`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          October 31, 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)

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

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 by check mark whether the registrant is a shell company (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 December 12, 2005
-----------------------------                   --------------------------------
Common Stock, $0.05 par value                              9,036,364








                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES

                           TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Report of Independent Registered Public Accounting Firm           3

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

           Condensed Consolidated Statements of Operations for the
           Three Months and the Nine Months Ended October 31, 2005
           and 2004                                                          5

           Condensed Consolidated Statement of Stockholders' Equity and
           Comprehensive Income (Loss) for the Nine Months Ended
           October 31, 2005                                                  6

           Condensed Consolidated Statements of Cash Flows for the
           Nine Months Ended October 31, 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                                                      33

Item 4.    Controls and Procedures                                          33


PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings                                                35
Item 1A.   Risk Factors                                                     38
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds      38
Item 3.    Defaults Upon Senior Securities                                  38
Item 4.    Submission of Matters to a Vote of Security Holders              38
Item 5.    Other Information                                                38
Item 6.    Exhibits                                                         38


Signatures                                                                  39

Certifications                                                              40



                                      -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 sheet
of National Auto Credit, Inc. and Subsidiaries as of October 31, 2005, the
related condensed consolidated statements of operations for each of the
three-month and nine-month periods ended October 31, 2005 and 2004; the related
condensed consolidated statement of stockholders' equity and comprehensive loss
for the nine-month period ended October 31, 2005 and the condensed consolidated
statements of cash flows for the nine-month periods ended October 31, 2005 and
2004. These 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
December 9, 2005




                                      -3-



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




                                                               October 31,       January 31,
                                                                  2005              2005
                                                              ------------      ------------
                                                              (unaudited)

                   ASSETS
Cash and cash equivalents                                      $      859          $     471
Accounts receivable, net of allowance of
 $67 and $65, respectively (Note 1)                                 2,785              2,132
Income taxes refundable                                               -                  826
Prepaid expenses                                                      303                256
Other current assets                                                  204                494
                                                              ------------      ------------
 Total current assets                                               4,151              4,179
Property and equipment, net of accumulated
 depreciation of $1,810 and $1,216, respectively (Note 1)           1,845              2,240
Investment in AFC (Note 3)                                          8,111              7,955
Goodwill (Note 1)                                                   4,920              4,920
Other intangible assets, net of accumulated
 amortization of $1,277 and $852, respectively (Note 1)             8,205              8,630
Other assets                                                          148                165
                                                              ------------      ------------
                                                               $   27,380          $  28,089
                                                              ============      ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current maturities of long term obligations (Note 4)           $    1,175          $   1,612
Accounts payable                                                    1,969              1,255
Self-insurance claims (Note 6)                                        235                256
Accrued income taxes                                                  339                328
Deferred revenue (Note 1)                                           1,453              1,194
Other liabilities                                                   1,092              1,392
                                                              ------------      ------------
 Total current liabilities                                          6,263              6,037

Long term obligations (Note 4)                                      8,602              8,650
Convertible promissory note (Note 4)                                2,825              2,825
                                                              ------------      ------------
                                                                   17,690             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                                                  1,997              1,997
Additional paid-in capital                                        174,542            174,454
Retained deficit                                                 (143,607)          (143,383)
Deferred compensation                                                 (71)               (89)
Treasury stock, at cost, 31,409,475 and 29,946,975
 shares, respectively (Note 2)                                    (23,171)           (22,402)
                                                              ------------      ------------
 Total stockholders' equity                                         9,690             10,577
                                                              ------------      ------------
                                                               $   27,380         $   28,089
                                                              ============      ============


See accompanying notes to condensed consolidated financial statements.







                                      -4-





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


                                                             Three Months Ended                  Nine Months Ended
                                                                  October 31,                         October 31,
                                                        ---------------------------         ---------------------------
                                                            2005              2004              2005              2004
                                                        ---------        ----------         ---------        ----------

Service revenues                                        $  4,503         $   2,999          $  8,999         $   8,680

Cost of service revenues                                   2,390             1,846             5,155             5,134
                                                        ---------        ----------         ---------        ----------
 Gross profit                                              2,113             1,153             3,844             3,546

Selling, general and administrative                        2,210             1,926             6,046             5,512
                                                        ---------        ----------         ---------        ----------
 Loss from operations                                       (97)             (773)           (2,202)           (1,966)

Interest income                                                7               -                  42               -
Income from AFC investment                                   348               165               564               354
Interest expense                                            (161)             (221)             (484)             (565)
Other income - net (Note 2)                                  -                 -               1,897               -
                                                        ---------        ----------         ---------        ----------
Income (loss) from continuing operations
 before income taxes                                          97              (829)             (183)           (2,177)

Provision for income taxes                                   -                 -                 (15)              -
                                                        ---------        ----------         ---------        ----------
Income (loss) from continuing operations                      97              (829)             (198)           (2,177)

Income (loss) from discontinued
operations, net of tax                                       -                 -                  16                (6)
                                                        ---------        ----------         ---------        ----------
Net income (loss)                                       $     97         $    (829)          $  (182)        $  (2,183)
                                                        =========        ==========         =========        ==========

Basic and diluted income (loss) per share
 Continuing operations                                  $    .01         $    (.09)          $  (.02)        $    (.23)
 Discontinued operations                                     -                 -                 -                 -
                                                        =========        ==========         =========        ==========
  Net income (loss) per share                           $    .01         $    (.09)          $  (.02)        $    (.23)
                                                        =========        ==========         =========        ==========

Weighted average number
 of shares outstanding
 Basic and diluted                                         8,540             9,430             9,355             9,370
                                                        =========        ==========         =========        ==========




     See accompanying notes to condensed consolidated financial statements.



                                      -5-






                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             AND COMPREHENSIVE LOSS
                       NINE MONTHS ENDED OCTOBER 31, 2005
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)




                                      Preferred Stock          Common Stock
                                      ---------------    -----------------------    Additional
                                                 Par                      Par         Paid-In        Retained      Treasury
                                      Shares    Value      Shares        Value        Capital        Deficit         Stock
                                      ------   ------    ----------    ---------    -----------    -----------    -----------

Balance at
January 31, 2005                        -      $  -      39,949,589    $   1,997    $   174,454    $  (143,383)   $  (22,402)

Net loss                                                                                                  (182)
Treasury stock issued for services                                                                         (42)           75
Treasury stock purchased (Note 2)                                                                                       (844)
Fair value of Eligible Shareholder
 warrants to be issued (ote 2)                                                              88
Deferred compensation
 expense
                                      ------   ------    ----------    ---------    -----------    ------------   -----------
Comprehensive income (loss)

Balance at
 October 31, 2005                       -      $  -      39,949,589    $   1,997    $   174,542    $  (143,607)   $  (23,171)
                                      ======   ======    ==========    =========    ===========    ============   ===========



                                      Deferred                       Comprehensive
                                    Compensation                        Income
                                       Expense           Total          (Loss)
                                    -------------     ----------     -------------

Balance at
January 31, 2005                      $  (89)         $  10,577

Net loss                                                   (182)      $   (182)
Treasury stock issued for services                           33
Treasury stock purchased (Note 2)                          (844)
Fair value of Eligible Shareholder
  warrants to be issued (Note 2)                             88
Deferred compensation
 expense                                  18                 18
                                    -------------     ----------     -------------
Comprehensive income (loss)                                           $   (182)
                                                                     =============
Balance at
 October 31, 2005                     $  (71)          $  9,690
                                    ============      ==========



     See accompanying notes to condensed consolidated financial statements.



                                      -6-







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




                                                                                       Nine Months Ended
                                                                                          October 31,
                                                                                  ---------------------------
                                                                                     2005              2004
                                                                                  ---------         ---------

Cash flows from operating activities
 Net loss                                                                         $  (182)          $ (2,183)
 Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
  (Income) loss from discontinued operations                                          (16)                 6
  Depreciation and amortization                                                     1,019                996
  Fair value of Eligible Shareholder warrants                                          88               -
Changes in operating assets and liabilities, net of acquisition:
  Accounts receivable                                                                (653)              (487)
  Income tax refundable                                                               714                 92
  Accrued income tax                                                                   11                 (7)
  Accounts payable and other liabilities                                              826                 72
  Deferred revenue                                                                    259                661
  Other operating assets and liabilities, net                                        (345)              (548)
                                                                                ---------         ----------
   Net cash provided by (used in) operating activities                              1,721             (1,398)
                                                                                ---------         ----------
Cash flows from investing activities:
 Proceeds from AFC distributions                                                      408                937
 Purchase of property and equipment                                                  (199)              (187)
                                                                                ---------         ----------
   Net cash provided by investing activities                                          209                750
                                                                                ---------         ----------
Cash flows from financing activities:
 Proceeds from issuance of promissory note                                            -                1,000
 Proceeds from sale of treasury stock                                                 -                  237
 Payments to acquire treasury stock                                                (1,052)              -
 Payments of long term debt                                                          (485)              (357)
                                                                                ---------         ----------
   Net cash provided by (used in) financing activities                             (1,537)               880
                                                                                ---------         ----------
Increase in cash and cash equivalents from
 continuing operations                                                                393                232
Decrease in cash and cash equivalents from
discontinued operations                                                                (5)              (133)
Cash and cash equivalents at beginning of period                                      471                376
                                                                                ---------         ----------
Cash and cash equivalents at end of period                                        $   859           $    475
                                                                                =========         ==========
Supplemental disclosures of cash flow information:
 Interest paid                                                                    $   484           $    569
                                                                                =========         ==========
 Income taxes paid                                                                $     4           $      7
                                                                                =========         ==========
 Stock issued for services                                                        $    33           $   -
                                                                                =========         ==========
 Fair value of Eligible Shareholder warrants                                      $    88           $   -
                                                                                =========         ==========




      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
nine months ended October 31, 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 nine months ended October 31 2005, NAC realized
income from discontinued operations of $16,000. For the nine months ended
October 31, 2004, NAC incurred a loss from discontinued operations of $6,000.



                                      -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
$204,000 and $401,000, respectively, are included as a component of other
current assets at October 31, 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 nine months ended October 31,
2005 and 2004, NAC charged to operations $425,000 and $426,000, 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.

Income Taxes
------------

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

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 December 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.

      In May 2005, FASB issued Statement No. 154, Accounting Changes and Error
Corrections ("SFAS 154"). SFAS 154 replaces APB No. 20, Accounting Changes, and
SFAS 3, Reporting Accounting Changes in Interim Financial Statements, and
establishes retrospective application as the required method for reporting a
change in accounting principle, unless it is impracticable to determine either
the period-specific effects or the cumulative effect of the change. SFAS 154
applies to all voluntary changes in accounting principles and to changes
required by an accounting pronouncement in the instance that the pronouncement
does not include specific transition provisions. SFAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. NAC expects that the adoption of SFAS 154 will not have
a material impact on NAC's consolidated financial position or results of
operations.




                                      -11-



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


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.

         The Delaware Action principally sought: (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 contained
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 sought (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.




                                      -12-



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


NOTE 2 - SHAREHOLDER COMPLAINT SETTLEMENT - CONTINUED

         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 ("Eligible NAC
Shareholders") 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.
The New York Settlement Stipulation created for the benefit of NAC a Settlement
Fund in the amount of $2.5 million to be funded by an insurance policy. The New
York Court also subsequently approved $500,000 for legal fees for counsel to the
plaintiffs in the New York Action to be paid from the proceeds from 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.

         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 executed and delivered to NAC and NAC 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, was deemed final in June 2005 and NAC
received net proceeds of $2.0 million from NAC's insurer from the Settlement
Fund in the New York Action.





                                      -13-



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

NOTE 2 - SHAREHOLDER COMPLAINT SETTLEMENT - CONTINUED

         Pursuant to the Agreement, NAC agreed (subject to certain terms and
conditions set forth in the Agreement) to purchase from the Selling Shareholders
their 1,562,500 shares of 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. Effective June
30, 2005, NAC purchased 1,562,500 shares of Common Stock from the Selling
Stockholders.

         As a consequence of the confirmation of the New York Settlement
Stipulation, the Dismissing Action with Prejudice of the Delaware Action and the
subsequent purchase by NAC of Common Stock from the Selling Shareholders, for
the nine months ended October 31, 2005, NAC recorded (i) a charge to operations
of $100,000 for legal fees of the Selling Shareholders, (ii) a charge to
operations of $208,000 for the excess cost over the market value of the Common
Stock acquired as of the date of the Agreement, April 22, 2005, (iii) a charge
to other income of $88,000 for the expense of the fair value of the warrants to
be issued to Eligible Shareholders and (iv) realized other income of $2.0
million for the net proceeds received by NAC from the Settlement Fund. The
Eligible NAC Shareholders have until December 2005 to submit their claim for one
warrant for each 8.23 shares of Common Stock owned during the eligibility
period, 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. Upon the final
submission of claims by Eligible NAC Shareholders, NAC anticipates issuing the
final warrants in the fourth quarter of Fiscal 2006.

         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.



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 October 31, 2005 and 2004,
NAC recorded income of $348,000 and $165,000, respectively, representing its
share of AFC's net income. For the nine months ended October 31, 2005 and 2004,
NAC recorded income of $564,000 and $354,000, respectively, representing its
share of AFC's net income.



                                      -14-



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


NOTE 3 - INVESTMENT IN AFC - CONTINUED

      Summarized income statement data for AFC for the three months and nine
months ended September 30, 2005 and 2004, respectively, is as follows (in
thousands):










                                                             Three Months Ended                   Nine Months Ended
                                                                 September 30,                      September 30,
                                                          ---------------------------       ------------------------------
                                                              2005            2004              2005              2004
                                                          ------------    -----------       ------------     -------------

Revenues                                                   $    2,063     $    1,478        $    4,615        $    4,045

Film rental                                                       499            269             1,033               772
Operating costs                                                   628            639             1,743             1,849
Depreciation and amortization                                     197            198               584               589
General and administrative expenses                                43             42               127               127
                                                          ------------    -----------       ------------     -------------
                                                                1,367          1,148             3,487             3,337
                                                          ------------    -----------       ------------     -------------
Net income                                                 $      696     $      330        $    1,128        $      708
                                                          ============    ===========       ============     =============
NAC's proportionate share of net income                    $      348     $      165        $      564        $      354
                                                          ============    ===========       ============     =============




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 was due July
13, 2005, (ii) NAC was required to pay interest only, monthly and in arrears,
during the term and (iii) the Note accrued interest at twenty percent per annum.
In January and February 2005, NAC prepaid $650,000 and $350,000, respectively
and retired the Note.

         As a consequence of NAC's acquisition of The Campus Group effective
July 31, 2003, NAC issued to Mr. Steve Campus and certain family trusts
promissory notes of $9.9 million and 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 October 31, 2005, NAC has outstanding
obligations under the terms of the Base Notes, Trailing Notes and the
Convertible Notes of $6.0 million, $3.3 million and $2.8 million, respectively.




                                      -15-



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



NOTE 4 - CURRENT AND LONG TERM OBLIGATIONS - CONTINUED

         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. 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. The outstanding balance of the Term
Loan at October 31, 2005 is $45,000.

         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 October
31, 2005, the remaining balance of the SBA Loan of $367,000 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 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 October 31, 2005 was $44,000.

         The components of long term obligations at October 31, 2005 are as
follows (in thousands):

                                              Amounts
                                             ---------
Term loan                                    $     45
SBA loan                                          367
Promissory note                                    44
Base promissory notes                           6,046
Trailing promissory notes                       3,275
Convertible note payable                        2,825
                                             ---------
                                               12,602
Less current maturities                        (1,175)
                                             ---------
Long term obligations and
  convertible note payable                   $ 11,427
                                             =========




                                      -16-



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



NOTE 4 - CURRENT AND LONG TERM OBLIGATIONS - CONTINUED

         NAC's current maturities and long term obligations at October 31, 2005
are as follows (in thousands):







                                         Amounts
                                        ---------
2006                                    $  1,175
2007                                       1,143
2008                                       1,201
2009                                       1,262
2010                                       1,327
Thereafter                                 6,494
                                        ---------
                                        $ 12,602
                                        =========



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.



                                      -17-



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


NOTE 6 - COMMITMENTS AND CONTINGENCIES - CONTINUED

         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.

         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
October 31, 2005 and January 31, 2005, NAC had accrued $235,000 and $256,000,
respectively, to cover all outstanding self-insurance liabilities. 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 periodically 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. In the opinion of management, the amount of ultimate liability with
respect to any current actions, if any, is unlikely to materially affect our
financial position, results of operations or liquidity.


NOTE 7 - SUBSEQUENT EVENT

         On November 18, 2005, National Auto Credit, Inc. ("NAC") consummated
the acquisition of 100% of the membership interest in Option Technologies
Interactive LLC ("OTI") from Flexner Wheatley & Associates and MeetingNet
Interactive, Inc. OTI is a technology company providing interactive software and
hardware systems and services for use in live events, training and education
satellite videoconferencing and corporate meeting services.

         OTI revenues for the year ended December 31, 2004 and the nine months
ended September 30, 2005 were approximately $5.3 million and $4.3 million,
respectively. OTI is headquartered in Orlando, FL with additional full service
sales and service offices in Ogden, UT and Chicago, IL. OTI has approximately 22
employees.

         The purchase price of approximately $2.5 million was paid in a
combination of cash at closing, $744,000, the issuance of 496,250 shares of NAC
common stock and the issuance of two promissory notes aggregating $1.5 million.
The notes are repayable according to a formula based on future cash flows
realized from operations of OTI and bear interest at the rate of five percent
per annum until repaid. The purchase price is subject to an upward and downward
adjustment not to exceed $412,500 based upon OTI meeting, or failing to meet,
certain minimum financial performance criterion and an upward or downward
adjustment to the extent the book value of OTI at closing exceeded, or was less
than, a certain agreed amount.



                                      -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
------------------------

Acquisition
-----------
         On November 18, 2005, National Auto Credit, Inc. ("NAC") consummated
the acquisition of 100% of the membership interest in Option Technologies
Interactive LLC ("OTI") from Flexner Wheatley & Associates and MeetingNet
Interactive, Inc. OTI is a technology company providing interactive software and
hardware systems and services for use in live events, training and education
satellite videoconferencing and corporate meeting services.

         OTI revenues for the year ended December 31, 2004 and the nine months
ended September 30, 2005 were approximately $5.3 million and $4.3 million,
respectively. OTI is headquartered in Orlando, FL with additional full service
sales and service offices in Ogden, UT and Chicago, IL. OTI has approximately 22
employees.

         The purchase price of approximately $2.5 million was paid in a
combination of cash at closing, $744,000, the issuance of 496,250 shares of NAC
common stock and the issuance of two promissory notes aggregating $1.5 million.
The notes are repayable according to a formula based on future cash flows
realized from operations of OTI and bear interest at the rate of five percent
per annum until repaid. The purchase price is subject to an upward and downward
adjustment not to exceed $412,500 based upon OTI meeting, or failing to meet,
certain minimum financial performance criterion and an upward or downward
adjustment to the extent the book value of OTI at closing exceeded, or was less
than, a certain agreed amount.

Settlement of Shareholder Litigation
------------------------------------

         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 ("Eligible NAC Shareholders") 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



                                      -19-





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


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 New York Court
also subsequently approved $500,000 for legal fees for counsel to the plaintiffs
in the New York Action to be paid from the proceeds from 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.

         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 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 was deemed final in
June 2005 and NAC received net proceeds of $2.0 million from the 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


         Pursuant to the Agreement, NAC 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. Effective June
30, 2005, NAC purchased 1,562,500 shares of Common Stock from the Selling
Shareholders.

         As a consequence of the confirmation of the New York Settlement
Stipulation, the Dismissing Action with Prejudice of the Delaware Action and the
purchase of Common Stock from the Selling Shareholders, for the nine months
ended October 31, 2005, NAC recorded (i) a charge to operations of $100,000 for
legal fees of the Selling Shareholders, (ii) a charge to operations of $208,000
for the excess cost over the market value of the Common Stock acquired as of the
date of the Agreement, April 22, 2005, (iii) a charge to other income of $88,000
for the expense of the fair value of the warrants to be issued to Eligible
Shareholders and (iv) realized other income of $2.0 million for the net proceeds
received by NAC from the Settlement Fund. The Eligible NAC Shareholders have
until December 2005 to submit their claim for one warrant for each 8.23 shares
of Common Stock owned during the eligibility period, 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. Upon the final submission of claims by Eligible NAC
Shareholders, NAC anticipates issuing the final warrants in the fourth quarter
of Fiscal 2006.

         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 believes that settlement of the New York Action and the
Delaware Action, 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:




                                      -21-





                   NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS - 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 $204,000 and $401,000, respectively, are included as a
component of other current assets at October 31, 2005 and January 31, 2005.

         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.




                                      -22-





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


         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.

         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 October 31, 2005 was $235,000.

         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.




                                      -23-





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


         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.


FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS FROM OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2005
  AS COMPARED TO THE THREE MONTHS ENDED OCTOBER 31, 2004

         Service Revenues: Revenues for the three months ended October 31, 2005
were $4.5 million and are comprised principally of revenues derived from the
operations of OMI and The Campus Group. Revenues for the three months ended
October 31, 2004 were $3.0 million.

         For the three months ended October 31, 2005, revenues for The Campus
Group were $2.0 million as compared to revenues of $2.0 million for the three
months ended October 31, 2004. For the three months ended October 31, 2005,
revenues for OMI were $2.5 million as compared to revenues of $1.0 million for
the three months ended October 31, 2004. The aggregate increase in revenues for
the Campus Group and OMI of $1.5 million for the three months ended October 31,
2005 as compared to revenues for the three months ended October 31, 2004 was
principally due to an increase in the number, scope and value of client
assignments completed during the three months ended October 31, 2005. 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. Recently, The Campus Group and OMI hired three senior
marketing strategists for corporate communication services to develop new
marketing initiatives, create new project opportunities, seek new clients for
its services and expand existing client relationships to generate new revenues.
Although no assurances can be made, NAC will seek revenue expansion through the
retention of these new marketing strategists as a means to reduce year-to-year
and quarter-to-quarter fluctuations in its revenues as well as to ultimately
increase revenues. Generally, there is a six to twelve month investment period
before the Company expects to realize the benefits from the addition of such
personnel in the form of new projects and/or clients.

         Cost of Service Revenues: Cost of revenues for three months October 31,
2005 were $2.4 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 $1.1 million and (ii) OMI cost of revenues of $1.3 million. The
average gross margin for the three months ended October 31, 2005 was 43.1% and
48.4% for The Campus Group and OMI, respectively. Cost of revenues for three
months October 31, 2004 were $1.8 million and are comprised principally of (i)
The Campus Group cost of revenues of $1.4 million and (ii) OMI cost of revenues
of $388,000. The average gross margin for the three months ended October 31,
2004 was 26.4% and 61.0% for The Campus Group and OMI, respectively.



                                      -24-





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


         The aggregate increase in gross profit of $1.0 million is due to the
combined effect of (i) an increase in revenues and (ii) an increase in
production gross margin realized. The aggregate average gross margins for The
Campus Group and OMI increased 12.0% for the three months ended October 31, 2005
as compared to the three months ended October 31, 2004 which can be principally
attributed to (i) an increase of revenues realized to offset fixed production
overhead costs of 6% and (ii) an increase in general production margins of 6% as
a consequence of a favorable production mix during the three months ended
October 31, 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 October 31, 2005, SG&A expense was $2.2
million comprised of (i) Campus SG&A of $872,000, (ii) OMI SG&A of $417,000, and
(iii) NAC SG&A of $921,000. For the three months ended October 31, 2004, SG&A
expense was $1.9 million comprised of (i) Campus SG&A of $860,000, (ii) OMI SG&A
of $350,000, and (iii) NAC SG&A of $636,000. The increase of SG&A expense of
$284,000 for the three months ended October 31, 2005 as compared to the
comparable period ended October 31, 2004 is principally the result of the net
effects of (i) an increase in personnel costs of $236,000, (ii) an increase for
legal and other professional services of $91,000 and (iii) a net decrease in
other SG&A of $43,000.

         Income from AFC Investment: NAC accounts for its investment in AFC
using the equity method. For the three months ended October 31, 2005 and 2004,
NAC recorded income of $348,000 and $165,000, respectively, representing NAC's
share of AFC's net income for the three months ended September 30, 2005 and 2004
respectively.

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

                                                          Three Months Ended
                                                             September 30,
                                                      ------------------------
                                                         2005           2004
                                                      ---------      ---------
Revenues                                              $   2,063      $  1,478

Film rental                                                 499           269
Operating costs                                             628           639
Depreciation and amortization                               197           198
General and administrative expenses                          43            42
                                                      ---------      ---------
                                                          1,367         1,148
                                                      ---------      ---------
Net income                                            $     696      $    330
                                                      =========      =========
NAC's proportionate share of net income               $     348      $    165
                                                      =========      =========



                                      -25-






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


         AFC's revenues increased $585,000 for the three months ended September
30, 2005 as compared to the three months ended September 30, 2004, principally
as a result of the net effects of (i) a 35.2% increase in attendance, (ii) an
increase of $100,000 in other, concession and cafe revenues and (iii) a 4.6%
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 6.0% to 24.2% from 18.2% for the three months
ended September 30, 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
12.8% to 30.4% for the three months ended September 30, 2005 as compared to
43.2% for the three months ended September 30, 2004 due principally to an
increase in revenues realized without a corresponding increase in general
operating expenses. 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 federal income tax rate was zero
for the three month periods ended October 31, 2005 and October 31, 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.


FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS FROM OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 31, 2005
  AS COMPARED TO THE NINE MONTHS ENDED OCTOBER 31, 2004

         Service Revenues: Revenues for the nine months ended October 31, 2005
were $9.0 million and are comprised principally of revenues derived from the
operations of OMI and The Campus Group. Revenues for the nine months ended
October 31, 2004 were $8.7 million.

         For the nine months ended October 31, 2005, revenues for The Campus
Group were $6.0 million as compared to revenues of $7.1 million for the nine
months ended October 31, 2004. For the nine months ended October 31, 2005,
revenues for OMI were $3.0 million as compared to revenues of $1.6 million for
the nine months ended October 31, 2004. The aggregate increase in revenues for
the Campus Group and OMI of $319,000 for the nine months ended October 31, 2005
as compared to revenues for the nine months ended October 31, 2004 was
principally due to an increase in the number, scope and value of client
assignments completed during the nine months ended October 31, 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. As indicated above, The Campus Group and OMI
recently hired three senior marketing strategists for corporate communication
services to develop new marketing initiatives, create new project opportunities,
seek new clients for its services and expand existing client relationships to
generate new revenues. Although no assurances can be made, NAC will seek revenue
expansion through the retention of these new marketing strategists as a means to
reduce year-to-year and quarter-to-quarter fluctuations in its revenues as well
as to ultimately increase revenues. Generally, there is a six to twelve month
investment period before the Company expects to realize the benefits from the
addition of such personnel in the form of new projects and/or clients.




                                      -26-




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


         Cost of Service Revenues: Cost of revenues for nine months ended
October 31, 2005 were $5.1 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 $3.6 million and (ii) OMI cost of revenues of $1.5
million. The average gross margin for the nine months ended October 31, 2005 was
39.8% and 48.6% for The Campus Group and OMI, respectively. Cost of revenues for
nine months October 31, 2004 were $5.1 million and are comprised principally of
(i) The Campus Group cost of revenues of $4.2 million and (ii) OMI cost of
revenues of $944,000. The average gross margin for the nine months ended October
31, 2004 was 40.5% and 41.6% for The Campus Group and OMI, respectively.

         The aggregate increase in gross profit of $298,000 is due to the
combined effect of (i) an increase in revenues and (ii) an increase in gross
margin. The aggregate average gross margins for The Campus Group and OMI
increased 1.9% for the nine months ended October 31, 2005 as compared to the
nine months ended October 31, 2004 principally due to an increase in revenues
realized to offset fixed production overhead costs during the nine months ended
October 31, 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 nine months ended October 31, 2005, SG&A expense was $6.0
million comprised of (i) Campus SG&A of $2.3 million, (ii) OMI SG&A of $923,000,
and (iii) NAC SG&A of $2.8 million. For the nine months ended October 31, 2004,
SG&A expense was $5.5 million comprised of (i) Campus SG&A of $2.3 million, (ii)
OMI SG&A of $870,000, and (iii) NAC SG&A of $2.4 million. The increase of SG&A
expense of $534,000 for the nine months ended October 31, 2005 as compared to
the comparable period ended October 31, 2004 is principally the result of the
net effects of (i) an increase in personnel costs of $362,000, (ii) the $100,000
charge to SG&A for legal fees associated with the Selling Shareholders, (iii)
the $208,000 charge to SG&A for the excess cost over the market value of Common
Stock acquired and (ii) a net decrease of other SG&A of $136,000 as NAC reduced,
other legal costs and general SG&A expenditures from period-to-period.




                                      -27-






                   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 nine months ended October 31, 2005 and 2004,
NAC recorded income of $564,000 and $354,000, respectively, representing NAC's
share of AFC's net income for the nine months ended September 30, 2005 and 2004
respectively.

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


                                                       Nine Months Ended
                                                          September 30,
                                                  --------------------------
                                                     2005            2004
                                                  ----------      ----------
Revenues                                          $    4,615      $    4,045

Film rental                                            1,033             772
Operating costs                                        1,743           1,849
Depreciation and amortization                            584             589
General and administrative expenses                      127             127
                                                  ----------      ----------
                                                       3,487           3,337
                                                  ----------      ----------
Net income                                        $    1,128      $      708
                                                  ==========      ==========
NAC's proportionate share of net income           $      564      $      354
                                                  ==========      ==========



         AFC's revenues increased $570,000 for the nine months ended September
30, 2005 as compared to the nine months ended September 30, 2004, principally as
a result of the combined effects of (i) a 13.9% increase in attendance, (ii) an
increase of $121,000 in other, concession and cafe revenues and (iii) a 3.8%
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 3.3% to 22.4% from 19.1% for the nine months
ended September 30, 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 7.9%
to 37.8% for the nine months ended September 30, 2005 as compared to 45.7% for
the nine months ended September 30, 2004 due principally to an increase in
revenues combined with a decrease in general operating expense for the nine
months ended September 30, 2005 as compared to the nine months ended September
30, 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 federal income tax rate was zero
for the nine month periods ended October 31, 2005 and October 31, 2004. NAC has
provided a full valuation allowance against its net operating loss carryforwards
and other net deferred tax asset items due to the uncertainty of their future
realization. Income tax expense for the nine months ended October 31, 2005 is
comprised of various state and local minimum income tax expense for the period.


                                      -28-






                   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 nine months ended October 31, 2005 and as of December
12, 2005, NAC had no external source of financing and has operated on its
existing cash balances, proceeds from its income tax refund, net proceeds from
the Shareholder Settlement, 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 October 31, 2005, NAC had cash of $859,000 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 was due July 13, 2005, (ii) NAC was
required to pay interest only, monthly and in arrears, during the term and (iii)
the Note accrued interest at twenty percent per annum. In January and February
2005, NAC prepaid $650,000 and $350,000, respectively, 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 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 October 31, 2005, NAC has
outstanding obligations under the terms of the Base Notes, Trailing Notes and
the Convertible Notes of $6.0 million, $3.3 million and $2.8 million,
respectively.



                                      -29-






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


         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.

         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 October 31, 2005 was $45,000.

         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 October
31, 2005, the remaining balance of the SBA Loan of $367,000 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 October 31, 2005 was $44,000.

           For the nine months ended October 31, 2005, NAC's cash and cash
equivalents increased $388,000 due principally to the net effects of (i) cash
flows provided by operations of $1.7 million, inclusive of the net proceeds
derived from the Shareholder Settlement of $2.0 million, (ii) proceeds from AFC
distributions of $408,000, offset by (iii) payments to acquire Common Stock of
$1.1 million, (iv) capital expenditures of $199,000, and (v) the repayment of
debt of $485,000. Principle components of NAC's cash flows from operations for
the nine months ended October 31, 2005 included the collection of NAC's $826,000
income tax refund and the net proceeds derived from the New York Settlement
Stipulation of $2.0 million. The cash flows from the distributions from AFC
decreased for the nine months ended October 31, 2005, as compared to those for
the nine months ended October 31, 2004, as a consequence of the timing of
distributions by AFC.

         NAC believes that the available cash and cash equivalents totaling
$859,000 at October 31, 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.



                                      -30-






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


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 December 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.



                                      -31-






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


      In May 2005, FASB issued Statement No. 154, Accounting Changes and Error
Corrections ("SFAS 154"). SFAS 154 replaces APB No. 20, Accounting Changes, and
SFAS 3, Reporting Accounting Changes in Interim Financial Statements, and
establishes retrospective application as the required method for reporting a
change in accounting principle, unless it is impracticable to determine either
the period-specific effects or the cumulative effect of the change. SFAS 154
applies to all voluntary changes in accounting principles and to changes
required by an accounting pronouncement in the instance that the pronouncement
does not include specific transition provisions. SFAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. NAC expects that the adoption of SFAS 154 will not have
a material impact on NAC's consolidated financial position or results of
operations.


         Inflation
         ---------

      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.




                                      -32-







FORWARD-LOOKING STATEMENTS

         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 October 31, 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


                                      -33-





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.








                                      -34-






                                    PART II.
                                OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

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.

         The Delaware Action principally sought: (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 contained
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 sought (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.




                                      -35-






         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 ("Eligible NAC
Shareholders") 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.
The New York Settlement Stipulation created for the benefit of NAC a Settlement
Fund in the amount of $2.5 million to be funded by an insurance policy. The New
York Court also subsequently approved $500,000 for legal fees for counsel to the
plaintiffs in the New York Action to be paid from the proceeds from 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.

         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 executed and delivered to NAC and NAC 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, was deemed final in June 2005 and NAC
received net proceeds of $2.0 million from NAC's insurer from the Settlement
Fund in the New York Action.



                                      -36-




         Pursuant to the Agreement, NAC agreed (subject to certain terms and
conditions set forth in the Agreement) to purchase from the Selling Shareholders
their 1,562,500 shares of 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. Effective June
30, 2005, NAC purchased 1,562,500 shares of NAC Common Stock from the Selling
Stockholders.

         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 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 October 31, 2005 was $235,000.



                                      -37-






         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. In
the opinion of management, the amount of ultimate liability with respect to any
current actions, if any, is unlikely to materially affect our financial
position, results of operations or liquidity.

ITEM 1A.       RISK FACTORS
         Not applicable

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
         Not applicable

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES
         Not applicable

ITEM 4.        SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
         Not applicable

ITEM 5.        OTHER INFORMATION
         Not applicable

ITEM 6.       EXHIBITS





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)                      40
31.2       Officer's Certification Pursuant to Section 302 of the
           Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)                      41
32.1       Certification of Principal Executive Officer Pursuant to
           18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)   42
32.2       Certification of Principal Financial Officer Pursuant to
           18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)   43



                                      -38-






                                   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: December 12, 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)



                                      -39-`