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

                                    FORM 10-Q

(X)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                  For the quarterly period ended         April 30, 2005
                                                --------------------------------

                                       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 or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)


555 Madison Avenue, 29th Floor, New York, New York              10022
---------------------------------------------------    -------------------------
(Address of principal executive offices) (Zip Code)

                    (212) 644-1400
-----------------------------------------------------
 (Registrant's telephone number, including area code)

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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                            Yes ( X )      No (   )

Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Securities and Exchange Act).

                            Yes (   )      No ( X )

Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date:

              Class                          Outstanding  at June 10, 2005
-----------------------------                -----------------------------
Common Stock, $0.05 par value                          10,102,614








                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>


                                                                                                          PAGE
                                                                                                          ----

     PART I.            FINANCIAL INFORMATION


     Item 1.            Financial Statements

                        Report of Independent Registered Public Accounting Firm                             3

                        Condensed Consolidated Balance Sheets as of
                        April 30, 2005 and January 31, 2005                                                 4

                        Condensed Consolidated Statements of Operations for the
                        Three Months Ended April 30, 2005 and 2004                                          5

                        Condensed Consolidated Statements of Stockholders' Equity and
                        Comprehensive Income (Loss) for the Three Months Ended
                        April 30, 2005                                                                      6

                        Condensed Consolidated Statements of Cash Flows for the
                        Three Months Ended April 30, 2005 and 2004                                          7

                        Notes to Condensed Consolidated Financial Statements                                8


     Item 2.            Management's Discussion and Analysis of
                        Financial Condition and Results of Operations                                      19


     Item 3.            Quantitative and Qualitative Disclosures about
                        Market Risk                                                                        30

     Item 4.            Controls and Procedures                                                            30


     PART II.           OTHER INFORMATION

     Item 1.            Legal Proceedings                                                                  32

     Item 2.            Unregistered Sales of Equity Securities and Use of Proceeds                        35

     Item 6.            Exhibits and Reports on Form 8-K                                                   35


     Signatures                                                                                            36

     Certifications                                                                                        37

</TABLE>



                                      -2-




                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS





REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
National Auto Credit, Inc. and Subsidiaries
New York, New York


         We have reviewed the accompanying condensed consolidated balance sheets
of National Auto Credit, Inc. and Subsidiaries as of April 30, 2005, the related
condensed consolidated statements of operations for each of the three-month
periods ended April 30, 2005 and 2004; the related condensed consolidated
statement of stockholders' equity and comprehensive loss for the three-month
period ended April 30, 2005 and the condensed consolidated statements of cash
flows for the three-month periods ended April 30, 2005 and 2004. The financial
statements are the responsibility of the Company's management.

         We conducted our reviews in accordance with standards established by
the Public Company Accounting Oversight Board ("PCAOB"). A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.

         Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.

         We have previously audited, in accordance with standards established by
the PCAOB, the consolidated balance sheet as of January 31, 2005, and the
related consolidated statements of operations, stockholders' equity and
comprehensive loss, and cash flows for the year then ended (not presented
herein) and in our report dated April 22, 2005, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of January 31, 2005, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.




/s/ Grant Thornton LLP
Cleveland, Ohio
June 10, 2005



                                       3



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

<TABLE>


                                                                               April 30,       January 31,
                                                                                  2005             2005
                                                                              -------------    -------------
                                                                              (unaudited)

                           ASSETS

Cash and cash equivalents                                                          $ 1,288            $ 471
Accounts receivable, net of allowance of
  $64 and $65, respectively (Note 1)                                                 1,463            2,132
Income taxes refundable                                                                  -              826
Prepaid expenses                                                                       118              256
Other current assets                                                                    86              494
                                                                              -------------    -------------
  Total current assets                                                               2,955            4,179

Property and equipment, net of accumulated
  depreciation of $1,411 and $1,216, respectively (Note 1)                           2,122            2,240
Investment in AFC (Note 3)                                                           7,907            7,955
Goodwill (Note 1)                                                                    4,920            4,920
Other intangible assets, net of accumulated
  amortization of $994 and $852, respectively (Note 1)                               8,488            8,630
Other assets                                                                           159              165
                                                                              -------------    -------------
                                                                                  $ 26,551         $ 28,089
                                                                              =============    =============


            LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current maturities of long term obligations (Note 4)                               $ 1,245          $ 1,612
Accounts payable                                                                       920            1,255
Self-insurance claims (Note 6)                                                         236              256
Accrued income taxes                                                                   339              328
Deferred revenue (Note 1)                                                              846            1,194
Other liabilities                                                                    1,277            1,392
                                                                              -------------    -------------
  Total current liabilities                                                          4,863            6,037

Long term obligations (Note 4)                                                       8,619            8,650
Convertible promissory note (Note 4)                                                 2,825            2,825
                                                                              -------------    -------------
                                                                                    16,307           17,512
                                                                              -------------    -------------

COMMITMENTS AND CONTINGENCIES (Notes 2 and 6)                                            -                -

STOCKHOLDERS' EQUITY
Preferred stock                                                                          -                -
Common stock - $.05 par value, authorized 40,000,000 shares,
  issued 39,949,589 and 39,949,589 shares, respectively                              1,997            1,997
Additional paid-in capital                                                         174,454          174,454
Retained deficit                                                                  (143,797)        (143,383)
Deferred compensation                                                                  (83)             (89)
Treasury stock, at cost, 29,846,975 and 29,946,975
  shares, respectively                                                             (22,327)         (22,402)
                                                                              -------------    -------------
  Total stockholders' equity                                                        10,244           10,577
                                                                              -------------    -------------
                                                                                  $ 26,551         $ 28,089
                                                                              =============    =============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                       4




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                  (UNAUDITED)



<TABLE>


                                                                        Three Months Ended
                                                                             April 30,
                                                                   -----------------------------
                                                                      2005             2004
                                                                   ------------     ------------

Service revenues                                                     $   2,864        $   3,293

Cost of service revenues                                                 1,497            1,947
                                                                   ------------     ------------
  Gross profit                                                           1,367            1,346

Selling, general and administrative                                      1,728            1,930
                                                                   ------------     ------------
  Loss from operations                                                    (361)            (584)

Interest income                                                              4                -
Income from AFC investment                                                 159               78
Interest expense                                                          (165)            (163)
                                                                   ------------     ------------

  Loss from continuing operations
     before income taxes                                                  (363)            (669)

Provision for income taxes                                                 (11)               -
                                                                   ------------     ------------

  Loss from continuing operations                                         (374)            (669)

Income (loss) from discontinued
  operations, net of tax                                                     2               (1)
                                                                   ------------     ------------

  Net loss                                                           $    (372)       $    (670)
                                                                   ============     ============

Basic and diluted loss per share
  Continuing operations                                              $    (.04)       $    (.07)
  Discontinued operations                                                    -                -
                                                                   ------------     ------------
     Net loss per share                                              $    (.04)       $    (.07)
                                                                   ============     ============

Weighted average number
   of shares outstanding
   Basic and diluted                                                    10,083            9,053
                                                                   ============     ============

</TABLE>

     See accompanying notes to condensed consolidated financial statements.




                                       5




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             AND COMPREHENSIVE LOSS
                       THREE MONTHS ENDED APRIL 30, 2005
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)



<TABLE>


                                       Preferred Stock         Common Stock
                                       ---------------- --------------------------    Additional
                                                  Par                       Par        Paid-In
                                       Shares    Value      Shares         Value       Capital
                                       -------  ------- -------------  ----------- --------------

Balance at
January 31, 2005                           -       $ -     39,949,589     $ 1,997     $ 174,454

Net loss
Treasury stock issued for services
Deferred compensation
 expense
                                       -------  ------- -------------  ----------- --------------


Comprehensive income (loss)


Balance at
 April 30, 2005                            -       $ -     39,949,589     $ 1,997     $ 174,454
                                       =======  ======= =============  =========== ==============




                                                                      Deferred                  Comprehensive
                                          Retained      Treasury    Compensation                    Income
                                           Deficit        Stock        Expense       Total          (Loss)
                                       ------------- ------------- -------------- -----------   -------------

Balance at
January 31, 2005                         $ (143,383)     $ (22,402)     $ (89)     $ 10,577

Net loss                                       (372)                                   (372)       $ (372)
Treasury stock issued for services              (42)            75                       33
Deferred compensation
 expense                                                                      6           6             6
                                       ------------- ------------- -------------- -----------   -------------


Comprehensive income (loss)                                                                        $ (366)
                                                                                                =============

Balance at
 April 30, 2005                          $ (143,797)     $ (22,327)     $ (83)     $ 10,244
                                       ============= ============= ============== ===========
</TABLE>




     See accompanying notes to condensed consolidated financial statements.




                                       6



                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


<TABLE>


                                                                                Three Months Ended
                                                                                     April 30,
                                                                             ----------------------------
                                                                                  2005           2004
                                                                             ------------    ------------

    Cash flows from operating activities
    Net loss                                                                    $  (372)       $   (670)
    Adjustments to reconcile net loss to net cash provided by
      (used in) operating activities:
       (Income) loss from discontinued operations                                    (2)              1
       Depreciation and amortization                                                337             330

    Changes in operating assets and liabilities, net of acquisition:

       Accounts receivable                                                          669             305
       Income tax refundable                                                        826              92
       Accrued income tax                                                            11              (7)
       Accounts payable and other liabilities                                      (335)            (27)
       Deferred revenue                                                            (348)           (198)
       Other operating assets and liabilities, net                                  316             256
                                                                            ------------    ------------
          Net cash provided by operating activities                               1,102              82
                                                                            ------------    ------------

    Cash flows from investing activities
     Proceeds from AFC distributions                                                208               -
     Purchase of property and equipment                                             (77)           (105)
                                                                            ------------    ------------
          Net cash provided by (used in) investing activities                       131            (105)
                                                                            ------------    ------------

    Cash flows from financing activities
     Payments of long term debt                                                    (398)            (24)
                                                                            ------------    ------------
          Net cash used in financing activities                                    (398)            (24)
                                                                            ------------    ------------

     Increase (decrease) in cash and cash equivalents from
       continuing operations                                                        835             (47)
     Decrease in cash and cash equivalents from
       discontinued operations                                                      (18)             (4)
     Cash and cash equivalents at beginning of period                               471             376
                                                                            ------------    ------------
     Cash and cash equivalents at end of period                                 $ 1,288        $    325
                                                                            ============    ============

    Supplemental disclosures of cash flow information
     Interest paid                                                              $   140        $    167
                                                                            ============    ============
     Income taxes paid                                                          $     -        $      7
                                                                            ============    ============
     Stock issued for services                                                  $    33        $      -
                                                                            ============    ============

</TABLE>





     See accompanying notes to condensed consolidated financial statements.




                                       7



                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

General
-------

         The accompanying unaudited condensed consolidated financial
statements include the accounts of National Auto Credit, Inc. and Subsidiaries
("NAC"). NAC, through its operating subsidiaries, Audience Response Systems,
Inc. ("ARS") and the Campus Group Companies, Inc. ("Campus" and collectively
with ARS, the "The Campus Group") and OMI Business Communications, Inc. ("OMI"),
specializes in the full-service design, creative development, production, post
production editing and transmission, via broadcast satellite videoconferencing,
webcasting and traditional on-site presentations, of corporate communication,
education and training video and other services for use at corporate events.
Additionally, NAC, through its investment in the Angelika Film Center LLC
("AFC"), operates in the movie exhibition industry (see Note 3).

         The financial statements are unaudited, but in the opinion of
management, reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of NAC's consolidated financial
position, results of operations, stockholders' equity and comprehensive loss,
and cash flows for the periods presented.

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial statements and with the rules of the Securities and
Exchange Commission applicable to interim financial statements, and therefore do
not include all disclosures that might normally be required for interim
financial statements prepared in accordance with generally accepted accounting
principles. The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with NAC's consolidated financial
statements, including the notes thereto, appearing in NAC's Annual Report on
Form 10-K for the year ended January 31, 2005. The results of operations for the
three months ended April 30, 2005 are not necessarily indicative of the
operating results for the full year.

           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.

         NAC uses a January 31 year-end for financial reporting purposes.
References herein to the fiscal year ended January 31, 2006 shall be the term
"Fiscal 2006" and references to other "Fiscal" years shall mean the year, which
ended on January 31 of the year indicated. The term the "Company" or "NAC" as
used herein refers to National Auto Credit, Inc. together with its subsidiaries
unless the context otherwise requires.

Discontinued Operations
-----------------------

         Effective December 31, 2001, NAC suspended its ZoomLot operations and
initiated steps to discontinue e-commerce operations. Additionally, as a
consequence of NAC's decision to discontinue its ZoomLot e-commerce operations,
NAC also formally exited the sub-prime used automobile consumer finance business
effective December 31, 2001. As a result of these decisions, both the e-commerce
and automobile finance segments have been classified as discontinued operations
as of January 31, 2002. For the three months ended April 30 2005 NAC realized
income from discontinued operations of $2,000. For the three months ended April
30, 2004, NAC incurred a loss from discontinued operations of $1,000.


                                       8





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Service Revenues
----------------

         NAC's service revenues are earned within short time periods, generally
less than one week. NAC recognizes revenue from video production, video editing,
meeting services and broadcast satellite or webcast services when the video is
complete and delivered or all technical services have been rendered. Deposits
and other prepayments are recorded as deferred revenue until revenue is
recognized. NAC does not have licensing or other arrangements that result in
additional revenues following the delivery of the video or a broadcast. Costs
accumulated in the production of the video, meeting services or broadcasts are
deferred until the sale and delivery are complete. Deferred production costs of
$85,000 and $401,000, respectively, are included as a component of other current
assets at April 30, 2005 and January 31, 2005, respectively.

         NAC recognizes revenue from website design and development when the
customer accepts the completed project. Deposits and other prepayments are
recorded as deferred revenue until revenue is recognized. These contracts are
generally limited to the design and development of websites and the presentation
of site library content developed by NAC. Clients also have the option to engage
NAC to maintain and upgrade their websites. These projects are separate from the
website development and design engagements, and the related revenue is
recognized over the term of the agreement, which is generally up to one year.

         NAC recognizes revenue from developing and maintaining websites
pursuant to the requirements of Statement of Position No. 97-2, "Software
Revenue Recognition" ("SOP 97-2"), as amended by Statement of Position No. 98-9,
"Software Revenue Recognition with Respect to Certain Arrangements." Under SOP
97-2, revenue attributable to an element in a customer arrangement is recognized
when persuasive evidence of an arrangement exists and delivery has occurred,
provided the fee is fixed or determinable, collectibility is probable and the
arrangement does not require significant customization of the software. If at
the outset of the customer arrangement, NAC determines that the arrangement fee
is not fixed or determinable or that collectibility is not probable, NAC defers
the revenue and recognizes the revenue when the arrangement fee becomes due and
payable or, when collectibility is uncertain, as cash is collected.

Cost of Service Revenues
------------------------

         Cost of revenues consists of direct expenses specifically associated
with client service revenues. The cost of revenues includes direct salaries and
benefits, purchased products or services for clients, web hosting, support
services, shipping and delivery costs.

Accounts Receivable
-------------------

         Accounts receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts is NAC's best estimate of the
amount of probable credit losses in NAC's existing accounts receivable. NAC
determines the allowance based on analysis of historical bad debts, client
concentrations, client credit-worthiness and current economic trends. NAC
reviews its allowance for doubtful accounts quarterly. Past-due balances over 90
days and specified other balances are reviewed individually for collectibility.
All other balances are reviewed on an aggregate basis. Account balances are
written off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. NAC does not have
any off-balance sheet credit exposure related to its customers.



                                       9




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Property and Equipment
----------------------

         Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
which range from eighteen months to ten years. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful lives of
the related improvements.

Goodwill and Other Intangible Assets
------------------------------------

         Intangible assets with indefinite lives, including goodwill, are not
subject to amortization but are subject to testing for impairment at least
annually or whenever there is an impairment indicator.

         In its acquisition of The Campus Group, NAC acquired certain intangible
assets including client relationships and lists and a non-competition agreement
with an initial aggregate fair value of $9.5 million. The useful lives of these
intangibles are estimated to be 17 years and 9 years, respectively. The
intangible assets with definite useful lives are amortized using the
straight-line method over those lives. For the three months ended April 30, 2005
and 2004, NAC charged to operations $142,000 and $142,000, respectively, for the
amortization of these intangible assets.

Impairment of Long-Lived Assets
-------------------------------

         NAC reviews the carrying value of its long-lived assets (other than
goodwill) whenever events or changes in circumstances indicate that its carrying
amount may not be recoverable. If indicators of impairment exist, NAC would
determine whether the estimated undiscounted sum of the future cash flows of
such assets is less than its carrying amount. If less, an impairment loss would
be recognized based on the excess of the carrying amount of such assets over
their respective fair values. NAC would determine the fair value by using quoted
market prices, if available, for such assets; or if quoted market prices are not
available, NAC would discount the expected estimated future cash flows.

Reclassifications
-----------------

         Certain Fiscal 2005 amounts have been reclassified to conform with
Fiscal 2006 presentations.














                                       10





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

New Accounting Pronouncements
-----------------------------

         In December, 2004 the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 123R (revised 2004), Share-Based Payment, which replaces
SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values
beginning with the first interim or annual period after June 15, 2005, with
early adoption encouraged. The pro forma disclosures previously permitted under
SFAS 123 no longer will be an alternative to financial statement recognition.
NAC is required to adopt SFAS 123R at the beginning of Fiscal 2007 (effective
February 1, 2006). Under SFAS No. 123R, NAC must determine the appropriate fair
value model to be used for valuing share-based payments, the amortization method
for compensation cost and the transition method to be used at date of adoption.
The transition methods include prospective and retrospective adoption options.
Under the retrospective option, prior periods may be restated either as of the
beginning of the year of adoption or for all periods presented. The prospective
method requires that compensation expense be recorded for all unvested stock
options and restricted stock at the beginning of the first quarter of adoption
while the retrospective methods would record compensation expense for all
unvested stock options and restricted stock beginning with the first period
restated. NAC has not yet determined the method of adoption or the effect of
adopting SFAS 123R, and has not determined whether the adoption will result in
amounts that are similar to the current pro forma disclosures under SFAS 123.

         In December 2004, the FASB issued SFAS No. 153, Exchange of Nonmonetary
Assets, which is an amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions. The guidance in APB Opinion No. 29 is based on the principle that
exchanges of nonmonetary assets should be measured based upon the fair value of
the assets exchanged, with certain exemptions to that principle. SFAS No. 153
eliminates the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a consequence of the exchange. The adoption of SFAS No. 153
will be effective for nonmonetary exchanges occurring in fiscal periods
beginning after June 15, 2005. NAC expects that the adoption of SFAS No. 153
will not have a material impact NAC's consolidated financial statements.


NOTE 2 - SHAREHOLDER COMPLAINT SETTLEMENT

Shareholder Complaints
----------------------

         In July and August 2001, NAC received three separate derivative
complaints filed with the Court of Chancery of Delaware ("Delaware Court") by
each of Academy Capital Management, Inc ("Academy Complaint")., Levy Markovich,
("Markovich Complaint") and Harbor Finance Partners ("Harbor Complaint"), all
shareholders of NAC, against James J. McNamara, John A. Gleason, William S.
Marshall, Henry Y.L. Toh, Donald Jasensky, Peter T. Zackaroff, Mallory Factor,
and Thomas F. Carney, Jr. (the "Director Defendants") and names NAC as a nominal
defendant. By order of the Delaware Court on November 12, 2001, the Academy,
Markovich and Harbor Complaints were consolidated under the title "In re
National Auto Credit, Inc. Shareholders Litigation," Civil Action No. 19028 NC
(Delaware Court) ("Delaware Action") and the Academy Complaint were consolidated
as the Delaware Action.


                                       11




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 2 - SHAREHOLDER COMPLAINT SETTLEMENT - CONTINUED

         The Delaware Action principally seeks: (i) a declaration that the
Director Defendants breached their fiduciary duties to NAC, (ii) a judgment
voiding an employment agreement with James J. McNamara and rescinding a stock
exchange agreement in which NAC acquired ZoomLot, (iii) a judgment voiding the
grant of stock options and the award of director fees allegedly related thereto,
(iv) an order directing the Director Defendants to account for alleged damages
sustained and profits obtained by the Director Defendants as a result of the
alleged various acts complained of, (v) the imposition of a constructive trust
over monies or other benefits received by the Director Defendants, (vi) a
judgment requiring the Director Defendants to promptly schedule an annual
meeting of shareholders and (vii) an award of costs and expenses.

           On October 12, 2001, NAC received a derivative complaint filed by
Robert Zadra, a shareholder of NAC, that had been filed with the Supreme Court
of the State of New York ("New York Court") on or about October 12, 2001 against
James J. McNamara, John A. Gleason, William S. Marshall, Henry Y. L. Toh, Donald
Jasensky, Peter T. Zackaroff, Mallory Factor, Thomas F. Carney, Jr., and NAC as
Defendants. On or about May 29, 2002 the complaint was amended to include class
action allegations (the "New York Action"). The New York Action contains
allegations similar to those in the Delaware Action concerning the Board's
approval of the employment agreement with James McNamara, option grants and past
and future compensation to the Director Defendants, and the ZoomLot transaction.
The New York Action seeks (i) a declaration that as a result of approving these
transactions the Director Defendants breached their fiduciary duties to NAC,
(ii) a judgment enjoining Director Defendants from proceeding with or exercising
the option agreements, (iii) rescission of the option grants to Director
Defendants, if exercised, (iv) an order directing the Director Defendants to
account for alleged profits and losses obtained by the Director Defendants as a
result of the alleged various acts complained of, (v) awarding compensatory
damages to NAC and the class, together with prejudgment interest, and (vi) an
award of costs and expenses.

         NAC has vigorously defended against each of the respective claims made
in the Delaware Action and New York Action, as it believes that the claims have
no merit.

         The parties in the New York Action thereafter engaged in settlement
negotiations and, in December 2002, the parties entered into a stipulation of
settlement which was thereafter amended in November 2004 (the "New York
Settlement Stipulation"). Under the terms of the New York Settlement
Stipulation, NAC agreed (subject to certain terms and conditions) to, among
other things, (a) adopt or implement certain corporate governance procedures or
policies, (b) issue to a class of NAC shareholders who had continuously held NAC
Common Stock from December 14, 2000 through December 24, 2002 up to one million
warrants (one warrant per 8.23 shares of Common Stock), with each warrant having
a five year term and being exercisable for shares of NAC Common Stock at a price
of $1.55 per share, (c) cancel 50% of certain stock options granted on December
15, 2000, and (d) make certain payments for legal fees for counsel to the
plaintiffs in the New York Action. In addition, the New York Settlement
Stipulation created for the benefit of NAC a Settlement Fund in the amount of
$2.5 million which has been funded by an insurance policy. The legal fees for
counsel to the plaintiffs in the New York Action are not to exceed 25% of the
Settlement Fund.

         In order to facilitate the settlement and dismissal of the separate
Delaware Action as well as the New York Action, on April 22, 2005, NAC entered
into a Stock Purchase Agreement ("Agreement") with Academy Capital Management,
Inc., Diamond A. Partners, L.P., Diamond A. Investors, L.P., Ridglea Investor
Services, Inc. and William S. Banowsky (hereinafter referred to collectively as
the "Selling Stockholders"). The Selling Stockholders had also raised objections
to the settlement of the New York Action. The New York Court (a) had rejected
the objections raised by the Selling Stockholders and (b) had approved as fair
and in the best interests of NAC and its shareholders the proposed settlement of
the New York Action as set forth in the New York Settlement Stipulation. The
Selling Stockholders had then filed an appeal (the "Appeal") to such
determination by the New York Court.





                                       12




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 2 - SHAREHOLDER COMPLAINT SETTLEMENT - CONTINUED

         Pursuant to the terms of the Agreement, the Selling Stockholders
agreed, among other things, to do the following:

         o    enter into a stipulation (to be filed with the New York Court)
              pursuant to which they will (a) irrevocably withdraw, with
              prejudice, any objections they had asserted or might have asserted
              with respect to the settlement of the New York Action, (b)
              stipulate to the entry of an order dismissing the New York Action
              and (c) agree to the dismissal of the Appeal.

         o    enter into a stipulation (to be filed with the Appellate Division,
              First Department, of the Supreme Court of the State of New York)
              providing for the dismissal of the Appeal.

         o    enter into a stipulation (to be filed in the Delaware Court),
              pursuant to which they will agree to the dismissal of the Delaware
              Action with prejudice.

         The Selling Stockholders have executed and delivered to NAC and NAC has
filed with the applicable New York Court and Delaware Court each of the
stipulations referred to above. Effective May 5, 2005, the New York Court
entered a Final Order and Judgment in which it approved the Stipulation of
Dismissal of Objections, finding the terms set forth therein fair, reasonable
and adequate, and dismissed the New York Action and the objections to the New
York Settlement with prejudice. Effective May, 13, 2005, the Appellate Division,
First Department, of the Supreme Court of the State of New York granted the
dismissal of the Appeal. Effective May 18, 2005, the Delaware Court granted an
Order and Judgment Dismissing Action with Prejudice the Delaware Action. As a
consequence of each of the above actions by the respective courts, settlement of
the New York Action and the Delaware Action, the settlement has received
preliminary confirmation as of May 2005 and management estimates final
confirmation by the end of June 2005.

         Pursuant to the Agreement, NAC has agreed (subject to certain terms and
conditions set forth in the Agreement) to purchase from the Selling Shareholders
their 1,562,500 shares of NAC Common Stock at a price of $0.6732 per share (or a
total purchase price of $1,051,875) and to contribute $100,000 to cover a
portion of the legal fees incurred by the Selling Shareholders. NAC's obligation
to purchase such shares is conditioned upon (as well as certain other
conditions) (a) an order or judgment having been entered by the New York Court
in the New York Action, dismissing the New York Action with prejudice, which
order or judgment shall not be subject to appeal or the time to appeal such
order or judgment shall have lapsed, and (b) an order or judgment having been
entered by the Delaware Court in the Delaware Action, dismissing the Delaware
Action with prejudice, which order or judgment shall not be subject to appeal or
the time to appeal such order or judgment shall have lapsed. NAC anticipates
that all or a substantial portion of the purchase price for any shares purchased
from the Selling Shareholders, as well as the $100,000 referred to above for
legal fees of the Selling Shareholders, will be funded from the net proceeds of
the $2.5 million that has been provided by NAC's insurer for a Settlement Fund
in the New York Action.

         As acknowledged by the Selling Shareholders in the Agreement, NAC was
willing to enter into the Agreement, settle the New York Action and the Delaware
Action and consummate the other transactions contemplated by the Agreement in
order to terminate prolonged and expensive litigation and NAC's entry into the
Agreement would not constitute or be deemed to constitute or evidence any
improper or illegal conduct by or on behalf of NAC (or any of its directors,
officers, employees and other agents or representatives) or any other wrong
doing by NAC (or any of its directors, officers, employees and other agents or
representatives). The Agreement was approved by the disinterested and
independent members of NAC's Board of Directors.



                                       13





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 3 - INVESTMENT IN AFC

         On April 5, 2000, NAC, through its wholly owned subsidiary National
Cinemas, Inc., acquired 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.

         AFC is currently owned 50% by NAC and 50% by Reading International,
Inc. ("Reading"). 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.

         NAC uses the equity method to account for its investment in AFC.
NAC's initial investment exceeded its share of AFC's net assets and that portion
of the investment balance is accounted for in a manner similar to goodwill. AFC
uses a December 31 year-end for financial reporting purposes. NAC reports on a
January 31 year-end, and for its fiscal quarters ending April 30, July 31,
October 31 and January 31 records its pro-rata share of AFC's earnings on the
basis of AFC's fiscal quarters ending March 31, June 30, September 30, and
December 31, respectively. For the three months ended April 30, 2005 and 2004,
NAC recorded income of $159,000 and $78,000, respectively, representing its
share of AFC's net income.

         Summarized income statement data for AFC for the three months ended
March 31, 2005 and 2004, respectively, is as follows (in thousands):


                                                  Three Months Ended
                                                        March 31,
                                            ------------------------------
                                                2005              2004
                                            ------------      ------------
Revenues                                      $ 1,411           $ 1,305

Film rental                                       307               260
Operating costs                                   544               633
Depreciation and amortization                     198               214
General and administrative expenses                42                42
                                           ------------      ------------
                                                1,091             1,149
                                           ------------      ------------
Net income                                      $ 320             $ 156
                                           ============      ============
NAC's proportionate share of net income         $ 159              $ 78
                                           ============      ============








                                       14




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 4 - CURRENT AND LONG TERM OBLIGATIONS

         On July 14, 2004, National Auto Credit, Inc. ("NAC") consummated a Loan
and Security Agreement ("Loan Agreement") with a lender and issued a Promissory
Note ("Note") of $1.0 million. The lender, Time Passages Corp., is an
unaffiliated third party lender. The President of Time Passages Corp. was a
former director of NAC who last served on NAC's board in January 2002. Pursuant
to the terms of the Note, (i) the outstanding principal of the Note is due July
13, 2005, (ii) NAC is required to pay interest only, monthly and in arrears,
during the term and (iii) the Note bears interest at twenty percent per annum.
NAC may prepay the Note at anytime and without a prepayment penalty. In January
2005, NAC prepaid $650,000 of the Note. In February 2005, NAC prepaid the
$350,000 remaining balance and retired the Note.

         As a consequence of NAC's acquisition of The Campus Group effective
July 31, 2003, NAC issued to Steve Campus and certain family trusts promissory
notes of $9.9 million and issued to a family trust a convertible promissory note
of $2.8 million. Of the $9.9 million in promissory notes issued by NAC, $6.6
million of the promissory notes ("Base Notes") bear interest at 5% per annum and
are repayable in quarterly installments according to a formula based upon the
future cash flows realized from The Campus Group over a period not to exceed
seven years. The remaining $3.3 million in promissory notes ("Trailing Notes")
issued by NAC bear interest at 5% per annum and are repayable in quarterly
installments, commencing upon the retirement of the Base Notes, according to a
formula based upon the future cash flows realized from The Campus Group over a
period not to exceed three years subsequent to the retirement of the Base Notes.
The $2.8 million convertible promissory note (i) bears interest at 5% per annum,
payable quarterly in cash or accumulating as principal at the election of NAC,
(ii) requires principal payments to commence upon the retirement of the Base
Notes and Trailing Notes and is then repayable in quarterly installments
according to a formula based upon the future cash flows realized from The Campus
Group over a period not to exceed three years and (iii) is convertible at the
option of the holder into shares of NAC common stock at a base conversion price
of $1.50 per share. The holder may not convert the convertible promissory note
into NAC common stock prior to repayment of the Base Notes and Trailing Notes.
The promissory notes are secured by the capital stock of the companies
comprising The Campus Group. At April 30, 2005, NAC has outstanding obligations
under the terms of the Base Notes, Trailing Notes and the Convertible Notes of
$6.1 million, $3.3 million and $2.8 million, respectively.

         As a consequence of NAC's acquisition of OMI effective April 1, 2003,
NAC assumed $814,000 in bank debt and capital lease obligations to financial
institutions and issued a promissory note payable to Dean Thompson in the amount
of $153,000.

         During 2001, OMI obtained a $300,000 bank term loan (the "Term Loan")
to finance certain capital expenditures. The Term Loan is payable in monthly
installments of $6,000, comprised of principal and interest, over a five year
term, expiring in July 2006. The Term Loan bears interest at the rate of 8.25%
per annum. The Term Loan is collateralized by substantially all of OMI's assets
and the personal guarantee of Mr. Thompson. In April 2004, as a consequence of a
change in control provision in the Term Loan, the bank has requested accelerated
repayment of the Term Loan. Accordingly, the $79,000 outstanding balance of the
Term Loan at April 30, 2005 has been classified as a component of current
maturities of long term obligations.









                                       15





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 4 - CURRENT AND LONG TERM OBLIGATIONS - CONTINUED

         On April 25, 2002, OMI obtained a $402,000 loan guaranteed by the U.S.
Small Business Administration (the "SBA Loan") to finance losses incurred as a
result of the September 11, 2001 terrorist attacks in New York City. At April
30, 2005, the remaining balance of the SBA Loan of $379,000 is repayable in
monthly installments of $3,309 with the last payment due in April 2017. The SBA
Loan bears interest at the rate of 4% per annum. The SBA Loan is collateralized
by substantially all of OMI's assets and the personal guarantee of Mr. Thompson.
Pursuant to the terms of the Merger Agreement, NAC is seeking to obtain a
release of Mr. Thompson's personal guarantee from the SBA Loan. The outstanding
balance of the SBA Loan at April 30, 2005 was $379,000.

         The promissory note payable to Mr. Thompson is payable in monthly
installments of principal and interest over a 36 month period expiring April
2006. The promissory note bears interest at 5% per annum. The outstanding
balance of the promissory note at April 30, 2005 was $54,000.

         OMI leases computer equipment under several different capital leases
with finance institutions with various payment terms, expiration dates and
imputed annual rates of interest. At April 30, 2005, the amounts outstanding
under capital leases were $11,000, net of $2,000 of interest.

         The components of long term obligations at April 30, 2005 are as
follows (in thousands):


                                                  Amounts
                                                  -------
 Capital leases                                      $ 11
 Term loan                                             79
 SBA loan                                             379
 Promissory note                                       54
 Base promissory notes                              6,066
 Trailing promissory notes                          3,275
 Convertible note payable                           2,825
                                              ------------
                                                   12,689

 Less current maturities                           (1,245)
                                              ------------
 Long term obligations and
    convertible note payable                     $ 11,444
                                              ============


          NAC's current maturities and long term obligations at April 30, 2005
are as follows (in thousands):



                                                    Amounts
                                                    -------
         2006                                      $ 1,245
         2007                                        1,141
         2008                                        1,199
         2009                                        1,260
         2010                                        1,325
          Thereafter                                 6,521
                                               ------------
                                                    12,691

 less interest due under
    capital leases obligations                          (2)
                                               ------------
                                                  $ 12,689
                                               ============

         The  cost and accumulated depreciation for equipment under capital
leases were $335,000 and $233,000, respectively at April 30, 2005.


                                       16


                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 5 - ISSUANCE OF TREASURY STOCK

         In February 2005, NAC issued 100,000 shares of unregistered, restricted
treasury stock as compensation for professional services rendered by an
unrelated third party. Such shares issued were recorded at their then market
value of $0.33 per share for an aggregate cost of $33,000. The restricted shares
may not be sold or otherwise transferred without registration under the
Securities and Exchange Act of 1933, as amended, or applicable state securities
laws or an exemption therefrom. In the event that NAC proposes to register any
of its securities under the Securities Act, whether for its own account or for
the account of another shareholder, the treasury stock issued may be included in
such registration.



NOTE 6 - COMMITMENTS AND CONTINGENCIES

Self-Insurance Reserves for Property Damage and Personal Injury Claims.
-----------------------------------------------------------------------

         NAC, under the names Agency Rent-A-Car, Inc. ("ARAC"), Altra Auto
Rental and Automate Auto Rental, previously engaged in the rental of automobiles
on a short-term basis, principally to the insurance replacement market. In
Fiscal 1996, NAC 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 NAC.

         NAC maintained and continues to maintain self-insurance for claims
relating to bodily injury or property damage from accidents involving the
vehicles rented to customers by its discontinued automobile rental operations.
NAC was, when required by either governing state law or the terms of its rental
agreement, self-insured for the first $1.0 million per occurrence, and for
losses in excess of $5.0 million per occurrence, for bodily injury and property
damage resulting from accidents involving its rental vehicles. NAC was also
self-insured, up to certain retained limits, for bodily injury and property
damage resulting from accidents involving NAC vehicles operated by employees
within the scope of their employment. In connection therewith, NAC established
certain reserves in its financial statements for the estimated cost of
satisfying those claims.

         NAC estimates the required self-insurance liability based upon specific
identification of the known matters subject to future claims, the nature of the
claim and the estimated costs to be incurred. These estimates include, but are
not limited to, NAC's historical loss experience and projected loss factors. The
required self-insurance liability is subject to adjustment in the future based
upon changes in the nature of the remaining claims or the ultimate cost. As a
consequence of NAC's sale of its automobile rental operations in 1995, NAC
believes that all incurred claims have been reported to NAC and that there are
no longer any incurred but not yet reported claims to be received by NAC. NAC's
self-insurance liability at April 30, 2005 and January 31, 2005 was $236,000 and
$256,000, respectively.

         Because of the uncertainties related to several residual small claims
and legal proceedings involving NAC's former rental operations and
self-insurance claims, it is difficult to project with precision the ultimate
effect the adjudication or settlement of these matters will have on NAC. At
April 30, 2005 NAC had accrued $236,000 to cover all outstanding self-insurance
liabilities. As additional information regarding NAC's potential liabilities
becomes available, NAC will revise the estimates as appropriate.


                                       17




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE 6 - COMMITMENTS AND CONTINGENCIES - CONTINUED

Other Litigation
----------------

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



























                                       18




                                     ITEM 2.
                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


GENERAL

         National Auto Credit, Inc. ("the Company" or "NAC") began operations in
1969 and was incorporated in Delaware in 1971. NAC is a multi-dimensional
corporate communications and entertainment company. NAC, through its operating
subsidiaries, Audience Response Systems, Inc. ("ARS") and the Campus Group
Companies, Inc. ("Campus" and collectively with ARS, the "The Campus Group") and
OMI Business Communications, Inc. ("OMI"), specializes in the full-service
design, creative development, production, post production editing and
transmission, via broadcast satellite videoconferencing, webcasting and
traditional on-site presentations, of corporate communication, education and
training video and other services for use at corporate events. Additionally,
NAC, through its investment in the Angelika Film Center LLC ("AFC"), operates in
the movie exhibition industry.

Significant Developments
------------------------

         In order to settle a derivative and class action entitled Robert Zadra,
et al v, James A. McNamara, et al (Index. No. 01-604859) (hereinafter referred
to as the "New York Action") that was commenced against NAC and certain of its
directors in the Supreme Court of the State of New York, New York County (the
"New York Court"), NAC entered into a November 2004 Amended Stipulation of
Settlement (the "New York Settlement Stipulation"). Under the terms of the New
York Settlement Stipulation, NAC agreed (subject to certain terms and
conditions) to, among other things, (a) adopt or implement certain corporate
governance procedures or policies, (b) issue to a class of NAC shareholders who
had continuously held NAC Common Stock from December 14, 2000 through December
24, 2002 up to one million warrants (one warrant per 8.23 shares of Common
Stock), with each warrant having a five year term and being exercisable for
shares of NAC Common Stock at a price of $1.55 per share, (c) cancel 50% of
certain stock options granted on December 15, 2000, and (d) make certain
payments for legal fees for counsel to the plaintiffs in the New York Action. In
addition, the New York Settlement Stipulation created for the benefit of NAC a
Settlement Fund in the amount of $2.5 million which has been funded by an
insurance policy. The legal fees for counsel to the plaintiffs in the New York
Action are not to exceed 25% of the Settlement Fund.

         In order to facilitate the settlement and dismissal of a separate
derivative action entitled In re National Auto Credit, Inc, Shareholders
Litigation (Index No. 19028 NC) (hereinafter referred to as the "Delaware
Action"), which had been commenced in the Chancery Court for the State of
Delaware (the "Delaware Court") against NAC, as well as the New York Action, on
April 22, 2005, NAC entered into a Stock Purchase Agreement ("Agreement") with
Academy Capital Management, Inc., Diamond A. Partners, L.P., Diamond A.
Investors, L.P., Ridglea Investor Services, Inc. and William S. Banowsky
(hereinafter referred to collectively as the "Selling Stockholders"). The
Selling Stockholders had also raised objections to the settlement of the New
York Action. The New York Court (a) rejected the objections raised by the
Selling Stockholders and (b) approved as fair and in the best interests of NAC
and its shareholders the proposed settlement of the New York Action as set forth
in the New York Settlement Stipulation. The Selling Stockholders then filed an
appeal (the "Appeal") to such determination by the New York Court.






                                       19




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

         Pursuant to the terms of the Agreement, the Selling Stockholders
agreed, among other things, to do the following:

         o    enter into a stipulation (to be filed with the New York Court)
              pursuant to which they will (a) irrevocably withdraw, with
              prejudice, any objections they had asserted or might have asserted

         o    with respect to the settlement of the New York Action, (b)
              stipulate to the entry of an order dismissing the New York Action
              and (c) agree to the dismissal of the Appeal.

         o    enter into a stipulation (to be filed with the Appellate Division,
              First Department, of the Supreme Court of the State of New York)
              providing for the dismissal of the Appeal.

         o    enter into a stipulation (to be filed in the Delaware Court),
              pursuant to which they will agree to the dismissal of the Delaware
              Action with prejudice.

         The Selling Stockholders have executed and delivered to NAC and NAC has
filed with the applicable New York Court and Delaware Court each of the
stipulations referred to above. Effective May 5, 2005, the New York Court
entered a Final Order and Judgment in which it approved the Stipulation of
Dismissal of Objections, finding the terms set forth therein fair, reasonable
and adequate, and dismissed the New York Action and the objections to the New
York Settlement with prejudice. Effective May, 13, 2005, the Appellate Division,
First Department, of the Supreme Court of the State of New York granted the
dismissal of the Appeal. Effective May 18, 2005, the Delaware Court granted an
Order and Judgment Dismissing Action with Prejudice the Delaware Action. As a
consequence of each of the above actions by the respective courts, settlement of
the New York Action and the Delaware Action, the settlement has received
preliminary confirmation as of May 2005 and management estimates final
confirmation by the end of June 2005.

         Pursuant to the Agreement, NAC has agreed (subject to certain terms and
conditions set forth in the Agreement) to purchase from the Selling Shareholders
their 1,562,500 shares of NAC Common Stock at a price of $0.6732 per share (or a
total purchase price of $1,051,875) and to contribute $100,000 to cover a
portion of the legal fees incurred by the Selling Shareholders. NAC's obligation
to purchase such shares is conditioned upon (as well as certain other
conditions) (a) an order or judgment having been entered by the New York Court
in the New York Action, dismissing the New York Action with prejudice, which
order or judgment shall not be subject to appeal or the time to appeal such
order or judgment shall have lapsed, and (b) an order or judgment having been
entered by the Delaware Court in the Delaware Action, dismissing the Delaware
Action with prejudice, which order or judgment shall not be subject to appeal or
the time to appeal such order or judgment shall have lapsed. NAC anticipates
that all or a substantial portion of the purchase price for any shares purchased
from the Selling Shareholders, as well as the $100,000 referred to above for
legal fees of the Selling Shareholders, will be funded from the net proceeds of
the $2.5 million that has been provided by NAC's insurer for a Settlement Fund
in the New York Action.






                                       20




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

         As acknowledged by the Selling Shareholders in the Agreement, NAC was
willing to enter into the Agreement, settle the New York Action and the Delaware
Action and consummate the other transactions contemplated by the Agreement in
order to terminate prolonged and expensive litigation and NAC's entry into the
Agreement would not constitute or be deemed to constitute or evidence any
improper or illegal conduct by or on behalf of NAC (or any of its directors,
officers, employees and other agents or representatives) or any other wrong
doing by NAC (or any of its directors, officers, employees and other agents or
representatives). The Agreement was approved by the disinterested and
independent members of NAC's Board of Directors.

         Management currently anticipates that the final confirmed settlement of
the New York Action and the Delaware Action, as described above, will be
completed by June 30, 2005. When the settlement is confirmed, NAC will record
the repurchase shares at their market value, based upon the market price of
NAC's Common Stock on April 22, 2005 (which was $0.54 per share). As a
consequence, upon the confirmation of the settlement in the second quarter of
Fiscal 2006 and based upon current estimates, NAC will (i) record as a component
of stockholder's equity the net proceeds of $1.9 million derived from the
Settlement Fund, (ii) record a charge to stockholder equity for the issuance of
the five-year warrants issued to eligible shareholders, (iii) charge to
operations for the excess cost to repurchase the Common Stock over the $0.54
market value of the shares, and related legal costs of $208,000 and $100,000,
respectively, and (iv) record an net increase in cash and cash equivalents,
after the Common Stock repurchase of approximately $750,000.

         Management believes that settlement of the New York Action and the
Delaware Actions, as provided for in the Agreement and the New York Settlement
Stipulation, will allow management to concentrate its efforts on NAC's business
and will allow NAC to avoid the costs and distractions of prolonged litigation.

CRITICAL ACCOUNTING POLICIES

      NAC's consolidated financial statements are prepared in accordance with
generally accepted accounting principles, which require NAC to make estimates
and assumptions. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses of NAC. Certain accounting policies are
deemed "critical", as they require management's highest degree of judgment,
estimates and assumptions. These accounting estimates and disclosures have been
discussed with the Audit Committee of NAC's Board of Directors. A discussion of
NAC's critical accounting policies, the judgments and uncertainties affecting
their application, and the likelihood that materially different amounts would be
reported under different conditions or using different assumptions are as
follows:

         Service Revenues: NAC's service revenues are earned within short time
periods, generally less than one week. NAC recognizes revenue from video
production, video editing, meeting services and broadcast satellite or webcast
services when the video is complete and delivered or all technical services have
been rendered. Deposits and other prepayments are recorded as deferred revenue
until revenue is recognized. NAC does not have licensing or other arrangements
that result in additional revenues following the delivery of the video or a
broadcast. Costs accumulated in the production of the video, meeting services or
broadcasts are deferred until the sale and delivery are complete. Deferred
production costs of $85,000 and $401,000, respectively, are included as a
component of other current assets at April 30, 2005 and January 31, 2005.





                                       21




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

         NAC recognizes revenue from website design and development when the
customer accepts the completed project. Deposits and other prepayments are
recorded as deferred revenue until revenue is recognized. These contracts are
generally limited to the design and development of websites and the presentation
of site library content developed by NAC. Clients also have the option to engage
NAC to maintain and upgrade their websites. These projects are separate from the
website development and design engagements, and the related revenue is
recognized over the term of the agreement, which is generally up to one year.

         NAC recognizes revenue from developing and maintaining websites
pursuant to the requirements of Statement of Position No. 97-2, "Software
Revenue Recognition" ("SOP 97-2"), as amended by Statement of Position No. 98-9,
"Software Revenue Recognition with Respect to Certain Arrangements." Under SOP
97-2, revenue attributable to an element in a customer arrangement is recognized
when persuasive evidence of an arrangement exists and delivery has occurred,
provided the fee is fixed or determinable, collectibility is probable and the
arrangement does not require significant customization of the software. If at
the outset of the customer arrangement, NAC determines that the arrangement fee
is not fixed or determinable or that collectibility is not probable, NAC defers
the revenue and recognizes the revenue when the arrangement fee becomes due and
payable or, when collectibility is uncertain, as cash is collected.

         Cost of Service Revenues: Cost of revenues consists of direct expenses
specifically associated with client service revenues. The cost of revenues
includes direct salaries and benefits, purchased products or services for
clients, web hosting, support services, shipping and delivery costs.

         Accounts Receivable: NAC extends credit to clients in the normal course
of business. NAC continuously monitors collections and payments from clients and
maintains an allowance for doubtful accounts based upon historical experience
and any specific client collection issues that have been identified. Since
accounts receivable are concentrated in a relatively few number of clients, a
significant change in the liquidity or financial position of any of these
clients could have a material adverse impact on the collectibility of the
accounts receivable and future operating results. NAC does not have any
off-balance sheet credit exposure related to its customers.

         Valuation of Long-lived Assets and Goodwill: NAC reviews the carrying
value of its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of these assets may not be fully
recoverable and it annually assesses whether goodwill has been impaired by
comparing the carrying amount of the goodwill to its fair value. When it is
determined that the carrying amount of long-lived assets or goodwill is
impaired, impairment is measured by comparing an asset's estimated fair value to
its carrying value. The determination of fair value is based on quoted market
prices in active markets, if available, or independent appraisals; sales price
negotiations; or projected future cash flows discounted at a rate determined by
management to be commensurate with our business risk. The estimation of fair
value utilizing discounted forecasted cash flows includes significant judgments
regarding assumptions of revenue, operating and marketing costs; selling and
administrative expenses; interest rates; property and equipment additions and
retirements; and industry competition, general economic and business conditions,
among other factors.





                                       22




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

         Management has determined that there was no impairment to our
long-lived assets and goodwill on the basis of a review of a discounted cash
flow analysis, which for goodwill is performed at the level of the subsidiaries
to which the goodwill relates. If there is a material change in the assumptions
used in the determination of fair value or a material change in the conditions
or circumstances influencing fair value, NAC could be required to recognize a
material impairment charge.

         Self-Insurance Claims: NAC maintained and continues to maintain
self-insurance for claims and associated litigation expenses relating to bodily
injury or property damage from accidents involving the vehicles rented to
customers by its discontinued automobile rental operations occurring in Fiscal
1996 and prior. NAC was, when required by either governing state law or the
terms of its rental agreement, self-insured for the first $1.0 million per
occurrence, and for losses in excess of $5.0 million per occurrence, for bodily
injury and property damage resulting from accidents involving its rental
vehicles. NAC was also self-insured, up to certain retained limits, for bodily
injury and property damage resulting from accidents involving NAC vehicles
operated by employees within the scope of their employment.

         NAC is subject to certain self-insurance claims and litigation expenses
relating to its discontinued automobile rental operations. NAC estimates the
required self-insurance liability based upon specific identification of the
known matters subject to future claims, the nature of the claim and the
estimated costs to be incurred. These estimates include, but are not limited to,
NAC's historical loss experience and projected loss factors. The required
self-insurance liability is subject to adjustment in the future based upon
changes in the nature of the remaining claims or the ultimate cost. As a
consequence of NAC's sale of its automobile rental operations in 1995, NAC
believes that all incurred claims have been reported to NAC and that there are
no longer any incurred but not yet reported claims to be received by NAC. NAC's
self-insurance liability at April 30, 2005 was $236,000.

         Because of the uncertainties related to several residual small claims
and legal proceedings involving NAC's former rental operations and
self-insurance claims, it is difficult to project with precision the ultimate
effect the adjudication or settlement of these matters will have on NAC. As
additional information regarding NAC's potential liabilities becomes available,
NAC will revise the estimates as appropriate.

         Income Taxes: NAC recognizes deferred tax assets and liabilities based
on differences between the financial statement carrying amounts and the tax
basis of assets and liabilities. Loss carrybacks, reversal of deferred tax
liabilities, tax planning and estimates of future taxable income are considered
in assessing the need for a valuation allowance. At the time it is determined
that NAC is unable to realize deferred tax assets in excess of the recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Likewise, should management determine that
NAC would not be able to realize all or part of its net deferred tax assets in
the future, an adjustment to the deferred tax assets would be charged to income
in the period such determination was made.





                                       23





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS FROM OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2005
AS COMPARED TO THE THREE MONTHS ENDED APRIL 30, 2004

         Service Revenues: Revenues for the three months ended April 30, 2005
were $2.9 million and are comprised principally of revenues derived from the
operations of OMI and The Campus Group. Revenues for the three months ended
April 30, 2004 were $3.3 million.

         For the three months ended April 30, 2005, revenues for The Campus
Group were $2.6 million as compared to revenues of $3.1 million for the three
months ended April 30, 2004. For the three months ended April 30, 2005, revenues
for OMI were $242,000 as compared to revenues of $261,000 for the three months
ended April 30, 2004. The aggregate decrease in revenues for the Campus Group
and OMI of $415,000 for the three months ended April 30, 2005 as compared to
revenues for the three months ended April 30, 2004 was principally due to a
decrease in the number, scope and value of client assignments completed during
the three months ended April 30, 2005 and 2004. The nature of OMI's and The
Campus Group's business is such that the nature and timing of assignments
completed for clients, and the resulting revenue, will vary from period to
period.

         Cost of Service Revenues: Cost of revenues for three months April 30,
2005 were $1.5 million and are comprised principally of cost of revenues derived
from operations of The Campus Group and OMI, (i) The Campus Group cost of
revenues of $1.3 million and (ii) OMI cost of revenues of $147,000. The average
gross margin for the three months ended April 30, 2005 was 48.5% and 39.0% for
The Campus Group and OMI, respectively. Cost of revenues for three months April
30, 2004 were $1.9 million and are comprised principally of (i) The Campus Group
cost of revenues of $1.7 million and (ii) OMI cost of revenues of $174,000. The
average gross margin for the three months ended April 30, 2004 was 41.3% and
33.8% for The Campus Group and OMI, respectively.

         The increase in gross profit of $21,000 is due to the net effect of (i)
a decrease in revenues offset by (ii) an increase in gross margin. The aggregate
average gross margins for The Campus Group and OMI increased 6.8% for the three
months ended April 30, 2005 as compared to the three months ended April 30, 2004
due to a greater proportion of video production and symposium revenues which
realized higher project margins during the three months ended April 30, 2005.

         Selling, General and Administrative ("SG&A"): SG&A expenses includes
SG&A expenses of OMI's operations ("OMI SG&A"), The Campus Group's operations
("Campus SG&A") and NAC's personnel, occupancy, legal, professional, insurance
and other general corporate overhead costs ("NAC SG&A").

         For the three months ended April 30, 2005, SG&A expense was $1.7
million comprised of (i) Campus SG&A of $718,000, (ii) OMI SG&A of $244,000, and
(iii) NAC SG&A of $766,000. For the three months ended April 30, 2004, SG&A
expense was $1.9 million comprised of (i) Campus SG&A of $760,000, (ii) OMI SG&A
of $304,000, and (iii) NAC SG&A of $866,000. The decrease of SG&A expense of
$202,000 for the three months ended April 30, 2005 as compared to the comparable
period ended April 30, 2004 is principally the result of (i) a decrease in
personnel costs of $77,000 and (ii) a net decrease of other SG&A of $125,000 as
NAC reduced general SG&A expenditures from period-to-period.




                                       24




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

         Income from AFC Investment: NAC accounts for its investment in AFC
using the equity method. For the three months ended April 30, 2005 and 2004, NAC
recorded income of $159,000 and $78,000, respectively, representing NAC's share
of AFC's net income for the three months ended March 31, 2005 and 2004
respectively.

         The following sets forth summarized operating results for AFC (in
thousands):



                                                  Three Months Ended March 31,
                                                 -----------------------------
                                                      2005          2004
                                                 -------------   -------------
         Revenues                                  $ 1,411         $ 1,305

         Film rental                                   307             260
         Operating costs                               544             633
         Depreciation and amortization                 198             214
         General and administrative expenses            42              42
                                                 -------------   -------------
                                                     1,091           1,149
                                                 -------------   -------------
         Net income                                $   320         $   156
                                                 =============   =============
         NAC's proportionate share of net income   $   159         $    78
                                                 =============   =============


         AFC's revenues increased $106,000 for the three months ended March 31,
2005 as compared to the three months ended March 31, 2004, principally as a
result of the combined effects of (i) a 6.0% increase in attendance, (ii) an
increase of $31,000 in other, concession and cafe revenues and (iii) a 3.3%
increase in average ticket prices period-to-period. The attendance, and at times
the ticket prices, at AFC will vary depending on audience interest in, and the
popularity of the films it exhibits and other factors. Film rental, as a
percentage of revenue, increased 1.9% to 21.8% from 19.9% for the three months
ended March 31, 2005 and 2004, respectively. Film rental expense generally is a
factor of a fixed percentage rental rate per film multiplied by the number of
tickets sold. AFC experiences fluctuations in film rental expense, as a
percentage of revenue, depending upon the rental rate per film and the
popularity of the film. Operating costs, as a percent of revenue, decreased 9.9%
to 38.6% for the three months ended March 31, 2005 as compared to 48.5% for the
three months ended March 31, 2004 due principally to a increase in revenues
realized and a reduction in general operating expense for the three months ended
March 31, 2005 as compared to the three months ended March 31, 2004. The nature
of AFC's operating costs tend to generally be more fixed overhead-related costs
and advertising expenses.

         Income Taxes: Due to net operating losses and the availability of net
operating loss carryforwards, NAC's effective income tax rate was zero for the
three month periods ended April 30, 2005 and April 30, 2004. NAC has provided a
full valuation allowance against its net operating loss carryforward and other
net deferred tax asset items due to the uncertainty of their future realization.
Income tax expense for the three months ended April 30, 2005 is comprised of
various state and local minimum income tax expense for the period.





                                       25




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


LIQUIDITY AND CAPITAL RESOURCES

         Throughout the three months ended April 30, 2005 and as of June 10,
2005, NAC had no external source of financing and has operated on its existing
cash balances, proceeds from its income tax refund, cash flows from operations,
and distributions from its investment in AFC. NAC will continue to pursue
reductions in its operating expenses and new debt or equity financing (which
there can be no assurance NAC will obtain such financing) as means of
supplementing NAC's resources available to pursue new acquisitions, joint
ventures or other business development opportunities. At April 30, 2005, NAC had
cash of $1.3 million which together with any cash flow derived from its
investment in AFC and the operations of NAC's corporate communications business
will be used to pursue such opportunities.

         As a consequence of periodic fluctuations in NAC's working capital
needs based upon the timing of collections, periods of increased media
production activity and the then pending collection of the income tax
refundable, on July 14, 2004 NAC consummated a Loan and Security Agreement
("Loan Agreement") with a lender and issued a Promissory Note ("Note") of $1.0
million. The lender, Time Passages Corp., is an unaffiliated third party lender.
The President of Time Passages Corp. was a former director of NAC who last
served on NAC's board in January 2002. Pursuant to the terms of the Note, (i)
the outstanding principal of the Note is due July 13, 2005, (ii) NAC is required
to pay interest only, monthly and in arrears, during the term and (iii) the Note
bears interest at twenty percent per annum. NAC may prepay the Note at anytime
and without a prepayment penalty. In January 2005, NAC prepaid $650,000 of the
Note. In February 2005, NAC prepaid the $350,000 remaining balance and retired
the Note.

         As a consequence of NAC's acquisition of The Campus Group effective
July 31, 2003, NAC issued to Mr. Campus and certain family trusts promissory
notes of $9.9 million and issued to a family trust a convertible promissory note
of $2.8 million. Of the $9.9 million in promissory notes issued by NAC, $6.6
million of the promissory notes ("Base Notes") bear interest at 5% per annum and
are repayable in quarterly installments according to a formula based upon the
future cash flows realized from The Campus Group over a period not to exceed
seven years. The remaining $3.3 million in promissory notes ("Trailing Notes")
issued by NAC bear interest at 5% per annum and are repayable in quarterly
installments, commencing upon the retirement of the Base Notes, according to a
formula based upon the future cash flows realized from The Campus Group over a
period not to exceed three years subsequent to the retirement of the Base Notes.
The $2.8 million convertible promissory note (i) bears interest at 5% per annum,
payable quarterly in cash or accumulating as principal at the election of NAC,
(ii) requires principal payments to commence upon the retirement of the $9.9
million of Base Notes and the Trailing Notes and is then repayable in quarterly
installments according to a formula based upon the future cash flows realized
from The Campus Group over a period not to exceed three years and (iii) is
convertible at the option of the holder into shares of NAC common stock at a
base conversion price of $1.50 per share. The holder may not convert the
convertible promissory note into NAC common stock prior to repayment of the Base
Notes and the Trailing Notes. The promissory notes are secured by the capital
stock of the companies comprising The Campus Group. At April 30, 2005, NAC has
outstanding obligations under the terms of the Base Notes, Trailing Notes and
the Convertible Notes of $6.1 million, $3.3 million and $2.8 million,
respectively.

         As a consequence of NAC's acquisition of OMI effective April 1, 2003,
NAC assumed $814,000 in bank debt and capital lease obligations to financial
institutions and issued a promissory note payable to Mr. Thompson in the amount
of $153,000.





                                       26




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


         During 2001, OMI obtained a $300,000 bank term loan (the "Term Loan")
to finance certain capital expenditures. The Term Loan is payable in monthly
installments of $6,000, comprised of principal and interest, over a five year
term, expiring in July 2006. The Term Loan bears interest at the rate of 8.25%
per annum. The Term Loan is collateralized by substantially all of OMI's assets
and the personal guarantee of Mr. Thompson. The outstanding balance of the Term
Loan at April 30, 2005 was $79,000.

         On April 25, 2002, OMI obtained a $402,000 loan guaranteed by the U.S.
Small Business Administration (the "SBA Loan") to finance losses incurred as a
result of the September 11, 2001 terrorist attacks in New York City. At April
30, 2005, the remaining balance of the SBA Loan of $379,000 is repayable in
monthly installments of $3,309 with the last payment due in April 2017. The SBA
Loan bears interest at the rate of 4% per annum.

         The promissory note payable to Mr. Thompson is payable in monthly
installments of principal and interest over a 36 month period expiring April
2006. The promissory note bears interest at 5% per annum. The outstanding
balance of the promissory note at April 30, 2005 was $54,000.

         OMI leases computer equipment under several different capital leases
with finance institutions with various payment terms, expiration dates and
imputed annual rates of interest. At April 30, 2005, amounts outstanding under
the capital leases were $11,000.

           For the three months ended April 30, 2005, NAC's cash and cash
equivalents increased $839,000 due principally to the net effects of (i) cash
flows provided by operations of $1.1 million, (ii) proceeds from AFC
distributions of $208,000, offset by (iii) capital expenditures of $77,000, and
(iv) the repayment of debt of $398,000. A principle component of NAC's cash
flows from operations for the three months ended April 30, 2005 was the
collection of NAC's $826,000 income tax refund. The cash flows from the
distributions from AFC increased in the first quarter of Fiscal 2006, as
compared to those for the three months ended April 30, 2004, as a consequence of
the timing of distributions by AFC and the increase in operating cash flow and
net income at AFC.

         NAC believes that the available cash and cash equivalents totaling $1.3
million at April 30, 2005 and any cash distributions from its investment in AFC
and cash flow from operations will be sufficient to pay operating expenses,
existing liabilities, fund existing debt repayments and fund its activities
through the next twelve months as NAC explores new strategic business
alternatives. Additionally, as previously discussed, NAC's lack of external
financing sources may limit its ability to pursue strategic business
alternatives being considered by NAC's Board of Directors. Such limitations may
have an adverse impact on NAC's financial position, results of operations and
liquidity.













                                       27




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


         In addition, pursuant to the terms of the New York Settlement
Stipulation and upon its final confirmation and the dismissal of the Delaware
Action, NAC would receive an estimated $1.9 million as the net proceeds, after
plaintiff attorney's fees, from the Settlement Fund. Pursuant to the terms of
the Stock Purchase Agreement ("Agreement") with the Selling Shareholders, NAC
has agreed to purchase 1,562,500 shares of NAC Common Stock at a price of
$0.6732 per share (or a total purchase price of $1,051,875) and to contribute
$100,000 to cover a portion of the legal fees incurred by the Selling
Shareholders. NAC expects to use a portion of the net proceeds derived from the
Settlement Fund to purchase the 1,562,500 shares of Common Stock. At April 30,
2005, no provision for the New York Settlement Stipulation has been recorded in
the consolidated financial statements as the final dismissals of the New York
Action and the Delaware Action have not been issued by the respective courts.


OTHER

         New Accounting Pronouncements
         -----------------------------

         In December, 2004 the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 123R (revised 2004), Share-Based Payment, which replaces
SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair values
beginning with the first interim or annual period after June 15, 2005, with
early adoption encouraged. The pro forma disclosures previously permitted under
SFAS 123 no longer will be an alternative to financial statement recognition.
NAC is required to adopt SFAS 123R at the beginning of Fiscal 2007 (effective
February 1, 2006). Under SFAS No. 123R, NAC must determine the appropriate fair
value model to be used for valuing share-based payments, the amortization method
for compensation cost and the transition method to be used at date of adoption.
The transition methods include prospective and retrospective adoption options.
Under the retrospective option, prior periods may be restated either as of the
beginning of the year of adoption or for all periods presented. The prospective
method requires that compensation expense be recorded for all unvested stock
options and restricted stock at the beginning of the first quarter of adoption
while the retrospective methods would record compensation expense for all
unvested stock options and restricted stock beginning with the first period
restated. NAC has not yet determined the method of adoption or the effect of
adopting SFAS 123R, and has not determined whether the adoption will result in
amounts that are similar to the current pro forma disclosures under SFAS 123.

         In December 2004, the FASB issued SFAS No. 153, Exchange of Nonmonetary
Assets, which is an amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions. The guidance in APB Opinion No. 29 is based on the principle that
exchanges of nonmonetary assets should be measured based upon the fair value of
the assets exchanged, with certain exemptions to that principle. SFAS No. 153
eliminates the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a consequence of the exchange. The adoption of SFAS No. 153
will be effective for nonmonetary exchanges occurring in fiscal periods
beginning after June 15, 2005. NAC expects that the adoption of SFAS No. 153
will not have a material impact NAC's consolidated financial statements.





                                       28




                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


         Inflation
         ---------

         Inflation has not had a material effect on NAC's business.

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

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


















                                       29




FORWARD-LOOKING STATEMENTS

         Some of the information in this report contains forward looking
statements within the meaning of the Some of the information in this report
contains forward looking statements within the meaning of the federal securities
laws that relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
us or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by the
forward-looking statements. You should not rely on forward-looking statements in
this report. Forward-looking statements typically are identified by use of terms
such as "anticipate", "believe", "plan", "expect", "intend", "may", "will",
"should", "estimate", "predict", "potential", "continue" and similar words
although some forward-looking statements are expressed differently. This report
may contain forward-looking statements attributed to third parties relating to
their estimates regarding the growth of our markets. All forward-looking
statements address matters that involve risk and uncertainties, and there are
many important risks, uncertainties and other factors that could cause our
actual results, as well as those of the markets we serve, levels of activity,
performance, achievements and prospects to differ materially from the
forward-looking statements contained in this report. You should also consider
carefully the statements under other sections of this report which address
additional facts that could cause our actual results to differ from those set
forth in any forward-looking statements. We undertake no obligation to publicly
update or review any forward-looking statements, whether as a result of new
information, future developments or otherwise.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Like virtually all commercial enterprises, NAC 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.

         NAC 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, NAC is not
exposed to market risk from these sources.

         As of April 30, 2005, the interest rates under NAC's long term and
convertible debt are fixed. As a result NAC has limited market risk associated
with market interest rates.


ITEM 4.  CONTROLS AND PROCEDURES

         As of the end of the period covered by this interim report on Form
10-Q, the Chief Executive Officer and the Chief Financial Officer of NAC (the
"Certifying Officers") have conducted evaluations of NAC's disclosure controls
and procedures. As defined under Sections 13a-15(e) and 15d-15(e)) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the term
"disclosure controls and procedures" means controls and other procedures of an
issuer that are designed to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the issuer's
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. The
Certifying




                                       30





Officers have reviewed NAC's disclosure controls and procedures and have
concluded that those disclosure controls and procedures were effective as of the
end of our most recent fiscal quarter. In compliance with Section 302 of the
Sarbanes-Oxley Act of 2002, (18 U.S.C. 1350), each of the Certifying Officers
executed an Officer's Certification included in this Quarterly Report on Form
10-Q.

         During our most recent fiscal quarter, there were no changes in our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
























                                       31




                                    PART II.

                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Shareholder Complaints
----------------------

         In July and August 2001, NAC received three separate derivative
complaints filed with the Delaware Court by each of Academy Capital Management,
Inc ("Academy Complaint"), Levy Markovich, ("Markovich Complaint") and Harbor
Finance Partners ("Harbor Complaint"), all shareholders of NAC, against James J.
McNamara, John A. Gleason, William S. Marshall, Henry Y.L. Toh, Donald Jasensky,
Peter T. Zackaroff, Mallory Factor, and Thomas F. Carney, Jr. (the "Director
Defendants") and names NAC as a nominal defendant. By order of the Delaware
Court on November 12, 2001, the Academy, Markovich and Harbor Complaints were
consolidated as the Delaware Action.

         The Delaware Action principally seeks: (i) a declaration that the
Director Defendants breached their fiduciary duties to NAC, (ii) a judgment
voiding an employment agreement with James J. McNamara and rescinding a stock
exchange agreement in which NAC acquired ZoomLot, (iii) a judgment voiding the
grant of stock options and the award of director fees allegedly related thereto,
(iv) an order directing the Director Defendants to account for alleged damages
sustained and profits obtained by the Director Defendants as a result of the
alleged various acts complained of, (v) the imposition of a constructive trust
over monies or other benefits received by the Director Defendants, (vi) a
judgment requiring the Director Defendants to promptly schedule an annual
meeting of shareholders and (vii) an award of costs and expenses.

         On October 12, 2001, NAC received a derivative complaint filed by
Robert Zadra, a shareholder of NAC, that had been filed with the New York Court
on or about October 12, 2001 against James J. McNamara, John A. Gleason, William
S. Marshall, Henry Y. L. Toh, Donald Jasensky, Peter T. Zackaroff, Mallory
Factor, Thomas F. Carney, Jr., and NAC as Defendants. On or about May 29, 2002
the complaint was amended to include class action allegations. The New York
Action contains allegations similar to those in the Delaware Action concerning
the Board's approval of the employment agreement with James McNamara, option
grants and past and future compensation to the Director Defendants, and the
ZoomLot transaction. The New York Action seeks (i) a declaration that as a
result of approving these transactions the Director Defendants breached their
fiduciary duties to NAC, (ii) a judgment enjoining Director Defendants from
proceeding with or exercising the option agreements, (iii) rescission of the
option grants to Director Defendants, if exercised, (iv) an order directing the
Director Defendants to account for alleged profits and losses obtained by the
Director Defendants as a result of the alleged various acts complained of, (v)
awarding compensatory damages to NAC and the class, together with prejudgment
interest, and (vi) an award of costs and expenses.

         NAC has vigorously defended against each of the respective claims made
in the Delaware Action and New York Action, as it believes that the claims have
no merit.

         The parties in the New York Action thereafter engaged in settlement
negotiations and, in December 2002, the parties entered into a stipulation of
settlement which was thereafter amended in November 2004 (the "New York
Settlement Stipulation"). Under the terms of the New York Settlement
Stipulation, NAC agreed (subject to certain terms and conditions) to, among
other things, (a) adopt or implement certain corporate governance procedures or
policies, (b) issue to a class of NAC shareholders who had continuously held NAC
Common Stock from December 14, 2000 through December 24, 2002 up to one million
warrants (one warrant per 8.23 shares of Common Stock), with each warrant having
a five year term and being exercisable for shares of NAC Common Stock at a price
of $1.55 per share, (c)





                                       32




cancel 50% of certain stock options granted on December 15, 2000, and (d) make
certain payments for legal fees for counsel to the plaintiffs in the New York
Action. In addition, the New York Settlement Stipulation created for the benefit
of NAC a Settlement Fund in the amount of $2.5 million which has been funded by
an insurance policy. The legal fees for counsel to the plaintiffs in the New
York Action are not to exceed 25% of the Settlement Fund.

         In order to facilitate the settlement and dismissal of the separate
Delaware Action as well as the New York Action, on April 22, 2005, NAC entered
into a Stock Purchase Agreement with Academy Capital Management, Inc., Diamond
A. Partners, L.P., Diamond A. Investors, L.P., Ridglea Investor Services, Inc.
and William S. Banowsky. The Selling Stockholders had also raised objections to
the settlement of the New York Action. The New York Court (a) had rejected the
objections raised by the Selling Stockholders and (b) had approved as fair and
in the best interests of NAC and its shareholders the proposed settlement of the
New York Action as set forth in the New York Settlement Stipulation. The Selling
Stockholders had then filed the Appeal.

         Pursuant to the terms of the Agreement, the Selling Stockholders
agreed, among other things, to do the following:

         o    enter into a stipulation (to be filed with the New York Court)
              pursuant to which they will (a) irrevocably withdraw, with
              prejudice, any objections they had asserted or might have asserted

         o    with respect to the settlement of the New York Action, (b)
              stipulate to the entry of an order dismissing the New York Action
              and (c) agree to the dismissal of the Appeal.

         o    enter into a stipulation (to be filed with the Appellate Division,
              First Department, of the Supreme Court of the State of New York)
              providing for the dismissal of the Appeal.

         o    enter into a stipulation (to be filed in the Delaware Court),
              pursuant to which they will agree to the dismissal of the Delaware
              Action with prejudice.

         The Selling Stockholders have executed and delivered to NAC and NAC has
filed with the applicable New York Court and Delaware Court each of the
stipulations referred to above. Effective May 5, 2005, the New York Court
entered a Final Order and Judgment in which it approved the Stipulation of
Dismissal of Objections, finding the terms set forth therein fair, reasonable
and adequate, and dismissed the New York Action and the objections to the New
York Settlement with prejudice. Effective May, 13, 2005, the Appellate Division,
First Department, of the Supreme Court of the State of New York granted the
dismissal of the Appeal. Effective May 18, 2005, the Delaware Court granted an
Order and Judgment Dismissing Action with Prejudice the Delaware Action. As a
consequence of each of the above actions by the respective courts, settlement of
the New York Action and the Delaware Action, the settlement has received
preliminary confirmation as of May 2005 and management estimates final
confirmation by the end of June 2005.

         Pursuant to the Agreement, NAC has agreed (subject to certain terms and
conditions set forth in the Agreement) to purchase from the Selling Shareholders
their 1,562,500 shares of NAC Common Stock at a price of $0.6732 per share (or a
total purchase price of $1,051,875) and to contribute $100,000 to cover a
portion of the legal fees incurred by the Selling Shareholders. NAC's obligation
to purchase such shares is conditioned upon (as well as certain other
conditions) (a) an order or judgment having been entered by the New York Court
in the New York Action, dismissing the New York Action with prejudice, which
order or judgment shall not be subject to appeal or the time to appeal such
order or judgment shall have lapsed, and (b) an order or judgment having been
entered by the Delaware Court in the Delaware Action, dismissing the Delaware
Action with prejudice, which order or judgment shall not be subject to appeal or
the time to appeal such order or judgment shall have lapsed. NAC anticipates
that all or a substantial portion of the purchase price for any shares purchased
from the Selling Shareholders, as well




                                       33




as the $100,000 referred to above for legal fees of the Selling Shareholders,
will be funded from the net proceeds of the $2.5 million that has been provided
by NAC's insurer for a Settlement Fund in the New York Action.

         As acknowledged by the Selling Shareholders in the Agreement, NAC was
willing to enter into the Agreement, settle the New York Action and the Delaware
Action and consummate the other transactions contemplated by the Agreement in
order to terminate prolonged and expensive litigation and NAC's entry into the
Agreement would not constitute or be deemed to constitute or evidence any
improper or illegal conduct by or on behalf of NAC (or any of its directors,
officers, employees and other agents or representatives) or any other wrong
doing by NAC (or any of its directors, officers, employees and other agents or
representatives). The Agreement was approved by the disinterested and
independent members of NAC's Board of Directors.

         Management currently anticipates that the final confirmed settlement of
the New York Action and the Delaware Action, as described above, will be
completed by June 30, 2005.

         Management believes that settlement of the New York Action and the
Delaware Actions, as provided for in the Agreement and the New York Settlement
Stipulation, will allow management to concentrate its efforts on NAC's business
and will allow NAC to avoid the costs and distractions of prolonged litigation.


Self-Insurance Reserves for Property Damage and Personal Injury Claims.
-----------------------------------------------------------------------

         NAC, under the names Agency Rent-A-Car, Inc. ("ARAC"), Altra Auto
Rental and Automate Auto Rental, previously engaged in the rental of automobiles
on a short-term basis, principally to the insurance replacement market. In
Fiscal 1996, NAC 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 NAC.

         NAC maintained and continues to maintain self-insurance for claims
relating to bodily injury or property damage from accidents involving the
vehicles rented to customers by its discontinued automobile rental operations
occurring in Fiscal 1996 and prior. NAC was, when required by either governing
state law or the terms of its rental agreement, self-insured for the first $1.0
million per occurrence, and for losses in excess of $5.0 million per occurrence,
for bodily injury and property damage resulting from accidents involving its
rental vehicles. NAC was also self-insured, up to certain retained limits, for
bodily injury and property damage resulting from accidents involving NAC
vehicles operated by employees within the scope of their employment.

         NAC is the subject to certain self-insurance claims and litigation
expenses relating to its discontinued automobile rental operations. NAC
estimates the required self-insurance liability based upon specific
identification of the known matters subject to future claims, the nature of the
claim and the estimated costs to be incurred. These estimates include, but are
not limited to, NAC's historical loss experience and projected loss factors. The
required self-insurance liability is subject to adjustment in the future based
upon changes in the nature of the remaining claims or the ultimate cost. As a
consequence of NAC's sale of its automobile rental operations in 1995, NAC
believes that all incurred claims have been reported to NAC and that there are
no longer any incurred but not yet reported claims to be received by NAC. NAC's
self-insurance liability at April 30, 2005 was $236,000.










                                       34




         Because of the uncertainties related to several residual small claims
and legal proceedings involving NAC's former rental operations and
self-insurance claims, it is difficult to project with precision the ultimate
effect the adjudication or settlement of these matters will have on NAC. As
additional information regarding NAC's potential liabilities becomes available,
NAC will revise the estimates as appropriate.

Other Litigation
----------------

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

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

         In February 2005, NAC issued 100,000 shares of unregistered, restricted
treasury stock as compensation for services rendered by an unrelated third
party. Such shares issued were recorded at their then market value of $0.33 per
share for an aggregate cost of $33,000. In the event that NAC proposes to
register any of its securities under the Securities Act of 1933, as amended (the
"Act"), whether for its own account or for the account of another shareholder,
the treasury stock issued may be included in such registration statement. NAC
issued the foregoing shares in privately negotiated transactions to "accredited
investors" (as the term is defined in Rule 501(a) of Regulation D promulgated
under the Act) pursuant to Section 4(2) of the Act and on Regulation D
promulgated thereunder, and in reliance on similar exemptions under applicable
state laws. These share issuances were approved by NAC's Board of Directors. The
investors in NAC's securities had access to the kind of information about NAC
that NAC would provide in a registration statement, were "accredited investors"
and represented to NAC their intentions to acquire the securities for investment
purposes only and not with a view to or for sale in connection with any
distribution thereof. Appropriate legends were affixed to the certificates
representing the securities issued. No placement fees were paid in conjunction
with the foregoing transactions. The proceeds from the above referenced
issuances were used for NAC's working capital purposes.

ITEM  6. EXHIBITS AND REPORTS ON FORM 8-K

     A) EXHIBITS

<TABLE>


        EXHIBIT                                                                                   PAGE
        NUMBER             TITLE OF EXHIBIT                                                      NUMBER
        -----------------------------------------------------------------------------------------------

        31.1              Officer's Certification Pursuant to Section 302 of the
                          Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)                             37
        31.2              Officer's Certification Pursuant to Section 302 of the
                          Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)                             38
        32.1              Certification of Principal Executive Officer Pursuant to
                          18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)          39
        32.2              Certification of Principal Financial Officer Pursuant to
                          18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)          40
</TABLE>


     B) REPORTS ON FORM 8-K

         None







                                       35




                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                         NATIONAL AUTO CREDIT, INC.


Date:     June 10, 2005                  By: /s/ James J. McNamara
      ------------------------------         ----------------------------------
                                            James J. McNamara
                                            Chairman of the Board and Chief
                                            Executive Officer
                                            (principal executive officer)


                                            By: /s/ Robert V. Cuddihy, Jr.
                                                -------------------------------
                                            Robert V. Cuddihy, Jr.
                                            Chief Financial Officer
                                            (principal accounting and
                                            financial officer)



















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