SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

For the quarterly period ended September 30, 2001

                        Commission file number: 000-24669

                          HOMETOWN AUTO RETAILERS, INC.
             (Exact name of Registrant as specified in its charter)

            Delaware                             06-1501703
            (State or other jurisdiction of      (IRS Employer
            Incorporation or organization)       Identification No.)

                              774 Straits Turnpike
                               Watertown, CT 06795
               (Address of principal executive offices) (Zip code)

                                 (860) 945-6900
               (Registrant's telephone number including area code)

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

            Indicate the number of shares outstanding of each of the
            registrant's classes of common stock, as of the latest practicable
            date.

                    Title                                            Outstanding
------------------------------------------------                     -----------
Common Stock, Class A, par value $.001 per share                      3,561,605
Common Stock, Class B, par value $.001 per share                      3,613,500


                                       2
<PAGE>

                                      INDEX

PART I.                         FINANCIAL INFORMATION                       Page

ITEM 1.  Consolidated Balance Sheets at September 30, 2001
         and December 31, 2000                                              5

         Consolidated Statements of Operations for
         Nine and three months ended September 30, 2001 and 2000            6

         Consolidated Statement of Equity at September 30, 2001             7

         Consolidated Statements of Cash Flows for
         Nine months ended September 30, 2001 and 2000                      8

         Notes to Consolidated Financial Statements                         9

ITEM 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                13

PART II.                         OTHER INFORMATION

ITEM 2.  Changes in Securities and Use of Proceeds                          23

ITEM 4.  Submission of Matters to a Vote of Security Holders                23

ITEM 6.  Exhibits and Reports on Form 8-K                                   23

SIGNATURES                                                                  24


                                       3
<PAGE>

                           FORWARD LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are
"forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based, in part, on assumptions involving the continued
expansion of business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein particularly in view of the Company's limited history of operating
multiple dealerships in a combined entity, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved. Factors that
could cause actual results to differ materially from those expressed or implied
by such forward-looking statements include, but are not limited to, the factors
set forth herein under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations."


                                       4
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

                          HOMETOWN AUTO RETAILERS, INC.
                           CONSOLIDATED BALANCE SHEETS
                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                  Sept. 30,     December 31,
                           ASSETS                                    2001           2000
                                                                 (Unaudited)
                                                                 -----------    ------------
<S>                                                                <C>            <C>
Current Assets
   Cash and cash equivalents                                       $ 4,055        $   586
   Accounts receivable, net                                          6,826          6,149
   Inventories                                                      32,107         40,964
   Prepaid expenses and other current assets                         1,639          1,576
                                                                   -------        -------
      Total current assets                                          44,627         49,275

Property and equipment, net                                          7,356          7,594
Investment in CarDay Inc.                                               --          3,258
Goodwill, net                                                       23,883         24,793
Other assets                                                         1,354          2,144
                                                                   -------        -------
      Total assets                                                 $77,220        $87,064
                                                                   =======        =======
             LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Floor plan notes payable                                        $32,516        $40,123
   Accounts payable and accrued expenses                             5,162          5,579
   Current maturities of long-term debt                                432            431
                                                                   -------        -------
      Total current liabilities                                     38,110         46,133

Long-term debt                                                       8,527          8,785
Long-term deferred income taxes                                        287          1,664
Other long-term liabilities                                            431            457
                                                                   -------        -------
      Total liabilities                                             47,355         57,039

Stockholders' Equity
   Preferred stock, $.001 par value, 2,000,000 shares
   Authorized, no shares issued and outstanding                         --             --
   Common stock, Class A, $.001 par value, 12,000,000 shares
   authorized, 3,546,605 and 2,301,109 issued and outstanding;           3              2
   Common stock, Class B, $.001 par value, 3,760,000 shares
   Authorized, 3,628,500 and 3,699,000 issued and outstanding            4              4
   Additional paid-in capital                                       29,730         28,786
   Retained earnings                                                   128          1,233
                                                                   -------        -------
      Total stockholders' equity                                    29,865         30,025
                                                                   -------        -------
      Total liabilities and stockholders' equity                   $77,220        $87,064
                                                                   =======        =======
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.


                                       5
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                   For the Three Months               For the Nine Months
                                                      Ended Sept. 30,                   Ended Sept. 30,
                                                ----------------------------      ----------------------------
                                                   2001             2000             2001             2000
                                                -----------      -----------      -----------      -----------
<S>                                             <C>              <C>              <C>              <C>
Revenues
   New vehicle sales                            $    41,356      $    44,422      $   117,864      $   137,706
   Used vehicle sales                                21,650           17,430           64,305           57,605
   Parts and service sales                            6,526            6,092           19,116           17,827
   Other dealership revenues, net                     2,208            1,899            5,964            5,500
                                                -----------      -----------      -----------      -----------
      Total revenues                                 71,740           69,843          207,249          218,638

Cost of sales
   New vehicle sales                                 39,359           42,102          111,752          130,512
   Used vehicle sales                                19,780           15,661           58,106           52,070
   Parts and service sales                            2,810            2,657            8,631            7,802
                                                -----------      -----------      -----------      -----------
        Cost of sales                                61,949           60,420          178,489          190,384
                                                -----------      -----------      -----------      -----------
      Gross profit                                    9,791            9,423           28,760           28,254

Amortization of goodwill                                176              163              529              490
Selling, general and administrative
   expenses                                           8,787            8,857           25,468           26,355
                                                -----------      -----------      -----------      -----------
      Income from operations                            828              403            2,763            1,409

Other income (expense)
   Interest income                                       25               --               75               --
   Interest (expense)                                  (417)            (553)          (1,698)          (1,590)
   Other income (expense), net                           95                3              576              (81)
   Valuation adjustment for CarDay Inc.              (3,258)              --           (3,258)              --
                                                -----------      -----------      -----------      -----------
      Income (loss) before taxes                     (2,727)            (147)          (1,542)            (262)

Provision (benefit) for income taxes                   (922)              37             (437)             (19)
                                                -----------      -----------      -----------      -----------
      Net income (loss)                         $    (1,805)     $      (184)     $    (1,105)     $      (243)
                                                ===========      ===========      ===========      ===========
Earnings (loss) per share, basic (Note 3)       $     (0.25)     $     (0.03)     $     (0.17)     $     (0.04)
Earnings (loss) per share, diluted (Note 3)     $     (0.25)     $     (0.03)     $     (0.17)     $     (0.04)
Weighted average shares, basic (Note 3)           7,175,320        5,998,529        6,396,151        5,994,816
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.


                                       6
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
                   UNAUDITED CONSOLIDATED STATEMENT OF EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                              Class A              Class B
                           Common Stock         Common Stock    Additional                    Total
                         ----------------     ----------------    Paid-in       Retained   Stockholders'
                         Shares    Amount     Shares    Amount    Capital       Earnings      Equity
                         ------    ------     ------    ------  ----------      --------   -------------
<S>                       <C>       <C>       <C>        <C>      <C>           <C>          <C>
Balance at
  December 31, 2000       2,301     $  2      3,699      $  4     $ 28,786      $ 1,233      $ 30,025
Conversion of Class B
  Common to Class A
  Common                     71       --        (71)       --           --           --            --
Shares Issued for
Newburgh Purchase           200       --         --        --           --           --            --
Capital Infusion from
Accredited Investors        975        1         --        --          974           --           975
Subscription
Receivable                   --       --         --        --          (30)          --           (30)

Net income                   --       --         --        --           --       (1,105)       (1,105)
                          -----     ----      -----      ----     --------      -------      --------
Balance at
  Sept. 30, 2001          3,547     $  3      3,628      $  4     $ 29,730      $   128      $ 29,865
                          =====     ====     ======      ====     ========      =======      ========
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.


                                       7
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                            For the Nine Months ended
                                                                    Sept. 30,
                                                            -------------------------
                                                               2001           2000
                                                            ---------      ----------
<S>                                                           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss)                                             $(1,105)     $   (243)

Adjustments to reconcile net income
   to net cash provided by operating activities -
   Depreciation and amortization                                  967           925
   (Gain)/loss on disposal of business unit                      (254)           --
   (Gain)/loss on on impairment of CarDay Inc. investment       3,258            --
   Deferred income taxes                                         (580)         (159)
   Changes in assets and liabilities:
      Accounts receivable, net                                   (671)       (2,055)
      Inventories                                               8,800        13,981
      Prepaid expenses and other current assets                  (200)          393
      Other assets                                                130          (103)
      Floor plan notes payable                                 (7,607)      (12,487)
      Accounts payable and accrued expenses                      (593)          (92)
      Other current liabilities                                   176            --
      Other liabilities                                           (26)          165
                                                              -------      --------
   Net cash from operating activities                           2,295           325
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                            (219)         (364)
   Proceeds from sales of property and equipment                   --            65
   Acquisition, net of cash acquired                               --          (701)
   Disposal of business unit                                      705            --
                                                              -------      --------
   Net cash from investing activities                             486        (1,000)
CASH FLOWS FROM FINANCING ACTIVITIES:

   Principal payments of long-term debt                          (257)         (350)
   Issuance of common stock                                       945           326
                                                              -------      --------
   Net cash from financing activities                             688           (24)
NET CHANGE IN CASH AND CASH EQUIVALENTS                         3,469          (699)
CASH AND CASH EQUIVALENTS, beginning of period                    586         1,635
                                                              -------      --------
CASH AND CASH EQUIVALENTS,  end of period                     $ 4,055      $    936
                                                              =======      ========
 Cash paid for - Interest                                     $ 1,414      $  1,590
 Cash paid for - Taxes                                            132           174
</TABLE>

The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.


                                       8
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

      Business of Hometown Auto Retailers, Inc. ("Hometown" or the "Company")

      Hometown sells new and used cars and light trucks, provides maintenance
and repair services, sells replacement parts and provides related financing,
insurance and service contracts through 10 franchised dealerships located in New
Jersey, New York, Connecticut, Massachusetts and Vermont. The Company's
dealerships offer 13 American and Asian automotive brands; Chevrolet, Chrysler,
Daewoo, Dodge, Ford, Isuzu, Jeep, Lincoln, Mazda, Mercury, Oldsmobile, Plymouth
and Toyota. Hometown's purpose is to consolidate and operate automobile
dealerships in the Northeast, primarily in New Jersey and New England.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      Basis of Presentation

      The Company believes that: (i) the accompanying financial information
contains all the material adjustments necessary to fairly present its financial
position as of September 30, 2001; (ii) all adjustments necessary to present
fairly the results for the interim periods have been made; and (iii) all
adjustments are of a normal recurring nature. Operating results of interim
periods are not necessarily indicative of the results for full year periods.

      The Company's operations are subject to seasonal variations, with the
second and third quarters generally contributing more revenues and operating
profit than the first and fourth quarters. This seasonality is driven primarily
by: (i) the historical timing of major Manufacturer incentive programs and model
changeovers; (ii) weather-related factors, which primarily affect parts and
service; and (iii) consumer buying patterns.

      Use of estimates

      The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions in determining the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

      Reclassifications

      Certain amounts in the December 31, 2000 Financial Statements have been
reclassified to conform with the current presentation.


                                       9
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      New Accounting Pronouncements

      In June 2001, the FASB approved SFAS Nos. 141 and 142 entitled Business
Combinations and Goodwill and Other Intangible Assets, respectively. The
statement on business combinations, among other things, eliminates the "Pooling
of Interests" method of accounting for business acquisitions entered into after
June 30, 2001. SFAS No. 142, among other things, eliminates the need to amortize
goodwill and requires companies to use a fair-value approach to determine
whether there is an impairment of existing and future goodwill. These statements
are effective for the Company beginning January 1, 2002 and have certain
transition rules that require the Company to obtain appraisals of certain of its
operating units, which must be completed within six months from adoption. The
Company is currently evaluating the impact of these pronouncements.

3. EARNINGS (LOSS) PER SHARE:

      "Basic earnings per share" represents net income divided by the weighted
average shares outstanding. "Diluted earnings per share" represents net income
divided by weighted average shares outstanding adjusted for the incremental
dilution of potentially dilutive securities. As of September 30, 2000, the
Company had potentially dilutive securities relating to both stock options and a
stock guarantee issued in connection with an acquisition (Note 7). As of
September 30, 2001, the Company had potentially dilutive securities relating to
stock options only.

4. INVENTORIES:

      New, used and demonstrator vehicles are stated at the lower of cost or
market, determined on a specific unit basis. Parts and accessories are stated at
the lower of cost (determined on a first-in, first-out basis) or market.
Inventories consist of the following:

                                                       9/30/01          12/31/00
                                                            (in thousands)
                                                       -------          --------
New Vehicles                                           $21,796           $31,002
Used Vehicles                                            8,550             8,038
Parts, accessories and other                             1,761             1,924
                                                       -------           -------
   Total Inventories                                   $32,107           $40,964
                                                       =======           =======

5. FLOOR PLAN NOTES PAYABLE:

      On March 15, 2001, the Company completed a refinancing of its revolving
line of credit with GE Capital Corporation to a traditional floor plan line of
credit at each dealership with Ford Motor Credit Corporation ("FMCC"). The new
floor plan loans carry an interest rate of prime less 75 basis points for new
vehicles and prime less 50 basis points for used vehicles. Interest expense on
floor plan notes payable, before manufacturers' interest assistance, totaled
approximately $704,000 for the three months and $2,408,000 for the nine months
ended September 30, 2001. Manufacturer interest assistance, which is recorded as
a reduction of net interest expense, totaled $535,000 and $1,470,000 for the
quarter and year to date, leaving net floor plan interest for the three and nine
months of $169,000 and $938,000 respectively.


                                       10
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. INTEREST INCOME (EXPENSE):

      The major components of Interest Income (Expense) are:

<TABLE>
<CAPTION>
                                                 For the three months ended   For the nine months ended
                                                          Sept. 30                     Sept. 30
                                                       (in thousands)               (in thousands)
                                                       2001      2000              2001        2000
                                                       ----      ----             ------      ------
<S>                                                    <C>       <C>              <C>         <C>
Interest Income:
Interest received from financial institutions         $  25        --            $    75          --
                                                      =====     =====            =======     =======
Interest (Expense):
Floor plan interest expense                           $(704)    $(793)           $(2,408)    $(2,499)
Manufacturers floor plan assistance                     535       515              1,470       1,749
Mortgage interest expense                              (224)     (232)              (670)       (695)
Other interest expense                                  (24)      (43)               (90)       (145)
                                                      -----     -----            -------     -------
Total Interest (Expense)                              $(417)    $(553)           $(1,698)    $(1,590)
                                                      =====     =====            =======     =======
</TABLE>

7. DISPOSAL OF BUSINESS UNIT:

      In January 2001, Hometown sold the franchise for its Morristown, NJ store
back to Lincoln Mercury for $700,000 in cash. During the first six months of
2001, Hometown received the $700,000 purchase price plus $40,000 for parts
returned and paid out a broker's commission of $35,000. Included in accounts
receivable is $6,000 still due for parts returned. The transaction resulted in
Hometown recording a $254,000 gain on the sale, which is included in other
income.

8. STOCK GUARANTEE

      In April 1999, the Company issued 100,000 shares of Hometown Class A
Common Stock as part of the purchase price of Newburgh Toyota. The Company had
guaranteed that the stock issued in connection with this transaction will have a
value of $1,000,000 at the end of a two-year period, and that additional shares
of the Company's common stock or cash would be issuable if there were a
shortfall. On June 28, 2001, an agreement was signed with the former owners
settling the guarantee whereby the Company in July issued 200,000 shares of
Hometown stock and will pay a fixed amount of $240,000, payable in monthly
installments through December 31, 2002 and a monthly profit sharing payment
equal to 20% of Newburgh Toyota's monthly pre-tax income over $57,142 for the
period from April 1, 2001 to December 31, 2002.


                                       11
<PAGE>

9. PRIVATE EQUITY FINANCING

      In July 2001, Hometown raised $974,996 through the sale of Units at $2.00
per Unit pursuant to a subscription agreement entered into on July 19, 2001
between Hometown and 10 accredited investors, including two officers and
directors, one other officer and one other director, of Hometown. Each Unit
consists of two shares of Class A Common Stock of Hometown plus a warrant to
purchase one additional share at an exercise price of $1.20 per share,
exercisable within a three year period. The purchasers were:

Accredited Investor       # of Units Purchased             # of Shares Issued

Corey Shaker(1)(2)                35,714                           71,428
Steven Shaker(2)                  35,714                           71,428
Janet Shaker                      35,714                           71,428
Richard Shaker                    35,714                           71,428
Joseph Shaker(1)                  35,714                           71,428
Edward Shaker                     35,714                           71,428
Edward D. Shaker                  35,714                           71,428
William C. Muller Trust          100,000                          200,000
William Muller, Jr.(1)(2)        100,000                          200,000
Paul Yamin                        37,500                           75,000

----------
(1) Director of Hometown; and
(2) Officer of Hometown.

10. SUBSEQUENT EVENTS

      On October 18, 2001, CarDay Inc. ceased operations. CarDay Inc. began
operations in 1999 as an 82% owned subsidiary of Hometown. For the year ended
December 31, 1999, the assets, liabilities and results of operations of CarDay
Inc. were included in Hometown's financial statements. In January 2000, CarDay
Inc. obtained $25 million in financing from a group of institutional investors.
The result of this financing was to reduce Hometown's ownership from 82% to
10.7%. Subsequently, Hometown did not reflect the assets, liabilities and
results of operations of CarDay Inc. in its financial statements because
ownership had been reduced to an amount below 20%. Hometown recorded the
increase in value of the investment, net of a deferred tax liability, as an
increase in Additional Paid-In Capital.

      As a result of CarDay Inc. ceasing operations, Hometown now considers the
investment to be permanently and totally impaired. The entire investment in
CarDay Inc. of $3,258,000 less an associated deferred tax liability of
$1,175,000 has been charged to income in the quarter ended September 30, 2001.
The charge has the effect of reducing net income for the quarter by $2,083,000
and reducing Earning per share, fully diluted, for the quarter by $.29.
Excluding the charge net income was $278,000 or $.04 per share fully diluted for
the three months and $978,000 or $.14 per share fully diluted for the nine
months. The charge does not affect cash, cash flow from operations, or liquidity
and capital resources.

                                       12
<PAGE>

      ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

      Hometown sells new and used cars and light trucks, provides maintenance
and repair services, sells replacement parts and provides related financing,
insurance and service contracts through 10 franchised dealerships located in New
Jersey, New York, Connecticut, Massachusetts and Vermont. Hometown's dealerships
offer 13 American and Asian automotive brands; Chevrolet, Chrysler, Daewoo,
Dodge, Ford, Isuzu, Jeep, Lincoln, Mazda, Mercury, Oldsmobile, Plymouth and
Toyota. Hometown's purpose is to consolidate and operate automobile dealerships
in the Northeast, primarily in New Jersey and New England.

Operating Strategy

      Hometown operates its dealerships as local businesses, responsive to the
communities they serve. Administratively, Hometown standardizes and centralizes
many functions in order to simplify operations and utilize scale economies. This
integration and implementation of best practices may present opportunities to
increase revenues and reduce costs but may also necessitate additional costs and
expenditures for corporate administration, including expenses necessary to
implement Hometown's acquisition strategy. These various costs and possible
cost-savings and revenue enhancements may make historical operating results not
comparable to, or indicative of, future performance.

Combined Revenues, Units, Gross Profit and Gross Profit Percentage to Revenues

      The total revenue by category for Hometown for the three and nine months
ended September 30, 2001 and September 30, 2000, are as follows:

<TABLE>
<CAPTION>
                               For the three months ended     For the nine months ended
                                        Sept. 30,                      Sept. 30,
                                     (in thousands)                 (in thousands)
                                   2001           2000           2001            2000
                                 -------        -------        --------        --------
<S>                              <C>            <C>            <C>             <C>
New vehicle                      $41,356        $44,422        $117,864        $137,706
Used vehicle - retail             18,610         15,378          54,608          49,240
Used vehicle - wholesale           3,040          2,052           9,697           8,365
Parts and service                  6,526          6,092          19,116          17,827
Other dealership revenues          2,208          1,899           5,964           5,500
                                 -------        -------        --------        --------
Total Revenue                    $71,740        $69,843        $207,249        $218,638
                                 =======        =======        ========        ========
</TABLE>


                                       13
<PAGE>

      The units sold by category for Hometown for the three and nine months
ended September 30, 2001 and September 30, 2000, are as follows:

                          For the three months ended  For the nine months ended
                                 September 30,              September 30,
                              2001         2000          2001          2000
                              -----        -----        ------        ------
New vehicle                   1,611        1,748         4,613         5,391
Used vehicle - retail         1,453        1,135         3,701         3,548
Used vehicle - wholesale        900          740         2,448         2,391
                              -----        -----        ------        ------
Total units sold              3,964        3,623        10,762        11,330
                              =====        =====        ======        ======

      The new vehicle revenue by manufacturer for Hometown for the three and
nine months ended September 30, 2001 and September 30, 2000, are as follows:

                      For the three months ended     For the nine months ended
                             September 30,                  September 30,
                            (in thousands)                 (in thousands)
                         2001           2000            2001            2000
                        -------        -------        --------        --------

Ford Motor              $16,549        $21,920        $ 48,951        $ 72,197
Toyota Motor             17,948         15,154          48,269          43,137
Daimler Chrysler          3,638          4,431          11,584          12,890
GM                        2,242          1,643           6,289           4,870
All Other                   979          1,274           2,771           4,612
                        -------        -------        --------        --------
Total Revenue           $41,356        $44,422        $117,864        $137,706
                        =======        =======        ========        ========

      The new vehicle units sold by manufacturer for Hometown for the three and
nine months ended September 30, 2001 and September 30, 2000, are as follows:

                          For the three months ended   For the nine months ended
                                    Sept. 30,                  Sept. 30,
                               2001          2000          2001          2000
                              -----         -----         -----         -----

Ford Motor                      551           766         1,664         2,509
Toyota Motor                    785           670         2,115         1,916
Daimler Chrysler                136           177           437           530
GM                               90            72           263           211
All Other                        49            63           134           225
                              -----         -----         -----         -----
Total units sold              1,611         1,748         4,613         5,391
                              =====         =====         =====         =====


                                       14
<PAGE>

      The gross profit (loss) by category for Hometown for the three and nine
months ended September 30, 2001 and September 30, 2000, are as follows:

<TABLE>
<CAPTION>
                               For the three months ended        For the nine months ended
                                         Sept. 30,                       Sept. 30,
                                      (in thousands)                  (in thousands)
                                   2001            2000            2001             2000
                                 -------         -------         --------         --------
<S>                              <C>             <C>             <C>              <C>
New vehicle                      $ 1,997         $ 2,320         $  6,112         $  7,194
Used vehicle - retail              2,027           1,783            6,220            5,666
Used vehicle - wholesale            (157)            (14)             (21)            (131)
Parts and service                  3,716           3,435           10,485           10,025
Other dealership revenues          2,208           1,899            5,964            5,500
                                 -------         -------         --------         --------
Total Gross Profit               $ 9,791         $ 9,423         $ 28,760         $ 28,254
                                 =======         =======         ========         ========
</TABLE>

      The gross profit (loss) percent of revenue by category for Hometown for
the three and nine months ended September 30, 2001 and September 30, 2000, are
as follows:

<TABLE>
<CAPTION>
                                        For the three months ended      For the nine months ended
                                                Sept. 30,                       Sept. 30,
                                          2001            2000            2001            2000
                                         ------          ------          ------          ------
<S>                                       <C>             <C>             <C>             <C>
New vehicle                                 4.6%            5.2%            5.2%            5.2%
Used vehicle - retail                      10.9%           11.6%           11.4%           11.5%
Used vehicle - wholesale                   (5.2%)          (0.7%)          (0.2%)          (1.6%)
Parts and service                          56.9%           56.4%           54.8%           56.2%
Other dealership revenues                 100.0%          100.0%          100.0%          100.0%
                                         ------          ------          ------          ------
Total Gross Profit percent                 13.6%           13.5%           13.9%           12.9%
                                         ======          ======          ======          ======
</TABLE>

Three months ended September 30, 2001 compared with three months ended September
30, 2000.

      Revenue

      Total revenues increased $1.9 million or 2.7% from $69.8 million for the
three months ended September 30, 2000 to $71.7 million for the three months
ended September 30, 2001.

      Although total revenues increased in the quarter, revenue from sale of new
vehicles decreased $3.0 million, or 6.8% from $44.4 million to $41.4 million.
Revenue decreases resulting from a decrease in new units sold of 137 vehicles
were partially offset by an increase in average revenue per vehicle of $258. The
decline in new vehicle sales is due in part to the loss of revenue from sales at
Morristown Lincoln Mercury, which was sold back to the manufacturer in January
2001, most of the loss of revenue, however, is due to the lower new car revenue
at the remaining four Lincoln Mercury locations that Hometown owns. Sales of


                                       15
<PAGE>

Lincoln Mercury new cars have declined nationwide compared to last year. This
decline was partially offset by new car sales at Hometown's two Toyota
locations. Due to gains in popularity during 2001, Hometown's Toyota new car
unit sales increased by 17.1%. The increase in average revenue per vehicle is
due to an average 1.5% price increase coupled with higher volume of more
expensive sport utility vehicles at Hometown's Toyota stores.

      Revenue from the sale of used vehicles at retail increased $3.2 million,
or 21.0%, from $15.4 million to $18.6 million for the quarter. The increase
consisted of a decrease in average revenue per vehicle of $741 offset by an
increase in sales of used vehicles at retail of 318 units. This increase in
revenue is due in part to the acquisition of International Auto which Hometown
tucked into Hometown's existing location at Wellesley, Massachusetts, and also
due to the increased efforts to sell certified pre-owned Lincoln Mercury
products at Hometown's four Lincoln Mercury locations, an increased focus on
arranging financing for customers with challenged credit histories, and, in
general, Hometowns efforts to promote pre-owned cars and trucks in an
environment of slowing economic activity.

      Revenue from the sale of used vehicles at wholesale increased $1.0
million, or 50.0%, from $2.0 million during last years third quarter to $3.0
million this year. The change consisted of an increase in sales of used vehicles
at wholesale of 160 units and an increase in revenue per vehicle of $603. The
increase in sales of used cars and trucks at retail, which Hometown is
experiencing, will generally also result in increases of used cars and trucks at
auction. This is due to the fact that used cars and trucks coming in on trade of
vehicles that are already pre-owned will be generally older than those on new
car and truck trade-ins and will often times not qualify for retail sales at
Hometown standards. In addition Hometown is more tightly controlling the number
of days a used vehicle remains in inventory by wholesaling aging vehicles.

      Parts and service sales revenue increased $0.4 million, or 6.6% from $6.1
million for the three months ended September 30, 2000, to $6.5million for the
three months ended September 30, 2001. This is due in large part to the
expansion of parts and service sales at Hometown's Baystate Lincoln Mercury and
Toyota of Newburgh locations, supporting Hometown's emphasis on parts and
service sales at retail. The increase was partially offset by the loss of
revenue from the sale of the Morristown location.

      Finance, Insurance, Extended Service (F&I) and other dealership revenues
increased $310,000 or 17.3% from $1.9 million for the three months ended
September 30, 2000 to $2.2 million for the three months ended September 30,
2001, due in large part to the fact that a high percentage of pre-owned cars and
trucks have financing arranged by the dealership. Hometown has established goals
and objectives to increase F&I revenues and has supported those efforts with
increased training and incentives. This ongoing support and focus continued into
the third quarter.

      Gross Profit

      Total gross profit increased $0.4 million, or 4.3%, from $9.4 million for
the three months ended September 30, 2000, to $9.8 million for the three months
ended September 30, 2001.

      Gross profit on new vehicle sales declined by $0.3 million or 13.0%, to
$2.0 million for the third quarter of 2001. This decline was attributable to a
reduction in the number of units sold of 137 as well as a decrease of $145 in
the average gross profit per vehicle. Gross profit on used vehicles sold at
retail grew $244,000 or 13.7%. This was due to a decrease of $175 in gross
profit per unit offset by an increase in units sold of 318 vehicles. This
increase in unit sales is due in large part to Hometown's focus on used car and
truck sales in general, and our increased focus on arranging financing for
credit challenged customers. Gross profit on parts and service sales increased
$281,000, or 8.2%, to $3.7 million for the quarter ended September 30, 2001.
This gross profit increase is due in large part to the concentration on used
cars, parts and service at all Hometown locations that was emphasized early on
in 2001 and continues throughout this year. These types of sales have
significantly higher margins than that of new cars and trucks.


                                       16
<PAGE>

      Amortization of Goodwill

      Goodwill amortization remained at a constant $176,000 for the quarter
ended September 30, 2001.

      Selling, General and Administrative Expenses

      Selling, general and administrative expenses were essentially flat for the
quarter at $8.8 million.

      Interest Income

      Since the refinancing of our floor plan loans on March 16, 2001, all
excess cash is being invested in a money market fund and earning interest
income. Under our prior financing arrangement, all excess cash was used to pay
off the loan balance, and as a result no income was earned in the year 2000.

      Interest Expense

      Interest expense decreased $136,000 from $553,000 in the third quarter of
2000 to $417,000 in the third quarter of 2001. The decrease was primarily
attributable to the lower rate on the floor plan loans resulting from the
refinancing with Ford Motor Credit Corporation.

      Other Income (Expense)

      Other income increased $92,000 from income of $3,000 in the three months
ended September 30, 2000 to income of $95,000 for the three months ended
September 30, 2001.

      Provision (Benefit) for Income Tax

      The effective income tax rate was (25)% in the quarter ended September 30,
2000 and 34% in the same period of 2001. The rates were based on current
forecasts of income before taxes, and current forecasts of permanent differences
between tax and book income. In particular, the third quarter of 2000 shows a
tax provision on a pretax loss due to the effect of non-deductible expenses,
mainly amortization of non-deductible goodwill.

      Earnings Per Share, Basic and Diluted

      See Note 3 to the Consolidated Financial Statements for a description of
dilutive and potentially dilutive securities.

Nine months ended September 30, 2001 compared with nine months ended September
30, 2000

      Revenue

      Total revenues for nine months ended September 2001 decreased $11.4
million or 5.2%, to $207.2 million from $218.6 million due primarily to the sale
of the under performing Morristown Lincoln Mercury store back to the
manufacturer in January 2001. Total revenues excluding Morristown (same store)
decreased $3.8 million or 1.8% from $210.8 million to $207 million for the same
period.

      Revenue from the sale of new vehicles decreased $19.8 million, or 14.4%
from $137.7 million for the nine months ended September 30, 2000 to $117.8
million for the same period this year. Revenue decreased due to a decrease in
new units sold of 778 vehicles, while average revenue per vehicle was basically
flat. The decline in units is attributable, in part, to the sale of Morristown
Lincoln Mercury back to the manufacturer in January 2001. The sale of Morristown
accounts for approximately $4.8 million of the decrease. In addition, all four
of Hometown's remaining Lincoln Mercury stores experienced lower unit sales,
offset somewhat by increases in new car and truck sales at Hometown's Toyota,
Ford, and Chevrolet stores.

      Revenue from the sale of used vehicles at retail increased $5.4 million,
or 10.9%, from $49.2 million for the nine months ended September 30, 2000, to
$54.6 million for the nine months ended September 30, 2001. The increase
consisted of an increase in average revenue per vehicle of $877 as well as an
increase of used vehicles at retail of 153 units. This is due in part to
Hometown's focus on increased sales of used cars and trucks for 2001. Revenue
from the sale of used vehicles at wholesale rose $1.3 million, or 15.9%, from
$8.3 million for the nine months ended September 30, 2000, to $9.7 million for
the nine months ended


                                       17
<PAGE>

September 30, 2001. That change consisted of an increase in revenue per vehicle
of $463 as well as an increase in sales of used vehicles at wholesale of 57
units. The number of used vehicles brought to auction has increased as
Hometown continues to focus on inventory reduction. In addition trade-ins
associated with used vehicle sales are typically older than trade-ins on new
vehicles and are not up to retail standards and therefore immediately sent to
auction.

      Parts and service sales revenue increased $1.2 million, or 7.2% from $17.8
million for the nine months ended September 30, 2000, to $19.1 million for the
nine months ended September 30, 2001, due in large part to the increase of parts
and service sales of Hometown's Baystate Lincoln Mercury and Toyota of Newburgh
locations and an overall concentration on this higher margin profit center in
light of anticipated lower new vehicles sales in 2001.

      Finance, Insurance, Extended Service (F&I) and other dealership revenues
increased $464,000, or 8.5% from $5.5 million for the nine months ended
September 30, 2000 to $6.0 million for the nine months ended September 30, 2001,
due in large part to the fact that a high percentage of pre-owned cars and
trucks have financing arranged by the dealership. With an increase in used car
revenue, F&I sales would be expected to increase. In addition, Hometown has set
goals and objectives in the F&I departments and has supported those efforts with
increased training.

      Gross Profit

      Total gross profit increased $0.5 million, or 1.8%, from $28.3 million for
the nine months ended September 30, 2000, to $28.8 million for the nine months
ended September 30, 2001. Total gross margins increased to 13.9% from 12.9%. The
increase was due in large part to increases in total unit sales at Hometown's
Toyota, Ford, and Chevrolet stores offset somewhat by lower sales volume at its
four Lincoln Mercury dealerships.

      Gross profit on new vehicles decreased $1.1 million, or 15.3%, from $7.2
million for the nine months ended September 30, 2000, compared to $6.1 million
for the same period of 2001. Unit sales decreased by 778 vehicles, and gross
profit per unit was reduced by $30.

      Gross profit on the sale of used vehicles at retail increased $0.5
million, or 8.8%, from $5.7 million for the first nine months of 2000 to $6.2
million for the same period of 2001. Unit sales increased by 153 units, and
gross profit per unit increased by $84. Used car gross margins decreased from
11.5% to 11.4% for the same nine-month period.

      Gross profit on parts and service increased $0.5 million, or 5.0%, from
$10.0 million for the nine months ended September 30, 2000, to $10.5 million for
the nine months ended September 30, 2001. Hometown's same store parts and
service sales increased $0.9 million or 9.2%. These increases are a result of
the increases in Hometown's parts and service sales.

      Amortization of Goodwill

      Goodwill amortization increased to $529,000 for the nine months ended
September 30, 2001 from $490,000 for the nine months ended September 30, 2000,
reflecting the acquisition of International Auto, Hometown's new high line
pre-owned car/truck center that Hometown tucked into its existing Wellesley,
Massachusetts location.

      Selling, General and Administrative Expenses

      Selling, general and administrative expenses decreased $0.9 million, or
3.4% from $26.4 million for the nine months ended September 30, 2000, to $25.5
million for the nine months ended September 30, 2001.


                                       18
<PAGE>

      The decrease was due to many factors: In early 2000, Hometown was in a
transition from its outsourced finance team, including its CFO, to the now
existing in house finance team. During this time there was an overlap of
expenses. Hometown also was financing its inventory with GE Capital, and paid
high monthly fees. Ford Credit, Hometown's current lender does not assess these
fees. Another advantage of Ford Credit is its ability for the dealerships to
have a much simpler cash management system-allowing Hometown to scale down the
number of people in its corporate office. Hometown also recognized a loss of
$345,000 on the sales of livery vehicles by Westwood Lincoln Mercury to Autotech
leasing services during this period. Additionally, the closing of the Morristown
store has reduced of general and administrative expenses by $485,000. These
decreases were partially offset by increased commissions due to higher sales at
the Newburgh dealership, and the profit sharing arrangement in place for the
high end used car operation at Baystate Lincoln Mercury.

      Interest Income

      Since the refinancing of our floor plan loans on March 16, 2001, all
excess cash is being invested in a money market fund and earning interest
income. Under our prior financing arrangement, all excess cash was used to pay
off the loan balance, and as a result no income was earned in the year 2000.

      Interest Expense

      Interest expense increased $108,000 from $1.6 million for the nine months
ended September 30, 2000 to $1.7 for the nine months ended September 30, 2001.
The increase was primarily attributable to lower manufacturer's assistance
payments due to lower sales and purchases of new vehicles.

      Other Income (Expense)

      Other Income for the nine months ended September 30, 2001 increased
$657,000 from an expense of $81,000 last year to income of $576,000 this year.
The change consisted primarily of increased incentive payments resulting from
Blue Oval certification from Ford (for Family Ford) and LPE certification from
Lincoln Mercury (for Baystate, Shaker's and Westwood Lincoln Mercury). Also
included is the gain from the sale of the Morristown dealership of $254,000.

      Provision (Benefit) for Income Tax

      The effective income tax rate was 7% in the nine months ended September
30, 2000 and 28% in the nine months ended September 30, 2001. The rate for
September, 2000 was low because of state taxes due from profitable dealerships
offsetting the Federal tax benefit, as well as non-deductible expenses such as
goodwill amortization. The 2001 rate was affected by the reversal of the
deferred tax liability that was recorded with the investment in CarDay Inc.

      Earnings (Loss) Per Share, Basic and Diluted

      See Note 3 to the Consolidated Financial Statements for a description of
dilutive and potentially dilutive securities.

Weighted Average Shares

      The basic weighted average shares outstanding for the nine months ended
Sept. 30, 2001 and 2000 are 6,396,151 shares and 5,994,816 shares, respectively.
Fully diluted shares outstanding were 7,132,917 and 6,334,689 respectively, at
those dates.


                                       19
<PAGE>

Cyclicality

      Hometown's operations, like the automotive retailing industry in general,
are affected by a number of factors relating to general economic conditions,
including consumer business cycles, consumer confidence, economic conditions,
availability of consumer credit and interest rates. Although the above factors,
among others, may affect Hometown's business, Hometown believes that the impact
on its operations of future negative trends in such factors will be somewhat
mitigated by its: (i) strong parts, service and collision repair services; (ii)
variable cost salary structure; (iii) geographic regional focus; and (iv)
product diversity.

Seasonality

      Hometown's operations are subject to seasonal variations, with the second
and third quarters generally contributing more revenues and operating profit
than the first and fourth quarters. This seasonality is driven primarily by: (i)
Manufacturer related factors, primarily the historical timing of major
Manufacturer incentive programs and model changeovers; (ii) weather-related
factors, which primarily affect parts and service; and (iii) consumer buying
patterns.

Effect of Inflation

      Inflation did not have a significant effect on the results of operations.

Liquidity and Capital Resources

      The principal sources of liquidity include cash on hand, cash from
operations, and floor plan financing.

      Cash and Cash Equivalents

      Total cash and cash equivalents at September 30, 2001 and December 31,
2000, were $4.1 million and $0.6 million, respectively, for an increase of $3.5
million in cash and cash equivalents. Operating activities provided $2.3 million
in cash. The sale of the Morristown dealership added $0.7 million. Capital
expenditures for property and equipment totaled $0.2 million and cash of $0.3
million was used for principal payments on long-term debt. $1.0 million was
raised in a private equity financing by issuing capital stock.

      Receivables

      Hometown had $6.9 million in accounts receivable at September 30, 2001
compared to $6.1 million at December 31, 2000. The majority of those receivables
are contracts-in-transit from companies that provide or secure financing for
customer purchases. The higher receivable amounts reflect the higher sales
activity normally expected in September versus December.

      Floor Plan Financing

      On March 16, 2001, Hometown completed a refinancing of its revolving line
of credit with GE Capital Corporation to a traditional floor plan line of credit
at each dealership with Ford Motor Credit Corporation. The new floor plan loans
carry an interest rate of prime less 75 basis points for new vehicles and prime
less 50 basis points for used vehicles. Interest expense on floor plan notes
payable, before manufacturers' interest assistance, totaled approximately $2.4
million for the nine months ended September 30, 2001. Manufacturer interest
assistance, which is recorded as a reduction of net interest expense, totaled
$1.5 million for the same period, leaving net floor plan interest for the nine
months of $0.9 million.


                                       20
<PAGE>

Disposal of Business Unit

      In January 2001, Hometown sold the franchise for its Morristown, NJ store
back to Lincoln Mercury for $0.7 million in cash. During the first six months of
2001, Hometown received the purchase price plus $40,000 for parts returned, and
paid out a broker's commission of $35,000. Included in accounts receivable is
$6,000 due for additional parts returned. The transaction resulted in Hometown
recording a $254,000 gain on the sale, which is included in other income.

Private Equity Financing

      In July 2001, Hometown raised $974,996 through the sale of Units at $2.00
per Unit pursuant to a subscription agreement entered into on July 19, 2001
between Hometown and 10 accredited investors, including two officers and
directors, one other officer and one other director, of Hometown. Each Unit
consists of two shares of Class A Common Stock of Hometown plus a warrant to
purchase one additional share at an exercise price of $1.20 per share,
exercisable within a three year period. The purchasers were:

Accredited Investor       # of Units Purchased             # of Shares Issued

Corey Shaker(1)(2)                35,714                           71,428
Steven Shaker(2)                  35,714                           71,428
Janet Shaker                      35,714                           71,428
Richard Shaker                    35,714                           71,428
Joseph Shaker(1)                  35,714                           71,428
Edward Shaker                     35,714                           71,428
Edward D. Shaker                  35,714                           71,428
William C. Muller Trust          100,000                          200,000
William Muller, Jr.(1)(2)        100,000                          200,000
Paul Yamin                        37,500                           75,000

----------
(1) Director of Hometown; and
(2) Officer of Hometown.

Contingencies and Commitments

      Legal Proceedings

      On or about February 7, 2001, Salvatore A. Vergopia and Edward A.
Vergopia, directors and formerly executive officers of Hometown, and Janet
Vergopia, the wife of Salvatore A. Vergopia (the "Vergopias") filed a complaint
in the Superior Court of New Jersey in Bergen County, against Hometown, its
officers and directors, certain holders of its Class B common stock, and certain
other unnamed persons, alleging breach of two employment agreements, wrongful
termination of employment, breach of a stockholders' agreement and certain other
wrongful conduct, including age discrimination and breach of fiduciary duty. The
Vergopias are seeking back pay, front pay, compensatory, consequential and
punitive damages, in an unspecified amount as well as, reinstatement, injunctive
and other legal and equitable relief. Subsequently, on or about April 19, 2001,
the Vergopias filed an amended complaint alleging interference with their right
to participate in Hometown's group health insurance plan pursuant to the
Consolidated Budget Reconciliation Act (COBRA) health benefit provisions.

      Hometown and the other defendants retained litigation counsel to represent
them in this action and served answers to the initial and the amended complaints
denying liability and asserting affirmative defenses, and are currently engaged
in pre-trial discovery with the Vergopias. In addition, Hometown also asserted
counterclaims for breach of contract and fiduciary duty against each of
Salvatore and Edward Vergopia. Subsequently, on or about June 26, 2001, the
Vergopias withdrew their application to the court for the reinstatement of
Salvatore A. Vergopia and Edward A. Vergopia to their former executive positions
at Hometown. In return, Salvatore A. Vergopia and Edward A. Vergopia were
included on an expanded slate of directors submitted in Hometown's stockholders
at the 2001 Annual Meeting of Stockholders, and were re-elected as directors by
vote of Hometown's Class B Stockholders.

      Hometown believes that the Vergopias commenced this action in response to
the dismissal of both Salvatore A. Vergopia and Edward A. Vergopia from their
officerships and employment positions with


                                       21
<PAGE>

Hometown. Hometown believes that they have meritorious defenses and intend to
vigorously defend this action, and that the eventual outcome of the case will
not have a material adverse effect on its consolidated financial position or
results of operations.

      On occasion, Hometown may be a defendant in lawsuits arising from normal
business activities. Hometown reviews pending litigation with legal counsel and
believes that the ultimate liability, if any, resulting from such actions will
not have a material adverse effect on its consolidated financial position or
results of operations.

Subsequent Events:

      On October 18, 2001, CarDay Inc. ceased operations. CarDay Inc. began
operations in 1999 as an 82% owned subsidiary of Hometown. For the year ended
December 31, 1999, the assets, liabilities and results of operations of CarDay
Inc. were included in Hometown's financial statements. In January 2000, CarDay
Inc. obtained $25 million in financing from a group of institutional investors.
The result of this financing was to reduce Hometown's ownership from 82% to
10.7%. Subsequently, Hometown did not reflect the assets, liabilities and
results of operations of CarDay Inc. in its financial statements because
ownership had been reduced to an amount below 20%. Hometown recorded the
increase in value of the investment, net of a deferred tax liability, as an
increase in Additional Paid-In Capital.

      As a result of CarDay Inc. ceasing operations, Hometown now considers the
investment to be permanently and totally impaired. The entire investment in
CarDay Inc. of $3,258,000 less an associated deferred tax liability of
$1,175,000 has been charged to income in the quarter ended September 30, 2001.
The charge has the effect of reducing net income for the quarter by $2,083,000
and reducing Earning per share, fully diluted, for the quarter by $.29.
Excluding the charge net income was $278,000 or $.04 per share fully diluted for
the three months and $978,000 or $.14 per share fully diluted for the nine
months. The charge does not affect cash, cash flow from operations, or liquidity
and capital resources.

New Accounting Pronouncements

      In June 2001, the FASB approved SFAS Nos. 141 and 142 entitled Business
Combinations and Goodwill and Other Intangible Assets, respectively. The
statement on business combinations, among other things, eliminates the "Pooling
of Interests" method of accounting for business acquisitions entered into after
June 30, 2001. SFAS No. 142, among other things, eliminates the need to amortize
goodwill and requires companies to use a fair-value approach to determine
whether there is an impairment of existing and future goodwill. These statements
are effective for Hometown beginning January 1, 2002 and have certain transition
rules that require it to obtain appraisals of certain of its operating units,
which must be completed within six months from adoption. Hometown is currently
evaluating the impact of these pronouncements.

Forward Looking Statement

      When used in the Quarterly Report on Form 10Q, the words "may", "will",
"should", "expect", "believe", "anticipate", "continue", "estimate", "project",
"intend" and similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act regarding events, conditions and financial trends that
may affect Hometown's future plans of operations, business strategy, results of
operations and financial condition. Hometown wishes to ensure that such
statements are accompanied by meaningful cautionary statements pursuant to the
safe harbor established in the Private Securities Litigation Reform Act of 1995.
Prospective investors are cautioned that any forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties and
that actual results may differ materially from those included within the
forward-looking statements as a result of various factors including the ability
of Hometown to consummate, and the terms of, acquisitions. Such forward-looking
statements should, therefore, be considered in light of various important
factors, including those set forth herein and others set forth from time to time
in Hometown's reports and registration statements filed with the Securities and
Exchange Commission (the "Commission"). Hometown disclaims any intent or
obligation to update such forward-looking statements.


                                       22
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 2. Changes in Securities and Use of Proceeds

Changes in Securities Recent Sales of Unregistered Securities.

      In July 2001, Hometown raised $974,996 through the sale of Units at $2.00
per Unit pursuant to a subscription agreement entered into on July 19, 2001
between Hometown and 10 accredited investors, including two officers and
directors, one other officer and one other director, of Hometown. Each Unit
consists of two shares of Class A Common Stock of Hometown plus a warrant to
purchase one additional share at an exercise price of $1.20 per share,
exercisable within a three year period. The warrants expire in July 2006 and
have anti-dilution protection against capital changes. The sale of the Units was
exempt from registration under the Securities Act of 1933, as amended pursuant
to the exemption afforded under Section 4(2) or 4(6) of such Act. (For further
detail please refer to -"Management Discussion and Analysis" - "Private Equity
Financing")

ITEM 4. Submission of Matters to a Vote of Security Holders

None

ITEM 6. Exhibits and Reports on Form 8-K

a.    Exhibits:

      None.

b.    Reports on Form 8-K:

      None.


                                       23
<PAGE>

                                   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.

                          Hometown Auto Retailers, Inc.


November 8, 2001                        By: /s/ Corey E. Shaker
----------------                        ----------------------------------------
Date                                    Corey E. Shaker, President and Chief
                                        Executive Officer


November 8, 2001                        By: /s/ John J. Stavola
----------------                        ----------------------------------------
Date                                    John J. Stavola, Acting Chief Financial
                                        Officer


                                       24