company accounted for the initial option purchase, and the
extension payments, by initially determining the fair value of the option or
option extension to be de minimis. In determining the fair value of the option
or extension, the Company considered the period over which the option or
extension was exercisable, the option exercise price, the market price of the
Company's stock and the portion of the payments creditable to the payment due
upon any exercise of the option. The excess of the option or extension payments
over the market value of the underlying common stock was charged to expense. An
aggregate of $2,224,000 was charged to expense in fiscal 2000, which represented
the total of the $1,000,000 payment made to obtain the initial option and
$1,224,000 of the payments made to obtain the First Extension and Second
Extension.

         On November 22, 1999, the Board of Directors of the Company approved
the exercise of its option. On December 2, 1999, the Company exercised such
option and paid the unaffiliated stockholder an additional $2,274,000 for the
2,849,630 shares subject to the option, which amount equals the product of
2,849,630 and the $1.50 per share exercise price, less the $2,000,000 in
aggregate credits to which the Company became entitled under the Option
Agreement, the First Extension and the Second Extension. The Company recorded
the 2,849,630 repurchased shares at a price of $.895 per share, or an aggregate
of approximately $2,551,000, representing the market price of the common stock
at the date the Second Extension was agreed to.

         The Company's Board of Directors authorized the repurchase of up to
4,500,000 shares of the Company's outstanding stock, of which 4,195,598 and
1,345,968 shares have been repurchased by the Company as of January 31, 2000 and
1999, respectively. Shares repurchased amounted to 2,849,630, 0, and 47,400 in
fiscal years 2000, 1999 and 1998, respectively.




                                       39
<PAGE>   42



                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE H - Benefit Plans
         -------------

         The Company's 1993 Equity Incentive Plan provides for the granting of
incentive and non-qualified stock options, stock appreciation rights, and common
stock and restricted common stock awards to key employees. The total number of
shares available for options or awards granted under this Plan is 2,200,000
shares. There were (19,211), 76,400 and 33,200 shares of restricted stock
awarded (cancelled) under this Plan during the years ended January 31, 2000,
1999 and 1998, respectively. There were 1,093,311 shares available for future
stock awards or option grants at January 31, 2000.

         The Company's 1983 Stock Option Plan provided for the granting of both
incentive and non-qualified stock options to key employees. This Plan terminated
on April 17, 1993 and no further options may be granted, although options still
remain outstanding. Options previously granted under the Plan extend for ten
years and become exercisable in installments over the first five years.

         The Company's 1995 Dealer Stock Option Plan for Member Dealers provided
for the granting of up to 550,000 common stock options to member dealers based
upon certain volume criteria. The options become exercisable over a three-year
period. This program was discontinued during fiscal 1998. During the year ended
January 31, 1998 there were 24,500 options granted at a price of $11.13.
<TABLE>
<CAPTION>

                                                                                                 Weighted Average
                                                                            Number of             Exercise Price
                                                                             Options                 Per Share
                                                                       ---------------         ---------------------

<S>                                                                     <C>                        <C>
                             Balance January 31, 1997                         470,188              $       8.98
                                  Granted                                      35,000                     10.53
                                  Exercised                                   (27,239)                     6.76
                                  Cancelled                                  (112,783)                    10.15
                                                                       ---------------

                             Balance January 31, 1998                         365,166                      8.94
                                  Granted                                     513,000                      1.34
                                  Exercised                                      --                         --
                                  Cancelled                                  (242,556)                     8.10
                                                                       ---------------

                             Balance January 31, 1999                         635,610                      3.12
                                  Granted                                     800,000                      1.03
                                  Exercised                                      --                         --
                                  Cancelled                                  (528,650)                     2.81
                                                                       ---------------

                             Balance January 31, 2000                         906,960                      1.46
                                                                       ===============
</TABLE>



         The weighted-average grant date fair value of options granted during
fiscal 2000 was $0.94 per share.




                                       40
<PAGE>   43





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE H - Benefit Plans (cont.)
         -------------

         The outstanding options expire at various dates through the year 2009.
A summary of stock options outstanding and exercisable as of January 31, 2000 is
as follows:

<TABLE>
<CAPTION>

                                                  Options Outstanding                          Options Exercisable
                          --------------------------------------------------------   ----------------------------------------
        Range of                            Weighted Average      Weighted Average                         Weighted Average
       Per Share              Number      Remaining Contractual     Per Share            Number                Per Share
    Exercise Prices         Outstanding         Life (years)      Exercise Price       Exercisable          Exercise Price
--------------------      --------------  ---------------------   ----------------   --------------        ----------------

<S>                         <C>                    <C>             <C>               <C>                   <C>
$0.92 to $1.66                 881,000              9.07           $      1.19            881,000          $         1.19
$    7.70                        5,060              0.73                  7.70              5,060                    7.70
$10.75 to $11.14                18,700              5.14                 10.96             14,700                   10.98
$    14.77                       2,200              2.76                 14.77              2,200                   14.77
                            ----------                                                -----------

Totals                         906,960                                                   902,960
                            ==========                                               ===========
</TABLE>




         If the Company had recorded compensation expense using the fair value
method of SFAS 123, the Company's net after tax loss and loss per share would
have been as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                     Years Ended January 31,
                                          -------------------------------------------------------------------------
                                                   2000                      1999                    1998
                                          -----------------------    ---------------------     --------------------

<S>                                                <C>                      <C>                      <C>
Net loss, as reported                              $  (13,315)              $  (15,615)              $  (91,684)
Pro forma net loss                                    (13,696)                 (16,054)                 (91,858)
Loss per share, as reported                              (.47)                    (.55)                   (3.21)
Pro forma loss per share                                 (.49)                    (.56)                   (3.22)
</TABLE>



         The fair value of each award or option grant included in the above
calculations is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
the years ended January 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>

                                                                     Years Ended January 31,
                                          -------------------------------------------------------------------------
                                                   2000                      1999                    1998
                                          -----------------------    ---------------------     --------------------

<S>                                                 <C>                      <C>                     <C>
Risk-free interest rate                                 6.109%                   5.175%                   6.332%
Expected life                                       7.00 years               7.00 years               5.60 years
Expected volatility                                   108.499%                 111.733%                  40.939%
Dividend yield                                              0%                       0%                       0%

</TABLE>


         The effects of applying SFAS 123 for the pro forma disclosures are not
representative of the effects expected on reported net earnings (loss) per share
in future years, since the valuations are based on highly subjective assumptions
about the future, including stock price volatility and exercise patterns.



                                       41
<PAGE>   44



                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE H - Benefit Plans (cont.)
         -------------

         The Company has a 401(k) Savings and Profit-Sharing Plan ("401k")
covering substantially all employees who have completed one year of service with
the Company. This savings plan allows eligible employees to contribute up to 15
percent of their compensation on a pre-tax basis. The Company matches 50% of the
first 4% of the employees' contribution. Company contributions are vested
incrementally over 6 years. The charge to operations for the Company's
contribution was $67,300, $69,500 and $62,200 for years ended January 31, 2000,
1999 and 1998, respectively. The Company ceased allowing purchases of Company
stock into the 401(k) plan effective July 1, 1997.

         The Company does not typically provide post-retirement or
post-employment benefits to its employees.

NOTE I - Related Party Transactions
         --------------------------

         During fiscal 1998, the Company had a short-term unsecured uncommitted
line of credit with Brown Brothers Harriman ("BBH") for $13,700,000 of which
$838,000 was outstanding at January 31, 1998. The line of credit was terminated
on January 26, 1998, and the remaining principal was paid off in November 1998.
A former director of the Company was a partner of BBH.

NOTE J - Financial Instruments
         ---------------------

         The Company has various financial instruments including cash and cash
equivalents, installment loans, investments in affordable housing limited
partnerships, and miscellaneous other assets. Many of these instruments are
short-term in nature and the fair value of these financial instruments has been
estimated based on available market information and appropriate valuation
methodologies. The Company has determined that their carrying values approximate
estimated fair values.

         The Company determines the fair value of installment loans using the
mark-to-market accounting method for dealers in securities under section 475 of
the Internal Revenue Code. The carrying values and fair values, were $29,306,000
and $29,585,000, respectively, at January 31, 2000 and $70,401,000 and
$64,000,000, respectively, at January 31, 1999.


NOTE K - Commitments and Contingencies
         -----------------------------

         In the normal course of its business, the Company is named as defendant
in legal proceedings. It is the policy of the Company to vigorously defend
litigation and/or enter into settlements of claims where management deems
appropriate.

         The Company and certain of its former and current officers and
directors have been named as defendants in eleven purported class action
lawsuits which were filed in the United States District Court for the Northern
District of Ohio subsequent to the January 1998 resignation of the Company's
former independent auditors, Deloitte & Touche, LLP ("Deloitte & Touche"). The
actions, which were consolidated, allege fraud and other violations of the
federal securities laws and seeks money damages as the result of various alleged
frauds and violations of the Securities Exchange Act of 1934, including
misrepresentations about the adequacy of the Company's allowance for credit
losses and its loan underwriting practices.

         The actions were consolidated on October 16, 1998, and discovery was
stayed pending the court's rulings on various outstanding motions. On October
12, 1999, the Honorable Patricia Hemann, United States Magistrate, issued a
report and recommendation (the "Report") to the Honorable Solomon Oliver, United
States District Judge, recommending that the motions to dismiss filed by the
Company and the other defendants be granted. Plaintiffs filed an objection to
the Magistrate's Report with the District Court and the Company responded to
this objection.


                                       42
<PAGE>   45

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE K - Commitments and Contingencies (cont.)
         -----------------------------

         In April 2000, the Company and the class action plaintiff's
representatives reached an agreement in principle to settle the class action
securities litigation. Under the terms agreed upon, the Company will pay to the
plaintiffs' class $6.5 million in consideration for, among other things, the
release of all defendants from liability. The settlement is not an admission of
liability by any party. The settlement is subject to preparation and execution
of final documentation and court approval. The Company believes that it is
probable that the settlement will be approved by the court and completed on the
terms agreed to in principle, and accordingly at January 31, 2000 has accrued
the $6.5 million settlement amount together with an estimate of the legal fees
that will be incurred in completing the settlement. However, there can be no
assurance that the settlement will be approved and completed. In the event the
settlement is not completed, the Company intends to vigorously defend itself;
however, absent such settlement, the Company cannot currently predict the
ultimate outcome of this matter, and an unfavorable resolution of these actions
could have a material adverse effect on the Company's financial position,
results of operations and liquidity.

         The Securities and Exchange Commission, the United States Attorney for
the Northern District of Ohio, and the Federal Bureau of Investigation, are
investigating the issues raised as the result of the resignation of Deloitte &
Touche. The Company is cooperating fully with the investigations. The ultimate
outcome of these investigations on the Company cannot presently be predicted and
the Company has not recorded any provision for any monetary penalties that may
result from civil or criminal proceedings that might be commenced at the
conclusion of such investigations. An unfavorable resolution of any of these
investigations could have a material adverse effect on the Company's financial
position, results of operations and liquidity.

         Following the resignation of Deloitte & Touche, the Company instituted
investigations of its previous financial reporting and underwent changes in
management. In fiscal 1998 the Company accrued initial estimates of certain
resulting costs, and additional costs in excess of those initial estimates are
being expensed as incurred or as such estimates are revised. At January 31, 2000
the Company has accrued an aggregate of $7,125,000, representing (i) the accrual
of the costs of the settlement of the class action litigation, as discussed
above, and (ii) an estimate of the legal costs to be incurred in responding to
the investigations described above (see Note E). Included in the results of
operations for fiscal 2000, 1999 and 1998, respectively, are the following costs
(in thousands):
<TABLE>
<CAPTION>

                                                                                  Years Ended January 31,
                                                                         ----------------------------------------
                                                                          2000              1999             1998
                                                                         -------           ------           ------

<S>                                                                      <C>               <C>              <C>
Legal and settlement costs relating to litigation matters                $ 7,037           $2,545           $3,152
Crisis management consulting                                               3,063            3,898               58
Financing, loan waiver and prepayment fees                                   408            1,483            3,815
Fees for special independent audits                                          523              845              305
Costs of special investigations                                              273              654              250
Other                                                                          4              160               65
                                                                         -------           ------           ------
                                                                         $11,308           $9,585           $7,645
                                                                         =======           ======           ======
</TABLE>



         On April 6, 2000 the Company filed a complaint in the Delaware Court of
Chancery captioned National Auto Credit, Inc. v. Sam J. Frankino, Civil Action
No. 17973-NC. The complaint, as amended on May 3, 2000, seeks injunctive and
monetary relief against defendant Frankino for alleged breaches of fiduciary
duty in his capacity as a director of the Company. On May 8, 2000, Mr. Frankino
filed a motion to extend the time in which Mr. Frankino may respond to the
Company's complaint from May 18, 2000 to June 9, 2000.

         On April 7, 2000, Sam J. Frankino delivered to the Company a written
consent purportedly representing the holders of a majority of the outstanding
shares of the Company's common stock. The consent action purports to (a)

                                       43
<PAGE>   46

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE K - Commitments and Contingencies (cont.)
         -----------------------------

rescind any and all amendments to the Company's bylaws made on or after
March 1, 2000 (including those made on April 5, 2000 and described above); (b)
declassify the Board of Directors of the Company; and (c) remove the following
directors from the Board: John Gleason, David Huber, Donald Jasensky, William
Marshall, James McNamara, Philip Sauder, Henry Toh, and Peter Zackaroff. Messrs.
Huber, Jasensky, Sauder and Zackaroff were previously elected to serve on the
Board of Directors by Mr. Frankino. The Company has taken the position that the
consent is invalid, because, among other things, (i) the consent does not appear
to represent the holders of a majority of the Company's outstanding stock, (ii)
the consent was not preceded by a request for a record date as required by the
Company's bylaws, and (iii) the consent does not purport to represent an action
by the holders of eighty percent (80%) of each class of the Company's
outstanding voting stock, as required for an amendment to the Company's bylaws.
As a result of the Company's determination that the consent delivered by Mr.
Frankino was invalid, on April 13, 2000, Mr. Frankino filed a complaint in the
Delaware Court of Chancery captioned Sam J. Frankino v. David L. Huber, Donald
Jasensky, James J. McNamara, Philip A. Sauder, Henry Y.L. Toh, Peter T.
Zackaroff, John A. Gleason, William S. Marshall, and National Auto Credit, Inc.,
Civil Action No. 17984- NC, along with a motion to expedite. The complaint, as
amended on April 19, 2000, seeks an order of declaratory judgment confirming
that the individual defendants were validly removed from the Company's Board of
Directors by way of Mr. Frankino's April 7, 2000 written consent. On April 17,
2000, the Company and the individual defendants filed a motion to dismiss the
complaint and to stay discovery. As a result of the Company's April 17 motion,
Mr. Frankino filed an amended complaint on April 19. On April 24, 2000, the
Company and the individual defendants responded with a motion to dismiss Mr.
Frankino's amended complaint and to stay discovery. On May 3, 2000, the Company
filed its answer and affirmative defenses to the amended complaint. Pending
entry of the Court's final judgment in this action, an Order Maintaining Status
Quo provides that (i) the Board of Directors shall take no actions which are
outside the routine day-to-day operations of the Company in the ordinary course
of business, (ii) Mr. Frankino is required to give the Company five days notice
prior to acquiring, directly or indirectly, any additional stock of the Company,
soliciting proxies or written consents from stockholders of the Company, or
attempting to take action by consent without a meeting of stockholders, and
(iii) Ms. Dodero and Messrs. Dodero, Frankino, Huber, Jasensky, Maund, McNamara,
Sauder, Toh, Upton and Zackaroff shall constitute the Board of Directors of the
Company.

         On April 12, 2000, Sam J. Frankino filed a complaint in the Delaware
Court of Chancery captioned Sam J. Frankino v. National Auto Credit, Inc., Civil
Action No. 17985-NC. The complaint seeks an order directing the Company to
permit the inspection and copying of certain of its books and records. The
Company has made the books and records available.

         In December 1995, the U.S. Department of Labor notified the Company of
its investigation of the Company's pay practices concerning its former employees
in all states during the period from February 1, 1993 through September 30,
1995. On January 15, 1998, the Company reached an agreement in principle with
the Department of Labor to settle the matter in all states for approximately
$2,700,000 including civil penalties, interest and related payroll taxes. The
formal agreement was completed on September 11, 1998. The Company accrued
$2,720,000 in January 1998 for this settlement. The Company made its final
payment as directed by the Department of Labor regarding the settlement of this
issue in July 1999.

         The "Year 2000" issue involves the ability of a computer system to
properly recognize date sensitive information when the year changes to 2000.
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. During calendar year 1999 the Company took steps
to prepare its computer systems for the Year 2000, and through April 28, 2000
the Company has not experienced any material Year 2000 problems. Although the
Company believes that all of its material computer systems, and those of its
significant providers of goods and services, have now been tested through actual
use, there can be no assurance that latent Year 2000 problems remain
undiscovered. Such latent Year 2000 problems, if they exist, could have a
material adverse impact on the Company.



                                       44
<PAGE>   47



                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

 NOTE L - Discontinued Operations
          -----------------------

         The Company previously engaged in the rental of automobiles on a
short-term basis, principally to the insurance replacement market. In fiscal
1996, the Company disposed of its rental fleet business through the sale of
certain assets and through certain leases to a national car rental company. All
liabilities related to the discontinued rental business, principally
self-insurance claims, were retained by the Company.

         The Company also had a dealership operation that sold cars that were
retired from the rental fleet, primarily to member dealers of the Company's
financial services business. That operation was discontinued in fiscal 1997 as
the result of the Company's disposal of its automobile rental operations, and
the results of the operation of the dealership are included in the results of
discontinued operations.

         Through October 1, 1995, the Company was, when required by either
governing state law or the terms of its rental agreement, self-insured for the
first $1,000,000 per occurrence, and for losses in excess of $5,000,000 per
occurrence, for bodily injury and property damage resulting from accidents
involving its rental vehicles. The Company also self-insured, up to certain
retained limits, for bodily injury and property damage resulting from accidents
involving Company vehicles operated by employees within the scope of their
employment.

         Prior to fiscal 2000, the Company estimated its future payments for
self-insurance liabilities based upon an actuarial analysis of reported and
incurred but not reported claims. In fiscal 2000, due to the number of years
since the Company exited the rental car business and the reduction in the number
of open claims, the Company used the services of a claims review specialist to
review all open claims and determine the required case reserve on a claim by
claim basis. Changes in estimates of liabilities resulting from this analysis
are recognized in income in the period in which the estimates are changed.
Self-insurance claims expense, which related principally to the rental vehicles
and is included in discontinued operations, was $600,000 for fiscal 2000,
$50,000 for fiscal 1999, and $713,000 for fiscal 1998. Included in claims
expense are allocated loss adjustment expenses relating to costs incurred for
legal and processing the claims. This expense included in discontinued
operations as an adjustment to the loss on disposal of operations was $28,000
for fiscal 2000, $88,000 for fiscal 1999, and $619,000 for fiscal 1998. The
Company's aggregate self-insurance claims liability of $4,089,000 as of January
31, 2000 is subject to further revision as new information becomes available,
and such revisions may be material due to the uncertainties inherent in the
estimation process. In connection with its self-insurance, at January 31, 2000,
the Company had $210,000 of outstanding irrevocable standby letters of credit,
as required by various insurance regulatory authorities.








                                       45
<PAGE>   48

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE L - Discontinued Operations (cont.)
         -----------------------

         Summarized results of discontinued operations are as follows (in
thousands):
<TABLE>
<CAPTION>


                                                                                    Years Ended January 31,
                                                                    -------------------------------------------------
                                                                     2000                 1999                 1998
                                                                    -------              -------              -------

<S>                                                                 <C>                <C>                  <C>
Revenue                                                             $    --              $  --                $  --
Operating expense                                                       600                 (538)                 (56)
General and administrative expenses                                    (807)                --                  2,720
                                                                    -------              -------              -------
                                                                       (207)                (538)               2,664
                                                                    -------              -------              -------
Income (loss) before income taxes                                       207                  538               (2,664)
Provision (benefit) for income taxes                                   (562)                --                  2,183
                                                                    -------              -------              -------
Income (loss) from operations                                           769                  538               (4,847)
Loss on disposal of operations, net of tax                              (28)                 (88)              (1,126)
                                                                    -------              -------              -------

Income (loss) from discontinued operations                          $   741              $   450              $(5,973)
                                                                    =======              =======              =======
</TABLE>



         The fiscal 1998 loss represents the effect of additional self-insurance
losses and the accrual of $2,720,000 payable under the Company's settlement with
the U.S. Department of Labor (see Note K). The fiscal 1998 loss included income
tax expense of $2,690,000.

         The fiscal 1999 income of $450,000 represents the effects of refunds
from a funded workers' compensation partnership related to the discontinued
operations.

         The fiscal 2000 income of $741,000 represents the effects of negative
operating expenses of $207,000, an income tax benefit of $562,000, and a
revision of the loss on the disposal of the discontinued operation of $28,000,
net of tax. The negative operating expenses reflect the reversal of previously
accrued state taxes (other than income taxes) as the result of the settlement of
certain tax liabilities at amounts less than previously estimated and the
expiration of the statute of limitations with respect to certain other state
taxes, offset by a provision of $600,000 for self-insured liabilities. The
income tax benefit reflects the reversal of previously accrued income taxes as
the result of similar settlements and expiration of statute of limitation as
described above.





                                       46
<PAGE>   49





                  NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

  NOTE M - Quarterly Financial Data (Unaudited)
           ------------------------

         The following tables present quarterly financial information for fiscal
2000 and 1999 (in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                                  Quarter
                                                           ----------------------------------------------------------
                                                            First           Second            Third            Fourth
                                                           -------          -------          -------          -------
2000
----
<S>                                                        <C>              <C>              <C>              <C>
Total revenue                                              $ 2,147          $ 1,726          $ 1,572          $ 2,031
                                                           =======          =======          =======          =======

Loss from continuing operations                            $(4,143)         $(4,697)         $(1,163)         $(4,053)
Discontinued operations, net of tax                           --               --               --                741
                                                           -------          -------          -------          -------
Net loss                                                   $(4,143)         $(4,697)         $(1,163)         $(3,312)
                                                           =======          =======          =======          =======


Basic and Diluted (Loss) Earnings Per Share(1)
Continuing operations                                      $  (.14)         $  (.16)         $  (.04)         $  (.15)
Discontinued operations                                       --               --               --                .03
                                                           -------          -------          -------          -------
   Net loss per share                                      $  (.14)         $  (.16)         $  (.04)         $  (.12)
                                                           =======          =======          =======          =======


1999
----
Total revenue                                              $ 5,337          $ 4,555          $ 3,569          $ 2,818
                                                           =======          =======          =======          =======

Loss from continuing operations                            $(3,175)         $(2,565)         $(5,629)         $(4,696)
Discontinued operations, net of tax                           --               --               --                450
                                                           -------          -------          -------          -------
Net loss                                                   $(3,175)         $(2,565)         $(5,629)         $(4,246)
                                                           =======          =======          =======          =======


Basic and Diluted (Loss) Earnings Per Share:
Continuing operations                                      $  (.11)         $  (.09)         $  (.20)         $  (.16)
Discontinued operations                                       --               --               --                .01
                                                           -------          -------          -------          -------
   Net loss per share                                      $  (.11)         $  (.09)         $  (.20)         $  (.15)
                                                           =======          =======          =======          =======

</TABLE>

(1)The sum of the quarters do not equal year to date (loss) earnings per share
due to rounding.


NOTE N - Subsequent Events
--------------------------

         On March 17, 2000, the Company acting through NAC, sold to Crescent
Bank & Trust substantially all of the automobile retail installment loans
remaining in the Company's active portfolio for $17.9 million. In prior
transactions in March 2000, NAC had sold to First Southwestern Financial
Services, for $2.7 million, certain automobile retail installment loans held in
the Company's active portfolio and to Ameristar Financial Servicing Company,
L.L.C. for, $2.2 million, certain automobile retail installment loans held in
the Company's portfolio of charged-off accounts (representing approximately
one-third of the charged-off portfolio). The transactions above resulted in an
aggregate loss of approximately $2.1 million, which the Company will report in
the quarter ending April 30, 2000. In each of the three transactions, the buyer
was an independent party that did not have a material relationship with the
Company, any affiliate of the Company, any director or officer of the Company or
any associate of any officer or director of the Company. In each case, the
selling price was determined based upon arm's length negotiations between the
parties and was paid in cash at closing.




                                       47
<PAGE>   50

                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE N - Subsequent Events (cont.)
         -----------------

         Following its disposition of these automobile installment sale loans,
the Company's assets consisted principally of money market funds, commercial
paper, government securities and other short-term, highly liquid investments.

         On April 5, 2000, the Company purchased a 50% membership interest in
Angelika Film Center, LLC ("AFC"). AFC is the owner and operator of the Angelika
Film Center, which is a multiplex cinema and cafe complex in the Soho District
of Manhattan in New York City. The 50% membership interest was purchased from
Reading Entertainment, Inc. ("Reading") for 8,999,900 shares of the Company's
common stock and 100 shares of Series A Preferred Stock (representing 100% of
the Class of Series A Convertible Preferred Stock outstanding). As a result of
the transfer, AFC is now owned 50% by the Company, 33.33% by Reading and 16.67%
by Sutton Hill Associates. The Angelika Film Center will continue to be managed
by Sutton Hill Associates as a part of its City Cinemas Chain. For all matters
subject to a vote of members, a majority is required, except in the event of a
tie vote, in which event the Chairman of Reading shall cast the deciding vote.

         The Series A Convertible Preferred Stock is convertible into shares of
the Company's common stock on a one for one basis, subject to traditional
antidilution adjustment; it votes share for share with the Common Stock as a
single class, provided that as a class the Series A Preferred must separately
approve any amendments to the Company's charter or bylaws; it has a liquidation
value of $1.50 per share; and is entitled to a dividend preference equal to any
dividends declared on the Company's common stock (determined on a per share
basis).

         The Company also purchased from Reading two separate and independent
options to acquire additional cinema assets owned by Reading in the United
States. Under the first option, the Company has the right to acquire the
remaining 33.33% membership interest in AFC owned by Reading in exchange for the
issuance of an additional six million shares of the Company's common stock. To
the extent authorized but unissued shares of the Company's common stock are not
available for such purpose, the Company has the right to substitute cash for
such shares at the rate of $1.50 per share. The option can be exercised for a
period of 45 days, through and including May 20, 2000. The remaining 16.67%
interest would continue to be owned by Sutton Hill Associates, and the Angelika
Film Center would continue to be managed as a part of the City Cinemas Chain.

         Under the second option, which is independent of the first option, the
Company has the right to acquire the remainder of Reading's domestic cinema
exhibition assets for cash (including Reading's rights to acquire the City
Cinemas Chain of cinemas and related real estate in Manhattan), and, if the
Company has not previously exercised its option to acquire Reading's 33.33%
interest in AFC for stock, Reading's remaining interest in AFC. If the Company
exercises this right, it is required to give to Reading's affiliate, Citadel
Holding Corporation, a right to participate in such transaction on a 50/50 basis
with the Company. The option can be exercised for a period of 60 days, through
and including June 5, 2000. The Company paid to Reading $500,000 in
consideration of this option. The Company has the right to extend the option for
two 30-day periods by payment of an additional $100,000 for each such 30-day
extension period. The purchase price would be based on a value of $27,000,000
for AFC and the lower of the historical cost or fair value for the remainder of
Reading's assets. The decision whether or not to proceed with the exercise of
either or both of such options rests with the Company and not with Reading.





                                       48
<PAGE>   51


                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   YEARS ENDED JANUARY 31, 2000, 1999 AND 1998

NOTE N - Subsequent Events (cont.)
         -----------------

         AFC holds the Angelika Film Center under a long term lease having a
remaining term of approximately 26 years. The Angelika Film Center is a six
screen multiplex theater and cafe that focuses on the exhibition of art and
specialty films. The following sets forth the unaudited condensed operating
results for AFC for the year ended December 31, 1999 (in thousands):

               Revenues                                            $  7,376

               Film rental expenses                                   1,909
               Concession and cafe costs                                330
               Other operating expenses                               3,383
               Other                                                     28
                                                                   --------
                                                                      5,650
                                                                   --------

               Net income                                          $  1,726
                                                                   ========


         The following sets forth the pro forma condensed consolidated balance
sheet of the Company as of January 31, 2000, prepared assuming the sales of the
loans and the purchase of the interest in AFC described above had taken place on
that date (in thousands):
<TABLE>
<CAPTION>

            Assets                                             Liabilities and Stockholders' Equity
-----------------------------                                  --------------------------------------------------------------

<S>                                         <C>                <C>                                                  <C>
Cash and cash equivalents                   $ 81,567           Self-insurance claims                                $  4,089
Property and equipment, net                    7,677           Accrued income taxes                                    2,926
Investment in AFC                             11,078           Other liabilities                                      13,051
Assets held for sale                           6,861
Other                                          5,609           Stockholders' equity                                   92,726
                                            --------                                                                --------

Total Assets                                $112,792           Total Liabilities and Stockholders' Equity           $112,792
                                            ========                                                                ========
</TABLE>




         As discussed in Note K, on April 13, 2000 Sam J. Frankino, commenced
certain litigation in the Delaware Chancery Court to enforce his claim that on
April 7, 2000 he and other stockholders validly took certain actions by consent.
In the event Mr. Frankino is successful in that litigation, he may seek to set
aside the Company's purchase of the interest in AFC and the two options.


                                       49
<PAGE>   52






Item 9. Changes in and Disagreements with Accountants on Accounting and
------  ----------------------------------------------------------------
        Financial Disclosure
        --------------------

        None.










                                       50
<PAGE>   53


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant *
--------  --------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                                Term to
Name of Director     Age        Principal Occupation and Other Information            Director Since             Expire
-----------------   -----      -------------------------------------------------     ---------------    -----------------------

<S>                   <C>        <C>                                                      <C>            <C>
Lorraine Dodero       48         President and owner of Credex Auto Leasing and             1999         Next Annual Meeting of
                                 Finance since 1998, Trustee to the Corrine L.                                Stockholders
                                 Dodero Trust for the Arts and Sciences since
                                 1997. From 1971 to 1995, Ms. Dodero was
                                 President of Adverama, Inc. (an advertising
                                 company). Ms. Dodero was elected a Director of
                                 National Auto Credit, Inc. by way of written
                                 consent filed August 30, 1999, and effective
                                 November 12, 1999. Ms. Dodero is married to
                                 William J. Dodero. She is the daughter of Sam
                                 J. Frankino and first cousin to William Maund.

William J. Dodero     52         President and owner of Solon Road Auto Wash                1999                  2002
                                 since 1992 and Vice President of Credex Auto
                                 Leasing and Finance since 1998. Mr. Dodero was
                                 elected a Director of National Auto Credit,
                                 Inc. on September 15, 1999, and effective
                                 September 28, 1999. Mr. Dodero is married to
                                 Lorraine Dodero and is the son-in-law of Sam J.
                                 Frankino.

Sam J. Frankino       75         Founder and largest shareholder of the Company,            1999                  2002
                                 who served as Chairman of the Board of
                                 Directors from 1969 to 1998. Mr. Frankino also
                                 served as Chief Executive Officer from 1969 to
                                 1992 and from December 1993 to December 1994.
                                 Mr. Frankino was elected a Director of National
                                 Auto Credit, Inc. on September 15, 1999, and
                                 effective September 28, 1999. Mr. Frankino is
                                 the father of Lorraine Dodero. He is the
                                 father-in-law of William J. Dodero and the
                                 uncle of William Maund.


</TABLE>

*Pending entry of the Delaware Court of Chancery's final judgment in the matter
 of Frankino v. Huber, et.al., an Order Maintaining Status Quo provides, among
 other things, that Ms. Dodero and Messrs. Dodero, Frankino, Huber, Jasensky,
 Maund, McNamara, Sauder, Toh, Upton and Zackaroff shall constitute the Board of
 Directors of the Company until the Court has entered its final judgment in this
 action. Messrs. Gleason and Marshall were re-appointed to the Board on April 5,
 2000, but pending the outcome of the above captioned matter, Messrs. Gleason
 and Marshall may not serve on the Board. See Item 3 - Legal Proceedings.


                                       51
<PAGE>   54




Item 10.  Directors and Executive Officers of the Registrant (cont.)
--------  --------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                                 Term to
Name of Director      Age        Principal Occupation and Other Information            Director Since             Expire
-----------------    -----      -------------------------------------------------     ---------------    -----------------------
<S>                  <C>        <C>                                                      <C>             <C>
John A. Gleason       51         President and owner of Automax, Inc., an                  2000          Next Annual Meeting of
                                 independent car dealership since 1987. From                                  Stockholders
                                 1995 to 1998, Mr. Gleason served on National
                                 Auto Credit's Dealer Advisory Board and served
                                 as its Chairman from 1996 to 1998. Mr. Gleason
                                 previously served as Director of National Auto
                                 Credit, Inc. from February 20, 1998 to
                                 September 28, 1999. On April 5, 2000, Mr.
                                 Gleason was appointed to fill a vacancy on the
                                 Board of Directors of National Auto Credit,
                                 Inc.

David L. Huber        42         Chairman of the Board, National Auto Credit,              1999          Next Annual Meeting of
                                 Inc. since November 22, 1999. Chief Executive                                Stockholders
                                 Officer/President of Goshen Fidelity, Inc. (a
                                 non-prime automobile loan originator) since
                                 1993. Mr. Huber has over nineteen years
                                 experience in the automobile industry including
                                 former ownership of three dealerships. Mr.
                                 Huber was elected a Director of National Auto
                                 Credit, Inc. by way of written consent filed
                                 August 30, 1999, and effective November 12,
                                 1999.

Donald Jasensky       42         Owner and Operator of Automotive Dealership               1999                   2001
                                 Personnel LLC, since 1989. Mr. Jasensky was
                                 elected a Director of National Auto Credit,
                                 Inc. by way of written consent filed August 30,
                                 1999, and effective November 12, 1999.

William S. Marshall   82         Attorney engaged in private practice since                2000                   2001
                                 April 1985. For more than four years prior
                                 thereto, Mr. Marshall was a partner/stockholder
                                 of Miami, Florida office of the law firm Baskin
                                 & Steingut, P.A. Mr. Marshall previously served
                                 as Director of National Auto Credit, Inc. from
                                 1983 to 1993, and from March 9, 1998 to
                                 September 28, 1999. On April 5, 2000, Mr.
                                 Marshall was appointed to fill a vacancy on the
                                 Board of Directors of National Auto Credit,
                                 Inc.

William T. Maund      37         President and Chief Executive Officer of                  1999                   2001
                                 Americar Auto Rental, Inc. since 1984. Mr.
                                 Maund was elected a Director of National Auto
                                 Credit, Inc. by way of written consent filed
                                 August 30, 1999, and effective November 12,
                                 1999. Mr. Maund is the first cousin of Lorraine
                                 Dodero and nephew to Sam J. Frankino.


</TABLE>









                                       52
<PAGE>   55


<TABLE>
<CAPTION>

Item 10. Directors and Executive Officers of the Registrant (cont.)
-----------------------------------------------------------

Name of Director        Age      Principal Occupation and Other Information            Director Since        Term to Expire
-----------------      -----     -------------------------------------------------     ---------------    -----------------------
<S>                     <C>      <C>                                                      <C>             <C>

James J. McNamara        51      President of Film Management Corporation since            1998            Next Annual Meeting of
                                 1995. Chairman of the Board and Chief Executive                                Stockholders
                                 Officer of Princeton Media Group, Inc. (a
                                 magazine publisher) from 1994 to 1998.
                                 President and Chief Executive Officer of
                                 Celebrity Entertainment, Inc. since 1992. (A
                                 subsidiary of Princeton Media Group, Inc. and
                                 Celebrity Entertainment, Inc. effected an
                                 assignment of their respective assets for the
                                 benefit of creditors in 1998). Mr. McNamara
                                 accepted the position of Director of National
                                 Auto Credit, Inc. effective February 20, 1998
                                 and served as its Chairman from April 1998 to
                                 November 1999.

Philip A. Sauder         33      Vice President of Operations of Goshen                    1999            Next Annual Meeting of
                                 Fidelity, Inc. (a non-prime automobile loan                                     Stockholders
                                 originator) since 1996. Prior to 1996 Mr.
                                 Sauder was employed with State Farm Insurance
                                 in various accounting positions. Mr. Sauder was
                                 elected a Director of National Auto Credit,
                                 Inc. by written consent filed August 30, 1999,
                                 and effective November 12, 1999.


Henry Y. L. Toh          42      Officer and Director of I-Link Incorporated (an           1998                     2001
                                 Internet telephone company) since 1992, Four M.
                                 International, Inc. (a private investment
                                 entity) since 1992 and Four Vines
                                 International, Inc. (a wine producer and
                                 distributor) since 1996. Mr. Toh was appointed
                                 by the Board of Directors to fill a vacancy on
                                 the Board of Directors of National Auto Credit,
                                 Inc. effective December 22, 1998.

Robert E. Upton, Jr.     57      President of Micro Systems, Inc. since 1990.              2000            Next Annual Meeting of
                                 Chief Financial Officer of Power Ride                                          Stockholders
                                 Motorsports, Inc. from 1998 to 1999. Chief
                                 Operating Officer of Easy Money Group from 1997
                                 to 1998. President of Auto Info Finance of
                                 Virginia from 1995 to 1997. Mr. Upton was
                                 elected a Director of National Auto Credit,
                                 Inc. effective March 1, 2000 and Chief
                                 Financial Officer of National Auto Credit, Inc.
                                 from March 1, 2000 through April 5, 2000.

Peter T. Zackaroff       44      Vice President and General Counsel of Crawford            1999            Next Meeting of Annual
                                 Consulting, Inc. since 1996. Executive Vice                                      Stockholders
                                 President, Chief Legal Officer and Secretary of
                                 Agency Rent-A-Car, Inc. from 1988 to 1995. Mr.
                                 Zackaroff was elected a Director of National
                                 Auto Credit, Inc. by way of written consent
                                 filed August 30, 1999, and effective November
                                 12, 1999.

</TABLE>




                                       53
<PAGE>   56

Item 10.  Directors and Executive Officers of the Registrant (cont.)
--------  --------------------------------------------------

Executive Officers of the Registrant
------------------------------------

               The executive officers of the Company at January 31, 2000 were as
follows:

<TABLE>
<CAPTION>

Name of Officer                Age          Position with Company; Principal Occupation for Last Five Years
--------------------       -----------      ----------------------------------------------------------------

<S>                            <C>          <C>
David L. Huber                 42           Chairman of the Board and Chief Executive Officer since
                                            November 22, 1999. Chief Executive Officer/President
                                            Goshen Fidelity, Inc. since 1993.

Raymond A. Varcho              44           Vice President, General Counsel and Secretary since
                                            October 1997. Previously was Assistant General Counsel
                                            of Rockwell International Corporation from 1993 to 1997.

</TABLE>

Section 16(a) Beneficial Ownership Reporting Compliance.
--------------------------------------------------------

           Based solely upon a review of Forms 3, 4, 5, amendments thereto and
related information furnished to the Registrant during fiscal year 2000, the
following directors and officers were delinquent in their Section 16(a)
reporting obligations:

           Messrs. Frankino, Huber, Jasensky, Maund, Rice, and Sweitzer failed
to timely file Form 3. Mmes. Cesar and Howard and Messrs. Borys, Jaeger, Osco
and Varcho failed to timely file Form 4. Messrs. McNamara, Rice and Toh failed
to file Forms 4 and 5. Mr. and Ms. Dodero failed to file Forms 3 and 5.








                                       54
<PAGE>   57


Item 11.  Executive Compensation
--------  ----------------------
SUMMARY COMPENSATION TABLE

           The following table shows all compensation paid by the Company and
its subsidiaries for the fiscal years ended January 31, 2000, 1999, and 1998 to
(i) any persons who served as Chief Executive Officer or President during fiscal
2000 (Richard M. Cohen, David L. Huber and Allen D. Rice), (ii) the single
individual, other than persons who served as the Chief Executive Officer, who
served as an executive officer of the Company at January 31, 2000 and whose
income exceeded $100,000 (Raymond A. Varcho), and (iii) the single additional
person who served as an executive officer of the Company during fiscal 2000, but
had ceased to hold such position at January 31, 2000, and whose income exceeded
$100,000 (Davida S. Howard) (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>




Name and Principal Position                                                                     Long-Term
At Janaury 31, 2000                                      Annual Compensation              Compensation Awards
-------------------                            -------------------------------------    ------------------------
                                                                                                      Securities
                                                                                        Restricted    Underlying
                                                                        Other Annual      Stock        Options        All Other
                                      Fiscal      Salary        Bonus   Compensation(1)  Awards(2)       SARS      Compensation(3)
                                       Year         ($)          ($)         ($)            ($)           (#)           ($)
                                      ------   -----------   ---------- --------------- ----------    -----------   -------------

<S>                                    <C>        <C>         <C>           <C>         <C>            <C>             <C>
David L. Huber                         2000       63,462         --           --           --              --             --
Chief Executive Officer                1999         --           --           --           --              --             --
Commencing November 22, 1999           1998         --           --           --           --              --             --

Allen D. Rice(4)                       2000      165,769      100,000        9,196       30,600         300,000        358,645
President                              1999         --           --           --           --              --             --
Through November 12, 1999              1998         --           --           --           --              --             --

Raymond A. Varcho(5)                   2000      165,416        6,440       15,441        3,624            --            5,234
Vice President,                        1999      142,408        5,641       11,455        5,963           5,000          1,092
General Counsel and Secretary          1998       26,154        1,000        2,912         --              --              123

Davida S. Howard(6)                    2000      109,040        3,940       30,859        3,624            --          217,841
Vice President,                        1999      165,677       46,138       15,334        5,497          20,000          4,115
Finance and Controller                 1998      129,231       12,400       12,564       14,850            --            3,054
Through July 30, 1999

Richard M. Cohen(7)                    2000      133,334         --           --           --           100,000         89,267
Interim President                      1999       33,333         --           --           --           100,000           --
January 15, 1999 to May 31, 1999       1998         --           --           --           --              --             --


</TABLE>

(1) The amounts included in this column are the imputed value for the use of
    Company automobiles and related tax reimbursement. Employees who were
    Directors do not receive any additional compensation for serving on the
    Board of Directors.

(2) These awards are fully vested (except shares granted to Mr. Rice which vest
    proportionately on a monthly basis over the period of two years from the
    grant date) but may not be sold or transferred until such time as the
    recipient directly owns and maintains Company stock equal to three times the
    individual's salary, including bonus, or the individual terminates
    employment with the Company. Restricted stock holdings in excess of the
    required ownership amounts may be disposed of provided that minimum
    ownership requirements are maintained during the term of the individual's
    employment. The restricted shares awarded are eligible for any dividends the
    Company may declare on its Common Stock. The total restricted stock holding
    for the officers at January 31, 2000 were as follows:

                        Number of Shares     Fair Market Value
                      ------------------    -------------------

          Mr. Varcho         6,523               $ 5,479
          Mr. Rice          15,000               $12,600




(3) Other Compensation includes payments received as Directors, severance
    payments, executive life and disability insurance, vision, 401(k) match and
    medical premiums. In fiscal 2000, the Company contributed to Ms. Howard's
    and Mr. Varcho's 401(k) Savings and Retirement Plan and Trust Accounts in
    the following amounts: Ms. Howard - $3,192; Mr. Varcho - $3,046. Also, see
    "DIRECTORS FEES AND COMPENSATION".


                                       55
<PAGE>   58




Item 11.  Executive Compensation (cont.)
--------  ----------------------

(4) Mr. Rice, a former President and Director, resigned his position as
    President on November 12, 1999. Mr. Rice resigned from his position as a
    Director for the Company on December 7, 1999. Contemporaneous with his
    resignation as President, Mr. Rice and the Company negotiated the terms of a
    termination agreement, the definitive copy of which is subject to further
    negotiation. Pursuant to such negotiated terms, Mr. Rice received a sum of
    $335,000. An additional $300,000 contemplated by the negotiated terms of the
    termination agreement is being held pending further negotiations between Mr.
    Rice and the Company. Mr. Rice was awarded 30,000 shares of restricted stock
    and 300,000 stock options, but returned all unvested shares (15,000) and all
    stock options as part of his termination agreement. Also, see "DIRECTORS
    FEES AND COMPENSATION".

(5) Mr. Varcho's amounts reflect compensation commencing with his date of
    employment, October 15, 1997.

(6) Ms. Howard, was Vice President, Finance and Controller until her termination
    from the Company July 30, 1999. She entered into a twelve-month severance
    agreement with the Company to provide consulting services and agreeing to
    certain non-competition and non-solicitation terms in exchange for $200,000
    compensation and continued participation/coverage in all Company provided
    benefit plans. Compensation to be paid to Ms. Howard through July 2000 as
    part of her termination agreement is included in the totals for this fiscal
    year and includes: $12,394 under the "Other Annual Compensation" column, and
    $110,614 under the "All Other Compensation" column.

(7) Mr. Cohen, President of Richard M. Cohen Consultants, Inc., entered into a
    six-month agreement with the Company as a consultant effective November 30,
    1998. The Company appointed him Interim President and Director, effective
    January 1999 until Mr. Rice's appointment as President on May 12, 1999. Mr.
    Cohen continued to serve the Company in the capacity of Interim CFO until
    December 30, 1999. Amounts shown in the "All Other Compensation" column
    relate primarily to Mr. Cohen's duties as Interim CFO and Director. Also,
    see "DIRECTORS FEES AND COMPENSATION".


OPTIONS

Option/SAR Grants in Last Fiscal Year

               The following table sets forth (i) information concerning options
to purchase the Company's common stock granted to Named Executive Officers in
fiscal 2000 and (ii) the assumed appreciated value thereof. If a Named Executive
Officer is not listed in the table, he or she did not receive an option award in
fiscal 2000. No stock appreciation rights were granted to any of the Named
Executive Officers in fiscal 2000.
<TABLE>
<CAPTION>

                                                                                                      Potential Realizable Value at
                                                                                                      Assumed Annual Rates of Stock
                                                                                                             Price Appreciation
                                            Individual Grants                                                 for Option Term3
                   ---------------------------------------------------------------------                    ----------------------

                   Number of Securities       Percent of Total             Exercise or
                    Underlying Options/     Options/SARs Granted to        Base Price     Expiration
        Name         SARs Granted (#)       Employees in Fiscal Year(1)    ($/sh)(2)         Date             5% ($)       10% ($)
------------------  ------------------    ----------------------------  --------------    ------------      ---------    ----------

<S>                     <C>                         <C>                       <C>           <C>               <C>           <C>
 Richard M. Cohen       100,000                     12.50%                    1.03          5/6/09            65,000        164,000
 Allen D. Rice(4)       300,000                     37.50%                    1.02          5/12/09             --             --

</TABLE>




(1) Percentage shown is based upon all options granted to officers, directors
    and employees during fiscal 2000.

(2) Options were granted at market price of the stock at the date of the grant.
    Mr. Cohen's options vested 100% on the grant date of May 6, 1999.

(3) The dollar amounts under these columns are the result of calculations at
    assumed annual rates of stock appreciation of 5% and 10%, respectively; and
    therefore, may not reflect actual appreciation, if any, in the value of the
    stock price.

(4) Mr. Rice's options vested 12,500 on the grant date of May 12, 1999 with an
    additional 12,500 vesting monthly. However, Mr. Rice returned all vested and
    unvested options pursuant to the terms of the termination agreement
    negotiated on December 6, 1999. Had Mr. Rice retained these options, the
    potential realizable values at assumed annual rates of 5% and 10% stock
    price appreciation for the option terms would have been $192,000 and
    $488,000, respectively.






                                       56
<PAGE>   59



Item 11.  Executive Compensation (cont.)
--------  ----------------------

Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year End Option
Values

               The following table shows information concerning the aggregate
number and values as of fiscal year end of options held by Named Executive
Officers as of January 31, 2000. If a Named Executive Officer is not listed in
the table, he or she did not exercise any options in fiscal 2000 and held no
options at January 31, 2000. None of the Named Executive Officers held stock
appreciation rights at any time during fiscal 2000.
<TABLE>
<CAPTION>

                                                       Number of Securities Underlying      Value of Unexercised
                                                           Unexercised Options/SARs        In-the-Money Options/SARS
                         Shares                            at Fiscal Year End (#)(1)        at Fiscal Year End($)(2)
                       Acquired on        Value
      Name             Exercise (#)      Realized ($)    Exercisable   Unexercisable      Exercisable    Unexercisable
-----------------    ----------------   ------------    ------------   -------------      -----------    -------------

<S>                        <C>             <C>             <C>            <C>                  <C>             <C>
Richard M. Cohen(3)         -               -              150,000          -                  -               -
Raymond A. Varcho           -               -                5,000          -                  -               -
</TABLE>


(1)Includes options with exercisable prices ranging from $1.03 to $1.15.

(2)Values are calculated using the January 31, 2000 Common Stock closing
   transaction price of $.84 per share as reported on the OTC Bulletin Board.

(3)Mr. Cohen returned 50,000 previously granted options, having a per share
   exercise price of $1.15, as part of his separation agreement in December
   1999.


DIRECTORS FEES AND COMPENSATION

           From January 31, 1999 to July 29, 1999, each member of the Board who
was not an employee of the Company was paid $3,000 and expenses for attendance
at each meeting of the Board or Committee, and $250 an hour for time committed
outside of formal meetings and special assignments. After July 29, 1999 (the
date of issuance of the Company's fiscal 1999 financial statements), each member
of the Board who was not an employee of the Company was to be paid at the rate
of $75,000 per year. Each member of the Board was also paid a fee at the rate of
$25,000 per year for participation on each of the Board's Audit or Special
Committees, and $15,000 per year for participation on any other Board committee,
up to a maximum of $115,000 per year, regardless of the number of committees on
which such individual participated. However, beginning November 22, 1999,
Directors' compensation was again revised to provide that each member of the
Board who was not an employee of the Company would be entitled to receive $1,000
and reasonable expenses for attendance at each meeting of the full Board.

           Due to the substantial issues faced by the Company during fiscal
2000, as described elsewhere in this Report, various members of the Board of
Directors were required to devote substantial time to the affairs of the
Company. In particular, James McNamara devoted substantial time as the Chairman
of the Board, Chairman of the Special Committee, and Chairman of the Audit
Committee. Henry Toh devoted substantial time as a member of the Audit
Committee. William Marshall devoted considerable time as a member of the Audit
Committee and Special Committee. John Gleason devoted substantial time as a
member of the Special Committee.





                                       57
<PAGE>   60





Item 11.  Executive Compensation (cont.)
--------  ----------------------

               Amounts paid to Directors in fiscal 2000 (including significant
amounts paid for services performed at the hourly rates described above) were as
follows:
<TABLE>
<CAPTION>

<S>                            <C>                   <C>                          <C>
Richard M. Cohen              $   52,750              William T. Maund            $   3,000
Lorraine Dodero               $    3,000              James J. McNamara           $ 583,654(1)
William J. Dodero             $    3,000              Allen D. Rice               $  15,000
Sam J. Frankino               $    3,000              Philip A. Sauder            $   3,000
John A. Gleason               $  124,717              Terry Sweitzer              $   3,000
David L. Huber                $    3,000              Henry Y. L. Toh             $ 198,333
Donald Jasensky               $    3,000              Peter T. Zackaroff          $   3,000
William S. Marshall           $  132,689
</TABLE>



(1)Amount excludes $300,000 additional cash compensation paid during fiscal
   2000, but awarded by the Board and accrued in fiscal 1999.


           In addition, Messrs. Marshall, McNamara, Cohen, Gleason and Toh were
granted 100,000 options exercisable and fully vested with a per share exercise
price of $1.03, which was the fair market value of the Common Stock at the close
of business on May 6, 1999. Mr. Rice was granted 300,000 options, 12,500 vesting
on May 12, 1999 with an additional 12,500 vesting on the first of each month.
However, Mr. Rice returned all vested and unvested options to the Company
following his resignation.


EMPLOYMENT AGREEMENTS

           Mr. Rice, former President and Director, resigned from his position
as President on November 12, 1999 and from his position as a Director on
December 7, 1999. In a termination agreement, Mr. Rice received a sum of
$335,000 upon signing the agreement. In addition, a total of $300,000 is being
held, pending negotiations between Mr. Rice and the Company.

           Ms. Howard served as Vice President, Finance and Controller until her
termination from the Company on July 30, 1999. She entered into a twelve-month
severance agreement with the Company to provide consulting services and agreeing
to certain non-competition and non-solicitation terms in exchange for $200,000
compensation and continued participation in all Company provided benefit plans.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

           The Compensation Committee consisted of Messrs. Gleason, Marshall and
McNamara from March 1998 to September 28, 1999. At that time, Messrs. Gleason
and Marshall's terms expired and their participation in the Committee ceased. On
December 15, 1999, Messrs. William Maund and Peter Zackaroff were appointed to
the Committee, joining Mr. McNamara. There are no interlocking relationships, as
defined in the regulations of the Securities and Exchange Commission, involving
any of these individuals.




                                       58
<PAGE>   61

Item 12.  Security Ownership of Certain Beneficial Owners and Management
--------  --------------------------------------------------------------

           The following table sets forth information with respect to each
person or group known to the Company to be beneficial owners as of May 1, 2000,
of more than 5% of the Company's outstanding Common Stock. The table also sets
forth the Company's common stock beneficially owned, as of May 1, 2000 by all
Directors, the Chief Executive Officer of the Company, the Named Executive
Officers at January 31, 2000 and by all Officers and Directors of the Company as
a group.
<TABLE>
<CAPTION>


                                                Shares of                    Percent of
Name and Address                              Common Stock                      Class
of Beneficial Owner                      Beneficially Owned(1)              Outstanding(2)
-------------------                      ---------------------              --------------

<S>                                            <C>                             <C>
Sam J.  Frankino(3)                            15,743,012                      45.29%
7108 Eagle Terrace
West Palm Beach, FL 33412

Citadel Holding Corporation                       965,100                       2.78%
550 South Hope Street, #1825
Los Angeles, CA  90071

Reading Entertainment, Inc.(4)                  9,000,000                      25.89%
30 South 15th Street, #1300
Philadelphia, PA 19102-4826

Craig Corporation(5)                            9,965,100                      28.67%
550 South Hope Street, #1825
Los Angeles, CA 90071

            Directors
---------------------------------

Sam J. Frankino(3)                             15,743,012                      45.29%
David L. Huber(6)                                   7,700                         *
James J. McNamara                                 175,000                         *
Henry Y. L. Toh                                   175,000                         *
William J. Dodero(7)                               88,619                         *
Lorraine Dodero(8)                              1,116,348                       3.21%
Donald Jasensky                                     -                             *
William T. Maund                                    3,250                         *
Philip A. Sauder                                    -                             *
Peter T. Zackaroff                                  -                             *
William S. Marshall(9)                            185,000                         *
John A. Gleason                                   175,000                         *
Robert E. Upton, Jr.                               10,000                         *

Raymond A. Varcho                                  11,523                         *
The Officers and Directors
as a group                                     16,601,833                      47.76%
*Less than 1.0%
</TABLE>




(1)Includes shares which may be acquired within 60 days pursuant to the
   Company's 1993 Equity Incentive Plan as follows:

                          Mr. McNamara                175,000
                          Mr. Toh                     175,000
                          Mr. Marshall                175,000
                          Mr. Gleason                 175,000
                          Mr. Varcho                    5,000

(2)Based on 34,761,518 shares outstanding as of May 1, 2000.




                                       59
<PAGE>   62

Item 12.  Security Ownership of Certain Beneficial Owners and Management (cont.)
--------  --------------------------------------------------------------

(3)Based upon information included in an Amended Schedule 13D filed with the
   Securities and Exchange Commission by Mr. Frankino on or about August 30,
   1999, Mr. Frankino has both voting and investment power with respect to the
   shares listed. Of the shares shown above, 726,452 shares are held by the
   Samuel J. and Connie M. Frankino Charitable Foundation, and 1,000,000 shares
   are held by Corrine L. Dodero Trust for the Arts and Sciences, both of which
   are qualified charitable foundations, as to which Mr. and Mrs. Frankino have
   voting and investment power. Mr. Frankino disclaims any beneficial interest
   in those shares.

(4)Includes 8,999,900 shares of common stock and 100 shares of the Company's
   Series A Preferred Stock (representing 100% of the class of Series A
   Convertiable Preferred Stock outstanding) owned by FA, Inc. The Series A
   convertible preferred stock is convertible into shares of the Company's
   common stock on a one for one basis, subject to antidilution adjustment. FA,
   Inc. is a wholly-owned subsidiary of Reading Entertainment, Inc. ("Reading").

(5)Craig Corporation owns approximately 78% of Reading, and collectively with
   Reading owns approximately 49% of Citadel Holding Corporation.

(6)Held by spouse.

(7)Jointly held with spouse.

(8)Includes 88,619 jointly held with spouse, 279 held in IRA, 27,450 held by
   Lorraine Dodero as custodian for minor daughter, 1,000,000 held as trustee
   for Corinne L. Dodero Trust for the Arts and Sciences.

(9)Includes 7,000 shares held by spouse.


Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

               The Company exercised its option to purchase shares in the
Company from Mr. Ernest C. Garcia II: See Note G of Notes to Consolidated
Financial Statements for more information.

               In April 2000, the Company and the class action plaintiffs'
representatives reached an agreement in principle to settle the class action
securities litigation in which various current and former directors were named
as defendants. See Item 3 - Legal Proceedings.


                                     PART IV
                                     -------

Item 14.   Exhibits, Financial Statement Schedules, and Reports on
--------   -------------------------------------------------------
           Form 8-K Documents filed as part of this report:
           ------------------------------------------------

(a)(1)     The following financial statements are included in Part II, Item 8:

                 Report of Independent Certified Public Accountants

                 Financial Statements:

                   Consolidated Balance Sheets - as of
                     January 31, 2000 and 1999

                   Consolidated Statements of Operations -
                     Years Ended January 31, 2000, 1999 and 1998

                   Consolidated Statements of Stockholders' Equity - Years Ended
                     January 31, 2000, 1999 and 1998

                    Consolidated Statements of Cash Flows - Years Ended January
                      31, 2000, 1999 and 1998






                                       60
<PAGE>   63


Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------   ----------------------------------------------------------------
           (cont.)

                   Notes to Consolidated Financial Statements - Years Ended
                     January 31, 2000, 1999 and 1998

(a)(2)      The following financial statement schedule for the years ended
            January 31, 2000, 1999 and 1998 is submitted herewith:

                 Schedule II - Valuation and Qualifying Accounts

            All other schedules are omitted because the required information
            either is not applicable or is shown in the consolidated financial
            statements or notes.

(a)(3) Exhibits

                                  Description
                                  -----------

              2.1     Agreement of Merger (incorporated by reference to Exhibit
                      2 to the Company's Form 8B dated December 27, 1995, SEC
                      File No. 1-11601).

              3.1     Restated Certificate of Incorporation of National Auto
                      Credit, Inc. (incorporated by reference to Exhibit 3(1) to
                      the Company's Form 8B dated December 27, 1995, SEC File
                      No. 1-11601).

              3.2     Certificate of Designation, Number, Powers, Preferences
                      and Relative, Participating, Optional and Other Special
                      Rights and the Qualifications, Limitations, Restrictions,
                      and Other Distinguishing Characteristics of the Series A
                      Convertible Preferred Stock of National Auto Credit, Inc.,
                      dated as of April 5, 2000 (incorporated by reference to
                      Exhibit 10.3 of the Current Report on Form 8-K filed on
                      April 20, 2000, File No. 1-11601).

              3.3     Amended and Restated Bylaws of National Auto Credit, Inc.
                      dated April 5, 2000, filed herewith and incorporated
                      herein by reference.

              4.1     Specimen Stock Certificate - National Auto Credit, Inc.
                      (incorporated by reference to the Company's Annual Report
                      on Form 10-K for the fiscal year ended January 31, 1996,
                      SEC File No. 1-11601).

             10.1     National Auto Credit, Inc. 1983 Stock Option Plan
                      (incorporated by reference to the Company's Post Effective
                      Amendment No. 2 to Form S-8 as filed on October 1, 1987,
                      File No. 2-93984).

             10.2     Form of Directors' Indemnification Agreement dated July 2,
                      1986 (incorporated by reference to Exhibit 10(f) of the
                      Company's Annual Report of Form 10-K for fiscal year ended
                      January 31, 1988, File No. 0-12201).

             10.3     National Auto Credit, Inc. 1993 Equity Incentive Plan
                      (incorporated by reference to the Company's Form S-8
                      Registration Statement as filed on December 28, 1993, File
                      No. 33-51727).

             10.4     National Auto Credit, Inc. 401(k) Savings and Retirement
                      Plan and Trust (incorporated by reference to the Company's
                      Form S-8 Registration Statement as filed on December 28,
                      1993, File No. 33-51727).

             10.5     National Auto Credit, Inc. 1995 Stock Option Plan for
                      Member Dealers (incorporated by reference to the Company's
                      Form S-3 Registration Statement as filed on May 3, 1995,
                      File No. 33-58579).

             10.6     Employment Agreement dated as of May 12, 1999, between the
                      Company and Allen D. Rice (incorporated by reference to
                      Current Report on Form 8-K filed May 25, 1999, File No.
                      1-11601).



                                       61
<PAGE>   64


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-------- ----------------------------------------------------------------
         (cont.)

             10.7     Severance Agreement between Davida S. Howard and the
                      Company dated July 30, 1999, filed herewith and
                      incorporated herein by reference.

             10.8     Purchase and Sale Agreement of Contracts between Crescent
                      Bank & Trust and NAC, Inc. dated March 17, 2000
                      (incorporated by reference to Exhibit 10.1 of the Current
                      Report on Form 8-K filed April 3, 2000, File No. 1-11601).

             10.9     Purchase Agreement among National Auto Credit, Inc.,
                      National Cinemas, Inc., FA, Inc. and Reading
                      Entertainment, Inc., dated as of April 5, 2000
                      (incorporated by reference to Exhibit 10.1 of the Current
                      Report on Form 8-K filed on April 20, 2000, File No.
                      1-11601).

             10.10    Registration Rights Agreement, dated as of April 5, 2000
                      (incorporated by reference to Exhibit 10.2 of the Current
                      Report on Form 8-K filed on April 20, 2000, File No.
                      1-11601).

             10.11    Option Letter 1, dated as of April 5, 2000 (incorporated
                      by reference to Exhibit 10.4 of the Current Report on Form
                      8-K filed on April 20, 2000, File No. 1-11601).

             10.12    Option Letter 2, dated as of April 5, 2000 (incorporated
                      by reference to Exhibit 10.5 of the Current Report on Form
                      8-K filed on April 20, 2000, File No. 1-11601).

              21      Subsidiaries of National Auto Credit, Inc. at January 31,
                      2000.

              23      Consent of Independent Certified Public Accountants.

              27      Financial Date Schedule.

(b) Reports on Form 8-K -    No reports on Form 8-K have been filed by the
                             Registrant during the quarter ended January 31,
                             2000.




                                       62
<PAGE>   65




                                   SIGNATURES
                                   ----------


           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, National Auto Credit, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                              National Auto Credit, Inc.
                                                      Registrant


   Date      May  15, 2000                     By: /s/David L. Huber
        ----------------------                     ----------------------------
                                                   David L. Huber
                                                   Chairman and Chief Executive
                                                   Officer

          Pursuant to the requirements of the Securities Exchange Act
    of 1934, this report has been signed below by the following persons
    on behalf of the Registrant and in the capacities as indicated on
    May 15, 2000.


   Principal Executive Officer and
   -------------------------------
   Principal Financial Officer:

   By: /s/David L. Huber                      By: /s/Sean P. Maroney
       -------------------------------            -----------------------------
   David L. Huber                             Sean P. Maroney
   Chairman and Chief Executive               Director of Financial Reporting
   Officer

                                   Directors:
                                   ----------

                                              /s/James J. McNamara
  ------------------------------------        ----------------------------------
  Lorraine Dodero                             James J. McNamara

                                              /s/Philip A. Sauder
  ------------------------------------        ----------------------------------
  William J. Dodero                           Philip A. Sauder

                                              /s/Henry Y.L. Toh
  ------------------------------------        ----------------------------------
  Sam J. Frankino                             Henry Y.L. Toh

  /s/David L. Huber
  ------------------------------------        ----------------------------------
  David L. Huber                              Robert E. Upton, Jr.

  /s/Donald Jasensky                          /s/Peter T. Zackaroff
  ------------------------------------        ----------------------------------
  Donald Jasensky                             Peter T. Zackaroff


  ------------------------------------
  William T. Maund






                                       63
<PAGE>   66
<TABLE>
<CAPTION>

                                   SCHEDULE II


                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)



      Column A                                   Column B                 Column C            Column D           Column E
      --------                                   --------            -----------------        --------           --------

                                                 Balance at             Additions                                 Balance
                                                 beginning             Charged to:                                at end
     Description                                 of period         Expenses      Other        Deductions         of period
     -----------                                 ---------         --------      -----       ------------        ---------

<S>                                             <C>                 <C>           <C>         <C>                 <C>
   Year ended January 31, 2000
--------------------------------------
   Self-insurance claims                         $ 4,880           $  628         $ -        $  1,419 (a)         $ 4,089

   Year ended January 31, 1999
--------------------------------------
   Self-insurance claims                         $ 9,144           $   50         $ -        $  4,314 (a)         $ 4,880

   Year ended January 31, 1998
--------------------------------------
   Self-insurance claims                        $ 18,952           $  713         $ -        $ 10,521 (a)         $ 9,144

</TABLE>

           (a) Cash disbursements related to self-insured claims.








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