<PAGE>

                       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, 2003

                        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  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes[ ] No [X]

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                      3,654,853
Common Stock, Class B, par value $.001 per share                      3,520,252


<PAGE>

                                      INDEX

<TABLE>
<CAPTION>

PART I.    FINANCIAL INFORMATION                                                  Page
<S>        <C>                                                                    <C>
ITEM 1.    Consolidated Balance Sheets at September 30, 2003 (Unaudited)
           and December 31, 2002 (Audited)                                         3

           Unaudited Consolidated Statements of Operations for three and nine
           months ended September 30, 2003 and 2002                                4

           Unaudited Consolidated Statements of Stockholders' Equity for the
           nine months ended September 30, 2003 and 2002                           5

           Unaudited Consolidated Statements of Cash Flows for nine months
           ended September 30, 2003 and 2002                                       6

           Notes to Unaudited Consolidated Financial Statements                    7

ITEM 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                              16

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk             30

ITEM 4.    Controls and Procedures                                                30

PART II.   OTHER INFORMATION

ITEM 4.    Submission of Matters to a Vote of Security Holders                    31

ITEM 6.    Exhibits and Reports on Form 8-K                                       31

SIGNATURES                                                                        32

CERTIFICATIONS                                                                    33
</TABLE>

                           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 Hometown Auto  Retailers,  Inc.  ("Hometown")  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.  Hometown'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 Hometown.  Although Hometown 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,  the  inclusion  of such  information  should not be  regarded  as a
representation  by Hometown or any other person that the objectives and plans of
Hometown  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."

                                       2
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                          September 30,   December 31,
                                ASSETS                                        2003            2002
                                                                           (Unaudited)
                                                                            --------        --------
<S>                                                                         <C>             <C>
Current Assets:
   Cash and cash equivalents                                                $  5,741        $  3,624
   Accounts receivable, net                                                    7,026           4,883
   Inventories, net                                                           34,181          39,169
   Prepaid expenses and other current assets                                     557             510
   Deferred income taxes and taxes receivable                                  1,061           1,245
                                                                            --------        --------
     Total current assets                                                     48,566          49,431

Property and equipment, net                                                   12,689          12,882
Other assets                                                                   1,075           1,503
                                                                            --------        --------
     Total assets                                                           $ 62,330        $ 63,816
                                                                            ========        ========

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Floor plan notes payable                                                 $ 34,265        $ 38,522
   Accounts payable and accrued expenses                                       6,812           5,072
   Current maturities of long-term debt and capital lease obligations            998           1,164
   Deferred revenue                                                              697             588
                                                                            --------        --------
     Total current liabilities                                                42,772          45,346

Long-term debt and capital lease obligations                                  12,370          13,059
Long-term deferred income taxes                                                   90             118
Long-term deferred revenue                                                       754             743
                                                                            --------        --------
     Total liabilities                                                        55,986          59,266

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, 3,597,105 and 3,563,605 shares issued and
   outstanding                                                                     4               3
   Common stock, Class B, $.001 par value, 3,760,000 shares
   authorized, 3,578,000 and 3,611,500 shares issued and
   outstanding                                                                     3               4
   Additional paid-in capital                                                 29,760          29,760
   Accumulated deficit                                                       (23,423)        (25,217)
                                                                            --------        --------
     Total stockholders' equity                                                6,344           4,550
                                                                            --------        --------
     Total liabilities and stockholders' equity                             $ 62,330        $ 63,816
                                                                            ========        ========
</TABLE>

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

                                       3
<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 September 30,              Ended September 30,
                                                               ----------------------------      ----------------------------
                                                                  2003             2002              2003             2002
                                                               -----------      -----------      -----------      -----------
<S>                                                            <C>              <C>              <C>              <C>

Revenues
   New vehicle sales                                          $    52,786     $    47,597     $   139,668     $   129,172
   Used vehicle sales                                              16,888          18,039          52,021          58,076
   Parts and service sales                                          6,220           6,354          18,655          18,384
   Other, net                                                       2,286           2,358           6,259           6,811
                                                              -----------     -----------     -----------     -----------
      Total revenues                                               78,180          74,348         216,603         212,443

Cost of sales
   New vehicle                                                     49,272          44,740         130,640         121,295
   Used vehicle                                                    15,243          16,285          47,006          52,716
   Parts and service                                                2,830           2,861           8,463           8,262
                                                              -----------     -----------     -----------     -----------
      Total cost of sales                                          67,345          63,886         186,109         182,273
                                                              -----------     -----------     -----------     -----------
      Gross profit                                                 10,835          10,462          30,494          30,170

Selling, general and administrative expenses                        9,094           8,794          26,509          26,030
                                                              -----------     -----------     -----------     -----------
      Income from operations                                        1,741           1,668           3,985           4,140

   Interest income                                                     22              12              36              33
   Interest (expense)                                                (715)           (812)         (2,292)         (2,412)
   Other income                                                         5              11             956              35
   Other (expense)                                                     --              --              (3)             (3)
                                                              -----------     -----------     -----------     -----------
      Income before taxes and cumulative effect of
          accounting change                                         1,053             879           2,682           1,793
      Provision for income taxes                                      221             321             888             691
                                                              -----------     -----------     -----------     -----------
      Income before cumulative effect of accounting change            832             558           1,794           1,102
      Cumulative effect of accounting change                           --              --              --         (23,708)
                                                              -----------     -----------     -----------     -----------
Net income (loss)                                             $       832     $       558     $     1,794     $   (22,606)
                                                              ===========     ===========     ===========     ===========
Earnings (loss) per share, basic
     Before cumulative effect of accounting change            $      0.12     $      0.07     $      0.25     $      0.15
     Cumulative effect of accounting change                            --              --              --           (3.30)
                                                              -----------     -----------     -----------     -----------
Earnings (loss) per share, basic                              $      0.12     $      0.07     $      0.25     $     (3.15)
                                                              ===========     ===========     ===========     ===========
Earnings (loss) per share, diluted
     Before cumulative effect of accounting change            $      0.12     $      0.07     $      0.25     $      0.15
     Cumulative effect of accounting change                            --              --              --           (3.30)
                                                              -----------     -----------     -----------     -----------
Earnings (loss) per share, diluted                            $      0.12     $      0.07     $      0.25     $     (3.15)
                                                              ===========     ===========     ===========     ===========

Weighted average shares outstanding, basic                      7,175,105       7,175,105       7,175,105       7,175,105
Weighted average shares outstanding, diluted                    7,212,067       7,175,105       7,187,426       7,175,105
</TABLE>

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

                                       4

<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                           Class A                   Class B
                                         Common Stock              Common Stock           Additional                   Total
                                    ----------------------    -----------------------      Paid-in    Accumulated  Stockholders'
                                     Shares        Amount      Shares         Amount       Capital      Deficit        Equity
                                    --------      --------    --------       --------     --------     --------       --------
<S>                                    <C>       <C>             <C>        <C>           <C>          <C>           <C>
Balance at December 31, 2001           3,562     $      3        3,613      $      4      $ 29,730     $ (2,285)     $ 27,452

Conversion of Class B Common to
  Class A Common                           2           --           (2)           --            --           --            --
Paid subscription receivable              --           --           --            --            30           --            30
Net loss                                  --           --           --            --            --      (22,606)      (22,606)
                                    --------     --------     --------      --------      --------     --------      --------
Balance at September 30, 2002          3,564     $      3        3,611      $      4      $ 29,760     $(24,891)     $  4,876
                                    ========     ========     ========      ========      ========     ========      ========

Balance at December 31, 2002           3,564     $      3        3,611      $      4      $ 29,760     $(25,217)     $  4,550

Conversion of Class B Common to
  Class A Common                          33            1          (33)           (1)           --           --            --
Net income                                --           --           --            --            --        1,794         1,794
                                    --------     --------     --------      --------      --------     --------      --------
Balance at September 30, 2003          3,597     $      4        3,578      $      3      $ 29,760     $(23,423)     $  6,344
                                    ========     ========     ========      ========      ========     ========      ========
</TABLE>

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

                                       5
<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               For the Nine Months
                                                                               ended September 30,
                                                                            -------------------------
                                                                              2003            2002
                                                                            --------        --------
<S>                                                                         <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                           $  1,794        $(22,606)
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities -
   Cumulative effect of accounting change                                         --          23,708
   Depreciation and amortization                                               1,010             995
  (Gain) on sale of sales and service franchise                                 (936)             --
  (Gain) on sale of fixed assets                                                  (3)             --
   Deferred income taxes                                                         513             627
   Changes in assets and liabilities:
      Accounts receivable, net                                                (2,095)             63
      Inventories, net                                                         5,716          (2,363)
      Prepaid expenses and other current assets                                  (65)            (88)
      Other assets                                                                37             (23)
      Floor plan notes payable                                                (4,257)          3,852
      Accounts payable and accrued expenses                                    1,747            (112)
      Deferred revenue - current                                                 109             117
      Other long term liabilities and deferred revenue                            11             (16)
                                                                            --------        --------
   Net cash provided by operating activities                                   3,581           4,154

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                           (593)         (1,794)
   Proceeds from sale of property and equipment                                    6              --
   Proceeds from sale of sales and service franchise                             936              --
                                                                            --------        --------
   Net cash provided by (used in) investing activities                           349          (1,794)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments of long-term debt and capital lease obligations         (1,868)         (1,268)
   Proceeds from long-term borrowings                                             55              33
   Collection of subscription receivable                                          --              30
                                                                            --------        --------
   Net cash (used in) financing activities                                    (1,813)         (1,205)

Net increase in cash and cash equivalents                                      2,117           1,155
CASH AND CASH EQUIVALENTS, beginning of period                                 3,624           4,446
                                                                            --------        --------
CASH AND CASH EQUIVALENTS, end of period                                    $  5,741        $  5,601
                                                                            ========        ========
 Cash paid for - Interest                                                   $  2,325        $  2,396
 Cash paid for - Taxes                                                      $    316        $    261
 Purchases financed by capital lease obligations                            $    958        $    891
</TABLE>

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

                                       6

<PAGE>

                          HOMETOWN AUTO RETAILERS, INC.
              NOTES TO UNAUDITED 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 9 franchised  dealerships
located  in New  Jersey,  New  York,  Connecticut,  Massachusetts  and  Vermont.
Hometown's  dealerships  offer 10 American and Asian automotive brands including
Chevrolet,  Chrysler, Dodge, Ford, Jeep, Lincoln, Mazda, Mercury, Oldsmobile and
Toyota.

2.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           Basis of Presentation

           The accompanying consolidated balance sheet as of September 30, 2003,
the  consolidated  statements of operations  for the three and nine months ended
September 30, 2003 and 2002, the consolidated statements of stockholders' equity
and  the  consolidated  statements  of cash  flows  for the  nine  months  ended
September  30,  2003  and  2002,  are  unaudited.   The  consolidated  financial
statements include all significant majority-owned subsidiaries.  All significant
intercompany balances and transactions have been eliminated in consolidation.

           In the opinion of management,  all  adjustments  necessary to present
fairly the  financial  position,  results of  operations  and cash flows for the
interim periods were made. Certain reclassifications have been made to the prior
year amounts to conform to the current year presentation. Due to seasonality and
other factors, the results of operations for interim periods are not necessarily
indicative of the results that will be realized for the entire year.

           Certain  information and footnote  disclosures,  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles, were omitted.  Accordingly,  these consolidated financial statements
should be read in conjunction  with the  consolidated  financial  statements and
notes  thereto  for the year ended  December  31,  2002,  which are  included in
Hometown's filing of its annual report on Form 10-K.

           The  financial  statements  have been  prepared  in  conformity  with
generally accepted accounting principles and, accordingly, include amounts based
on estimates and judgments of management. Actual results could differ from those
estimates.

           Stock-based Compensation

           At  September  30,  2003,  Hometown  has  one  stock-based   employee
compensation  plan,  the 1998 Stock Option Plan (the "Stock  Option  Plan").  As
allowed by SFAS 148,  Hometown  has  elected  not to use one of the  alternative
methods of transition  available for a voluntary  change to the fair value based
method of accounting for stock-based  employee  compensation.  Hometown accounts
for this plan under the  recognition  and  measurement  principles of Accounting
Principles  Board  ("APB")  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees",  and related  Interpretations.  No stock-based employee compensation
cost is reflected in net income, as all options granted under those plans had an
exercise  price  equal to or  greater  than the market  value of the  underlying
common stock on the date of grant. The following table illustrates the effect on
net income and  earnings  per share if the  company  had  applied the fair value
recognition  provisions of FASB Statement No. 123,  "Accounting  for Stock-Based
Compensation", to stock-based employee compensation.


                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                                Three Months Ended                Nine Months Ended
                                                                   September 30,                    September 30,
                                                               2003            2002            2003            2002
                                                            ----------      ----------      ----------      ----------
                                                                                  (in thousands)
<S>                                                         <C>             <C>             <C>             <C>
Net income (loss), as reported                              $      832      $      558      $    1,794      $  (22,606)
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects (1)
                                                                   (10)             (7)            (22)            (21)
                                                            ----------      ----------      ----------      ----------
Pro forma net income (loss)                                 $      822      $      551      $    1,772      $  (22,627)
                                                            ==========      ==========      ==========      ==========
Earnings (loss) per share:
Basic, as reported                                          $     0.12      $     0.07      $     0.25      $    (3.15)
Basic, pro forma                                            $     0.11      $     0.07      $     0.25      $    (3.15)
Diluted, as reported                                        $     0.12      $     0.07      $     0.25      $    (3.15)
Diluted, pro forma                                          $     0.11      $     0.07      $     0.25      $    (3.15)
</TABLE>

(1)        All awards refers to awards granted,  modified,  or settled in fiscal
           periods since plan  inception in 1998;  that is, awards for which the
           fair value was required to be measured under Statement 123.

           New Accounting Pronouncements

           In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable  Interest  Entities.  The  objective  of this  interpretation  is to
provide  guidance  on how to  identify a variable  interest  entity  ("VIE") and
determine when the assets,  liabilities,  non-controlling interests, and results
of operations of a VIE need to be included in a company's consolidated financial
statements.  A company that holds  variable  interests in an entity will need to
consolidate  the entity if the  company's  interest  in the VIE is such that the
company will absorb a majority of the VIE's  expected  losses  and/or  receive a
majority  of  the   entity's   expected   residual   returns,   if  they  occur.
Interpretation   No.  46  also  requires   additional   disclosures  by  primary
beneficiaries and other significant variable interest holders. The provisions of
this  interpretation  became  effective  upon  issuance.  The  adoption  of this
interpretation  did not have any  effect on  Hometown's  consolidated  financial
statements.

                                       8

<PAGE>

3.         EARNINGS PER SHARE

            "Basic earnings (loss) per share" is computed by dividing net income
(loss) by the weighted  average  common shares  outstanding.  "Diluted  earnings
(loss) per share" is  computed  by dividing  net income  (loss) by the  weighted
average  common  shares  outstanding  adjusted for the  incremental  dilution of
potentially dilutive securities.  Options and warrants to purchase approximately
1,132,000 and 1,378,000  shares of common stock were outstanding as of September
30, 2003 and 2002,  respectively.  Basic and diluted weighted average shares for
the three and nine months ended September 30, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>

                                            Three Months Ended                          Nine Months Ended
                                 September 30, 2003    September 30, 2002    September 30, 2003    September 30, 2002
                                 ------------------    ------------------    ------------------    ------------------
<S>                              <C>                   <C>                   <C>                   <C>
Basic, Weighted Average Shares        7,175,105             7,175,105              7,175,105             7,175,105
                                      =========             =========              =========             =========

Common Stock Equivalents                 36,962                    --                 12,321                    --
                                      ---------             ---------              ---------             ---------
Diluted, Weighted Average Shares      7,212,067             7,175,105              7,187,426             7,175,105
                                      =========             =========              =========             =========
</TABLE>

           The common stock equivalents are options whose exercise price is less
than the average  market price of the common shares  during the period.  Periods
that do not include  common stock  equivalents is due to the options and warrant
prices being  greater than the average  market price of the common shares during
the period or due to the effect being anti-dilutive.

           The basic and diluted  earnings  per share is $0.12 and $0.07 for the
three months ended September 30, 2003 and September 30, 2002, respectively.  The
basic and diluted  earnings  per share for the nine months ended  September  30,
2003 is $0.25. The nine months ended September 30, 2003 includes $0.08 per share
from the gain on sale of a Chrysler /Jeep Sales and Service  Franchise (Note 8).
The basic and diluted  (loss) per share for the nine months ended  September 30,
2002 is  $(3.15),  which  includes  basic and  diluted  income per share  before
cumulative effect of accounting change of $0.15 and basic and diluted (loss) per
share for a cumulative  effect of accounting  change of $(3.30),  resulting from
the goodwill  impairment charge associated with the  implementation of SFAS 142.
See Note 4 to the  consolidated  financial  statements for the recognition of an
impairment of the carrying  value of its goodwill in 2002,  in  accordance  with
SFAS 142.

4.         GOODWILL AND OTHER INTANGIBLE ASSETS

           Effective  January 1, 2002,  Hometown adopted SFAS 142. At that time,
Hometown  ceased  recording  goodwill   amortization.   SFAS  142  requires  the
completion of a transitional  impairment test in the year of adoption,  with any
impairment identified upon initial implementation treated as a cumulative effect
of a change in accounting principle.

           Under  SFAS 142,  goodwill  impairment  is deemed to exist if the net
book value of a reporting  unit exceeds its estimated  fair value.  According to
the criteria  under SFAS 142, it has been  determined  that Hometown is a single
reporting unit.

           During 2002, Hometown completed its goodwill impairment testing which
resulted in Hometown  recording a  one-time,  non-cash  charge of  approximately
$23.7  million to  write-off  the  carrying  value of  goodwill.  This charge is
non-operational  in  nature  and  is  reflected  as a  cumulative  effect  of an
accounting  change in the  accompanying  statement  of  operations  for the nine
months ended  September 30, 2002.  Approximately  $9.6 million of this charge is
tax  deductible,  resulting  in a deferred  tax  benefit of  approximately  $3.8
million  against which a full  valuation  allowance  was  recorded.  Hometown is
reducing  its  valuation  allowance  as  goodwill  is  being  amortized  for tax
purposes.

                                       9
<PAGE>

           In calculating the impairment charge, the fair value of the reporting
unit was estimated  using both the discounted cash flow method and the guideline
company method.  The discounted  cash flow method used  Hometown's  estimates of
future cash flows  discounted  to present  value using an  appropriate  discount
rate. The guideline  company method selects  certain value measures of guideline
companies and calculates  appropriate  market multiples based on the fundamental
value  measures of the guideline  companies  and compares same to Hometown.  The
guideline   companies   chosen  were  other  publicly  traded  companies  within
Hometown's  Standard Industrial  Classification  (SIC) code. These methodologies
differ from  Hometown's  previous  policy,  as permitted  under SFAS 121,  using
undiscounted cash flows to determine if goodwill is recoverable.

           The goodwill  impairment  is  associated  with goodwill that resulted
from acquisitions since the formation of Hometown.  The amount of the impairment
reflects  the  effect of the change in  methodology  in  determining  impairment
charges as discussed above.

           A summary  of changes in  Hometown's  goodwill  during the year ended
December 31, 2002, is as follows (in thousands):

<TABLE>
<CAPTION>
   Reporting Unit                        Balance at                                         Balance at
                                      December 31, 2001           Impairments           December 31, 2002
                                      -----------------           -----------           -----------------
<S>                                   <C>                         <C>                   <C>
   Total Company                          $ 23,708                  $ 23,708                   $ -
                                       ===============             =========               ============
</TABLE>

           As of September 30, 2003 and December 31, 2002, Hometown's intangible
assets consisted of the following:

<TABLE>
<CAPTION>

                                                         9/30/03        12/31/02
                                                         -------        --------
                                                             (in thousands)
<S>                                                      <C>              <C>
Deferred finance charges                                 $ 267            $ 267
Accumulated amortization                                   (94)             (78)
Non-compete agreement                                      381              381
Accumulated amortization                                  (254)            (206)
Franchise fee                                               10               --
Accumulated amortization                                    (1)              --
                                                         -----            -----
   Net intangible assets (a)                             $ 309            $ 364
                                                         =====            =====
</TABLE>

           (a) These  assets are  included in Other  Assets in the  consolidated
financial statements


                                       10
<PAGE>

5.         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, net consist of the following:

<TABLE>
<CAPTION>
                                                       9/30/03         12/31/02
                                                       -------         --------
                                                           (in thousands)
<S>                                                    <C>               <C>
New Vehicles                                           $24,497           $29,236
Used Vehicles                                            7,496             7,264
Parts, accessories and other                             2,188             2,669
                                                       -------           -------
   Total Inventories                                   $34,181           $39,169
                                                       =======           =======
</TABLE>

           The  lower of cost or market  reserves  were  $0.7  million  and $0.6
million at September 30, 2003 and December 31, 2002, respectively.

6.         FLOOR PLAN NOTES PAYABLE

           Hometown has a floor plan line of credit at each dealership with Ford
Motor  Credit  Corporation  ("FMCC").  The FMCC  floor plan  agreement  provides
financing for vehicle  purchases  and is secured by and  dependent  upon new and
used vehicle inventory levels.  Maximum availability under the FMCC agreement is
a function of new and used car sales and is not a pre-determined amount.

           In June 2002, Hometown renewed its floor plan agreement with FMCC and
is now subject to the FMCC standard financing agreement which provides for floor
plan loans for new and used  vehicles  that have  variable  interest  rates that
increase or decrease based on movements in the prime or LIBOR borrowing rates.

7.         COMMITMENTS AND CONTINGENCIES

           Litigation

           In May  2001,  Hometown's  wholly-owned  subsidiary  Morristown  Auto
Sales,  Inc.  ("Morristown")  assigned the lease for the premises,  where it was
operating its Lincoln Mercury dealership in Morristown,  New Jersey to Crestmont
MM, L.P. (the "Assignee"). On or about July 12, 2002, Morristown received notice
from the landlord  that the Assignee  had not paid the  required  monthly  rent,
maintained the premises in accordance with the lease,  nor provided the required
insurance for the premises.  In September  2002,  Hometown  received notice of a
complaint filed by the landlord against Hometown,  Morristown and certain former
officers  seeking  payment of rent and other  obligations  through June 2005. In
October 2002,  Morristown filed a complaint  against the Assignee to recover any
potential damages from the Assignee as provided under the lease assignment.  The
Assignee  has  made a  claim  against  Hometown  for  breach  of the  assignment
agreement and misrepresentation of the use of the subject property. The Assignee
has also  brought  a claim  against  Morristown's  president,  Hometown's  Chief
Executive  Officer,  for  misrepresentation.  Total  anticipated  costs  for the
remainder  of the lease  term,  through  June 2005,  is  $540,000  for rent plus
certain other costs.  Hometown believes it has meritorious defenses to the claim
and cross-claim and intends to vigorously defend this action.  In addition,  the
landlord has leased the  premises to another  tenant for the period from January
29, 2003 through January 29, 2004 for a total of $120,000, thereby significantly
reducing  Morristown's  exposure to a damages  judgment for lost rent.  Hometown
does not  believe  that the  eventual  outcome  of the case will have a material
adverse  effect on  Hometown's  consolidated  financial  position  or results of
operations.


                                       11
<PAGE>


           In July 2002,  Hometown  received  notice of a complaint filed by the
Trust Company of New Jersey ("Trust Company") for payment under certain guaranty
agreements allegedly made by Hometown's wholly-owned subsidiary Westwood Lincoln
Mercury Sales, Inc.  ("Westwood") in favor of Trust Company in connection with a
sale of vehicles in 1998. Trust Company is seeking  approximately  $390,000 plus
other costs  totaling  approximately  $70,000.  Hometown  does not believe  that
Westwood  has any  obligations  under the  guaranty  agreements  due to  certain
actions taken by Trust Company in relation to the  underlying  debt,  the debtor
and other guarantors.  Hometown believes it has meritorious defenses and intends
to  vigorously  defend this action.  Hometown does not believe that the eventual
outcome  of  the  case  will  have  a  material  adverse  effect  on  Hometown's
consolidated financial position or results of operations.

           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,  for  an  unspecified  amount  as  well  as,   reinstatement,
injunctive  and other legal and  equitable  relief.  Salvatore  A.  Vergopia and
Edward A. Vergopia have also  commenced a second action for  defamation  against
Hometown and its Chief Executive  Officer,  which has been consolidated with the
action initially filed.

           Litigation  counsel has been retained by our insurers to represent us
in this action.  A motion has been  granted such that only a single  shareholder
remains  as an  individual  shareholder  defendant.  Also,  Hometown  has  filed
counterclaims  to recover  damages  associated  with the  Vergopias  breaches of
certain agreements,  as well as breaches of their fiduciary duties. Discovery is
proceeding in this action.

           We believe that the  Vergopias  commenced  this action in response to
our  dismissal of both  Salvatore A.  Vergopia and Edward A. Vergopia from their
officerships  and employment  positions with us. We believe we have  meritorious
defenses and are  vigorously  defending  this action.  Hometown does not believe
that the  eventual  outcome of the case will have a material  adverse  effect on
Hometown's consolidated financial position or results of operations.

           Universal  Underwriters  Group  ("Universal"),  Hometown's  insurance
provider,  commenced a lawsuit  against The Chubb Group of  Insurance  Companies
("Chubb"),   Hometown's  Director  and  Officer  Liability  Insurance  provider,
Hometown,  certain  officers,  directors  and  shareholders  of Hometown and the
Vergopias seeking a declaration of its coverage  obligations with respect to the
suit brought by the Vergopias  discussed above.  The suit has been  consolidated
with the  suit  brought  by the  Vergopias  for  discovery  and case  management
purposes.  Universal  originally  acknowledged  its  obligation  to  defend  and
indemnify  Hometown against the Vergopias claims and engaged separate counsel to
represent  Hometown  and its  directors.  Universal  is now seeking to limit its
obligations under the comprehensive insurance policy as well as require Chubb to
share in defense and indemnity  obligations.  Hometown  originally  commenced an
action  seeking  affirmative  declaration  of its rights  under its policy  with
Universal,  but allowed  this action to be stayed  pending a  resolution  of the
action  brought  by  Universal.   Hometown  has  brought  counterclaims  against
Universal and a cross-claim for  declaratory  judgment  against Chubb.  Hometown
maintains  that the insurers are obligated to defend and indemnify on all claims
brought by the Vergopias.  Hometown's former counsel and assistant secretary has
been added to the case as a  defendant  in the action and has made  cross-claims
against  Hometown  demanding  indemnification  for claims made by the  Vergopias
against  him in the  underlying  action.  Discovery  is ongoing on this  matter.
Hometown  believes it has  meritorious  claims and is vigorously  defending this
action and prosecuting its  counterclaims  and  cross-claims.  Hometown does not
believe  that the  eventual  outcome  of the case will have a  material  adverse
effect on Hometown's consolidated financial position or results of operations.

           Hometown  from time to time may be a defendant  in  lawsuits  arising
from normal business  activities.  Management  reviews  pending  litigation with
legal counsel and believes that the ultimate liability, if any, resulting



                                       12
<PAGE>

from  such  actions  will not  have a  material  adverse  effect  on  Hometown's
consolidated financial position or results of operations.

           Guarantees

           Hometown  guarantees  or  partially   guarantees  loans  advanced  by
financial institutions to certain customers.  It is Hometown's policy to provide
reserves for  potential  future  default  losses  based on available  historical
information.

           One of Hometown's dealerships, prior to fiscal 2000, had entered into
various  arrangements  whereby Hometown guaranteed or partially guaranteed loans
advanced by financial institutions to certain customers as follows:

      (i)   Portfolio of 8 customer's  limousine  vehicle  loans granted by Ford
            Motor  Credit  Co. As of  September  30,  2003,  Hometown  fully and
            partially    guaranteed    limousine   vehicle   loans   aggregating
            approximately $35,000.

      (ii)  Portfolio of 7 vehicle loans, granted by a financial institution, to
            various customers of the dealership with below average credit. As of
            September  30,  2003,   Hometown  fully  guaranteed   vehicle  loans
            associated with these customers aggregating approximately $11,000.

           The  guarantees  in (i) and (ii) above are  related to loans  whereby
Hometown is required  to pay the  remaining  loan  balance  upon  default by the
customer.  As of September  30, 2003,  Hometown has reserved  $13,000  against a
total maximum payout of $46,000 for these loans.  The reserve amount  represents
loans that are currently  delinquent.  Hometown would expect to realize proceeds
from the sale of these vehicles upon repossession of such vehicle. The amount of
proceeds,  if any,  is  undetermined  due to not knowing  the  condition  of the
vehicles.

           There  are  also 8 loans  whose  liens  were not  properly  perfected
totaling  approximately  $30,000 as of  September  30,  2003.  Hometown  will be
required to pay the remaining loan balance should the customers default on their
payments.  Hometown  is working to perfect  these  liens and has taken  steps to
prevent  this from  occurring in the future.  Hometown  has reserved  $3,000 for
these loans. The reserve amount represents loans that are currently  delinquent.
Hometown  would expect to realize  proceeds from the sale of these vehicles upon
repossession of such vehicle.  The amount,  if any, is  undetermined  due to not
knowing the condition of the vehicles.

           Hometown  will  continue  to provide a reserve for  potential  future
default  losses  associated  with the guarantees  based on available  historical
information. The reserve continues to decrease as the loans are paid off and due
to no new loan  guarantees  being  provided by Hometown to customers  with below
average credit.

           In  connection  with the  acquisition  in 1999 of real estate used by
Baystate Lincoln Mercury, Hometown guaranteed the mortgage debt of Rellum Realty
Company.  The 1999  guaranty  was  given in  substitution  for a  February  1998
guaranty of that debt by the Muller  Group,  a subsidiary  of  Hometown.  In the
event of default by Rellum  Realty  Company,  Hometown  is  required to make the
mortgage payments,  but does not take ownership of the property. As of September
30, 2003 the mortgage debt balance is $4.7 million.  Hometown makes annual lease
payments of $756,000 to the landlord.  The annual mortgage  payments made by the
landlord  total  approximately  $774,000.  The mortgage  matures March 2013. The
lease was recorded as a capital  lease.  The capital  lease  obligation  is $4.2
million at September 30, 2003.

           Warranties

           Hometown's  new vehicle  sales and certain  used  vehicle  sales have
manufacturer  warranties that specify  coverage and period.  In these instances,
Hometown is reimbursed by the  manufacturer for the cost of parts and service on
the vehicle  covered by these  warranties,  as  specified  by the  manufacturer.
Hometown also provides a limited  warranty on used vehicles sold at retail.  The
warranty  period is as  agreed  upon by the  customer  and may be  subject  to a
minimum period as mandated by the state.  The typical  warranty period ranges up
to three months.


                                       13
<PAGE>


Hometown also sells parts and service. Manufacturer parts are covered by limited
warranties,  as  specified  by the  manufacturer.  Service  also  has a  limited
warranty; whereby the part and certain labor costs are covered under the limited
manufacturer warranty.

           Hometown  records a reserve  referred to as "policy" for new and used
vehicle  warranties  and the  labor  portion  of  service  warranties  based  on
available  historical  information.  At September 30, 2003 and December 31, 2002
Hometown has a reserve of $210,000 and  $172,000,  respectively.  The reserve is
based on the  last  three  months  of new and used  vehicle  units  sold and the
average cost of repairs over the last twelve months. While Hometown believes its
estimated  liability  for product  warranties  is adequate and that the judgment
applied is appropriate,  the estimated  liability for product  warranties  could
differ materially from future actual warranty costs.

<TABLE>
<CAPTION>
                                                                              Additions To                       Balance At End
                                                           Balance At           Costs and                              of
   Reserve for Policy Work                              Beginning of Year       Expenses         Deductions         Quarter
   ---------------------------------                   ------------------    ---------------    ------------     --------------
<S>                                                    <C>                   <C>                <C>              <C>
 Nine Months Ended September 30, 2003                       $172,000             599,000          (561,000)         $210,000

</TABLE>


           Other revenues generated by sales of extended service plans, finance,
insurance  and other do not have any Hometown  warranties  attached to the sale,
except for certain sales in Connecticut dealerships.

           Connecticut  dealerships  operate  under state  laws,  which make the
dealers responsible for providing warranty service and insurance in the event of
default by the insurance  carriers.  Accordingly,  commissions  on insurance and
service  contract  sales  are  required  to be  recognized  over the life of the
related insurance product.  For these dealerships,  Hometown records the revenue
as a liability and amortizes the amount into revenue over a five-year period. At
September 30, 2003 and December 31, 2002, Hometown had $1,257,000 and $1,237,000
of  related  deferred  revenue,  respectively.  During  the  nine  months  ended
September  30,  2003,  these  dealerships  generated  approximately  $405,000 of
related warranty service and insurance revenue,  which was deferred.  During the
same period,  approximately  $385,000 of deferred revenue was amortized to Other
Revenues,  net. At September  30, 2003 and December 31, 2002,  Hometown also had
other deferred revenue of $194,000 and $94,000, respectively.

           Franchise Agreements

           On September  18, 2003,  Hometown was notified by Toyota Motor Sales,
U.S.A.,  Inc.  that the  period  during  which  Hometown  must  correct  certain
operational  deficiencies or make  substantial  progress toward  rectifying such
deficiencies  was extended for an additional  ninety (90) days through  December
18, 2003. Toyota had previously  expressed concerns that the financial resources
of the Toyota  dealerships  were being used to finance the cash flow deficits of
affiliated companies and that because of this the financial health of the Toyota
dealerships  was  detrimentally  affected by a net working  capital  deficiency.
Toyota  requested and Hometown  provided a written action plan and  consolidated
financial  forecast.  Toyota also  expressed  concerns  about the impact of Ford
Motor  Credit's  financing  terms upon the Toyota  dealerships  and the existing
litigation,  including the Vergopia's as discussed above in Note 7,  Commitments
and  Contingencies  - Litigation  and in  Managements  Discussion and Analysis -
Litigation.  Hometown developed and implemented plans to correct the operational
deficiencies  that would bring Hometown into  compliance.  Hometown has obtained
written  confirmations  from Ford Motor Credit in response to Toyota's  requests
for information relating to financing  arrangements.  In addition,  Hometown has
improved  net  working  capital  through the sale of a  Chrysler/Jeep  Sales and
Service  Franchise  (Note 8) and  advances  on warranty  income from  Hometown's
Extended Service Plan vendor. In addition,  Hometown has been in regular contact
with  Toyota to review the  efforts of  Hometown  to  resolve  the  deficiencies
alleged by Toyota. The two Toyota dealerships at September 30, 2003 had combined
revenues of $81.1  million and pre-tax  income  before  allocation  of corporate
costs of $1.9 million.  As of September 30, 2003,  Hometown believes that it has
corrected the alleged net working capital deficiency for the Toyota dealerships.
Hometown  believes that it will be able to alleviate  the concerns  expressed by
Toyota;  however,  Toyota has not yet withdrawn its  reservation of the right to
terminate the Toyota Dealership Agreements if sufficient progress is not made to
correct the  alleged  deficiencies.  Should  Hometown be notified by Toyota that
they intend to terminate the Toyota Dealership Agreements,  Hometown believes it
would have a reasonable amount of time to cure the default.


                                       14
<PAGE>

8.         SALE OF CHRYSLER/JEEP SALES AND SERVICE FRANCHISE

           On June 3, 2003  Hometown  sold the  Chrysler/Jeep  Sales and Service
Franchise  for its  Waterbury,  CT store for $950,000 in cash.  The  transaction
resulted  in Hometown  recording a $936,000  gain on the sale and is included in
Other Income in Hometown's  Consolidated  Statement of  Operations  for the nine
months ending September 30, 2003. Hometown will continue to use the property for
the sale of used cars.  The lease for the  property  expires  in 2013.  Hometown
wrote off the goodwill associated with this franchise in 2002. See Note 4.



                                       15
<PAGE>


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

           Management's  discussion  and  analysis of  financial  condition  and
results  of  operations  is  based on the  historical  financial  statements  of
Hometown  Auto  Retailers,  Inc. and contains  forward-looking  statements  that
involve risks and uncertainties. Hometown's actual results may differ materially
from those  discussed in the  forward-looking  statements as a result of various
factors,  as described  under "Risk  Factors" as detailed on  Hometown's  annual
report on Form 10-K for the year ended December 31, 2002.

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 9 franchised  dealerships
located  in New  Jersey,  New  York,  Connecticut,  Massachusetts  and  Vermont.
Hometown's  dealerships  offer 10 American and Asian automotive brands including
Chevrolet,  Chrysler, Dodge, Ford, Jeep, Lincoln, Mazda, Mercury, Oldsmobile and
Toyota.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

           As discussed in Note 4, effective  January 1, 2002,  Hometown adopted
SFAS 142. At that time,  Hometown ceased recording goodwill  amortization.  SFAS
142 requires the  completion of a  transitional  impairment  test in the year of
adoption,  with any impairment identified upon initial implementation treated as
a cumulative effect of a change in accounting principle.

           Under  SFAS 142,  goodwill  impairment  is deemed to exist if the net
book value of a reporting  unit exceeds its estimated  fair value.  According to
the criteria  under SFAS 142, it has been  determined  that Hometown is a single
reporting unit.

           During 2002, Hometown completed its goodwill impairment testing which
resulted in Hometown  recording a  one-time,  non-cash  charge of  approximately
$23.7  million to  write-off  the  carrying  value of  goodwill.  This charge is
non-operational  in  nature  and  is  reflected  as a  cumulative  effect  of an
accounting  change in the  accompanying  statement  of  operations  for the nine
months ended  September 30, 2002.  Approximately  $9.6 million of this charge is
tax  deductible,  resulting  in a deferred  tax  benefit of  approximately  $3.8
million  against which a full  valuation  allowance  was  recorded.  Hometown is
reducing  its  valuation  allowance  as  goodwill  is  being  amortized  for tax
purposes.

           In calculating the impairment charge, the fair value of the reporting
unit was estimated  using both the discounted cash flow method and the guideline
company method.  The discounted  cash flow method used  Hometown's  estimates of
future cash flows  discounted  to present  value using an  appropriate  discount
rate. The guideline  company method selects  certain value measures of guideline
companies and calculates  appropriate  market multiples based on the fundamental
value  measures of the guideline  companies  and compares same to Hometown.  The
guideline   companies   chosen  were  other  publicly  traded  company's  within
Hometown's  Standard Industrial  Classification  (SIC) code. These methodologies
differ from  Hometown's  previous  policy,  as permitted  under SFAS 121,  using
undiscounted cash flows to determine if goodwill is recoverable.

           The goodwill  impairment  is  associated  with goodwill that resulted
from acquisitions since the formation of Hometown.  The amount of the impairment
reflects  the  effect of the change in  methodology  in  determining  impairment
charges as discussed above.


                                       16
<PAGE>


UNITS

           The units sold by category for Hometown for the three and nine months
ended September 30, 2003 and 2002, are as follows:

<TABLE>
<CAPTION>
                                    For the three months      For the nine months
                                     ended September 30,       ended September 30,
                                       2003        2002        2003        2002
                                      ------      ------      ------      ------
<S>                                 <C>           <C>         <C>         <C>
New vehicle                            1,990       1,841       5,456       5,097
Used vehicle - retail                    947       1,038       2,883       3,237
Used vehicle - wholesale                 936         781       2,316       2,205
                                      ------      ------      ------      ------
Total units sold                       3,873       3,660      10,655      10,539
                                      ======      ======      ======      ======
</TABLE>

           Hometown sold a Chrysler/Jeep  new car franchise on June 3, 2003. The
units sold by  category  for  Hometown  on a same  store  basis  (excluding  the
Chrysler/Jeep  new car  franchise for all periods) for the three and nine months
ended September 30, 2003 and 2002, are as follows:

<TABLE>
<CAPTION>
                                  For the three months        For the nine months
                                   ended September 30,        ended September 30,
                                    2003         2002         2003         2002
                                   ------       ------       ------       ------
<S>                               <C>           <C>          <C>          <C>
New vehicle                         1,990        1,753        5,363        4,857
Used vehicle - retail                 947        1,038        2,883        3,237
Used vehicle - wholesale              936          781        2,316        2,205
                                   ------       ------       ------       ------
Total units sold                    3,873        3,572       10,562       10,299
                                   ======       ======       ======       ======
</TABLE>


THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 2002.

           REVENUE

           Total revenue  increased  $3.9 million,  or 5.2% to $78.2 million for
the three months ended  September 30, 2003,  from $74.3 million for three months
ended  September 30, 2002.  Hometown sold a  Chrysler/Jeep  new car franchise on
June 3,  2003.  On a same  store  basis  (excluding  the  Chrysler/Jeep  new car
franchise for all periods),  revenues  increased $6.3 million,  or 8.8% to $78.2
million for the three months ended  September  30, 2003,  from $71.9 million for
three months  ended  September  30, 2002.  This  increase was  primarily  due to
increased  sales of new vehicles ($7.4 million),  partially  offset by decreased
sales of used  vehicles  ($1.1  million).  New vehicle  sales were helped by the
continuation of consumer financing deals, such as zero percent financing,  which
in turn contributed to the decrease in used vehicle sales.


           Revenue  from the sale of new vehicles  increased  $5.2  million,  or
10.9% to $52.8 million for the three months ended September 30, 2003, from $47.6
million for the three months ended  September  30, 2002.  On a same store basis,
revenues increased $7.4 million,  or 16.3% to $52.8 million for the three months
ended  September  30,  2003,  from  $45.4  million  for the three  months  ended
September  30, 2002.  This is comprised of an increase of 237 units sold in 2003
compared to 2002 ($6.2  million) and a 2.4%  increase in average  selling  price
($1.2 million). The increase is primarily due to increases at Hometown's Lincoln
Mercury ($2.8 million),  Chevrolet ($2.5 million),  Toyota ($1.8 million), Mazda
($0.8  million)  and the  remaining  Chrysler/Jeep  ($0.4  million)  dealerships
partially offset by a decrease at Hometown's Ford dealership ($0.9


                                       17
<PAGE>

million).  The increase at the Lincoln Mercury  dealerships was primarily due to
an additional 56 units sold in 2003  compared to 2002 ($1.8  million),  combined
with a 6.5%  increase  in the average  selling  price  ($1.0  million).  Lincoln
Mercury  includes  an increase in sales of 9 livery  units ($0.2  million).  The
increase at the  Chevrolet  dealership  was  primarily due to an increase of 104
units sold in 2003 compared to 2002 ($2.5  million).  The increase at the Toyota
dealerships  was  primarily due to an increase of 79 units sold in 2003 compared
to 2002 ($1.9  million),  partially  offset by a slight  decrease in the average
selling  price  ($0.1  million).  This is net of a decrease in fleet sales ($0.1
million).  The  increase  at  the  Mazda  dealership  was  primarily  due  to an
additional  36  units  sold  in  2003  compared  to  2002  ($0.8  million).  The
Chrysler/Jeep  increase was  primarily  due to an increase of 9 units sold ($0.2
million) in the 2003 period  compared  to the 2002 period  combined  with a 9.4%
increase in the average selling price ($0.2  million).  The decrease at the Ford
dealership  was primarily due to a decrease of 47 units sold in 2003 compared to
2002 ($1.2 million),  partially offset by a 4.8% increase in the average selling
price ($0.3 million).

           Revenue from the sale of used vehicles  decreased  $1.1  million,  or
6.1%,  to $16.9 million for three months ended  September  30, 2003,  from $18.0
million for the three months ended September 30, 2002. This was primarily due to
reduced used vehicle  sales at retail  ($1.1  million),  due to a decrease in 91
units ($1.3 million)  partially  offset by an increase in average  selling price
($0.2 million).  Essentially all dealerships  experienced decreased revenue from
the sale of used vehicles at retail.  An increase of 155 units sold at wholesale
($0.6  million)  was offset by a decrease in their  average  selling  price.  As
discussed  above,  new vehicle sales were helped by the continuation of consumer
financing deals,  such as zero percent  financing,  which in turn contributed to
the decrease in used vehicle sales.

           Parts and service  revenue  decreased  $0.2 million,  or 3.1% to $6.2
million for the three months ended September 30, 2003, from $6.4 million for the
three  months  ended  September  30,  2002.  As  a  result  of  the  sale  of  a
Chrysler/Jeep new car franchise, that dealerships parts and service business was
closed.  Excluding  this  business  for all periods,  parts and service  revenue
increased  $0.1 million or 1.6% for the three months ended  September  30, 2003,
compared to the three months ended September 30, 2002.

           Other  dealership  revenues  decreased less than $0.1 million to $2.3
million for the three months ended September 30, 2002, from $2.4 million for the
three months ended September 30, 2003.  This decrease is primarily  attributable
to decreases in other dealership revenues (extended service plan income, finance
income and other income) of used vehicles  ($0.1  million),  from decreased unit
sales and lower average other revenue per vehicle sold,  partially  offset by an
increase in similar  revenues  attributable  to sales of new vehicles (less than
$0.1 million).

           GROSS PROFIT

           Total gross profit  increased $0.3 million,  or 2.9% to $10.8 million
for the three months ended  September 30, 2003, from $10.5 million for the three
months ended September 30, 2002. Hometown sold a Chrysler/Jeep new car franchise
on June 3, 2003.  On a same store basis  (excluding  the  Chrysler/Jeep  new car
franchise  for all periods),  gross profit  increased  $0.7 million,  or 6.9% to
$10.8 million for the three months ended  September 30, 2003, from $10.1 million
for the three  months ended  September  30, 2002.  This  increase was  primarily
attributable  to an  increase in new vehicle  gross  profit of $0.8  million and
gross profit on other dealership revenues ($0.1 million),  partially offset by a
decrease in gross profit on sale of used vehicles ($0.2  million).  Gross profit
percentage  for  Hometown  was 14.0% in 2003 and 14.3% in 2002.  Adjusting  both
periods for Toyota and Chevrolet fleet sales,  gross profit percentage was 15.0%
in 2003 and 15.2% in 2002.

           Gross profit on the sale of new vehicles  increased $0.6 million,  or
20.7%,  to $3.5 million for the three months ended September 30, 2003, from $2.9
million for the three months  ended  September  30, 2002.  On a same store basis
gross profit on the sale of new vehicles  increased $0.8 million,  or 29.6%,  to
$3.5 million for the three months ended  September  30, 2003,  from $2.7 million
for the three months ended  September 30, 2002.  The increase in gross profit is
primarily attributable to an increase of 237 units ($0.4 million), combined with
a 14.7%  increase in average  gross  profit per  vehicle  ($0.4  million).  Most
dealerships  experienced an increase in gross profit in the 2003 period compared
to 2002.  Gross profit  percentage  for 2003 was 7.0% compared to


                                       18
<PAGE>


6.3% for 2002.  Adjusting  both  periods for Toyota and  Chevrolet  fleet sales,
which generate low margins, gross profit percentage for new vehicles was 7.8% in
2003 and 7.0% in 2002.

           Gross profit on the sale of used vehicles decreased $0.2 million,  or
11.1%,  to $1.6 million for the three months ended  September 30, 2003 from $1.8
million  for the three  months  ended  September  30,  2002.  This  decrease  is
primarily  due to a 9.5%  decrease in average  gross  profit per  vehicle  ($0.2
million),  partially offset by an increase of 64 units.  Gross profit percentage
on the sale of used vehicles was 8.8% in 2003 and 2002.

           Parts and service gross profit  decreased  $0.1 million,  or 2.9%, to
$3.4 million for the three months ended  September  30, 2003,  from $3.5 million
for the three months  ended  September  30,  2002.  As a result of the sale of a
Chrysler/Jeep new car franchise, that dealerships parts and service business was
closed.  Excluding this business for all periods, parts and service gross profit
increased  approximately  $30,000 or less than 1.0% for the three  months  ended
September 30, 2003,  compared to the three months ended  September 30, 2002. The
increase was primarily  attributable  to the increase in revenues.  Gross profit
percentage was 56.7% in 2003 compared to 59.6% in 2002.

           SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

           Selling,  general and administrative expenses increased $0.3 million,
or 3.4%,  to $9.1 million for the three months ended  September  30, 2003,  from
$8.8  million for the three  months  ended  September  30,  2002.  Increases  in
advertising  ($0.2 million) and various reserves for chargebacks ($0.2 million),
were partially offset by other cost reductions ($0.1 million).

           INTEREST EXPENSE

           Interest expense decreased $0.1 million, or 12.5% to $0.7 million for
the three  months  ended  September  30,  2003,  from $0.8 million for the three
months ended September 30, 2002.

           PROVISION FOR INCOME TAX

           The  effective  income  tax  rate was  21.0%  for the  quarter  ended
September  30, 2003 and 36.5% for the same period of 2002.  The rates were based
on current  forecasts of income before taxes, and current forecasts of permanent
differences  between  tax and book  income.  The 2003 rate  reflects  a $196,000
reduction  in the  valuation  allowance  associated  with  the  amortization  of
goodwill for tax purposes.

           NET INCOME

           Net income increased  $274,000 to $832,000 for the three months ended
September 30, 2003, from $558,000 for the three months ended September 30, 2002.
See above for explanation of changes.

           EARNINGS PER SHARE, BASIC AND DILUTED AND WEIGHTED AVERAGE SHARES

           "Basic  earnings (loss) per share" is computed by dividing net income
(loss) by the weighted  average  common shares  outstanding.  "Diluted  earnings
(loss) per share" is  computed  by dividing  net income  (loss) by the  weighted
average  common  shares  outstanding  adjusted for the  incremental  dilution of
potentially dilutive securities.  Options and warrants to purchase approximately
1,132,000 and 1,378,000  shares of common stock were outstanding as of September
30, 2003 and 2002, respectively. The basic weighted average shares are 7,175,105
shares for both the three months ended  September 30, 2003 and 2002. The diluted
weighted  average shares are 7,212,067 shares and 7,175,105 shares for the three
months ended September 30, 2003 and 2002,  respectively.  Options whose exercise
price is less than the  average  market  price of the common  shares  during the
period are included in weighted average shares as common stock equivalents.  See
Note 3. The  basic  and  diluted  earnings  per share is $0.12 and $0.07 for the
three months ended September 30, 2003 and September 30, 2002, respectively.


                                       19
<PAGE>


NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 2002.

           REVENUE

           Total revenue  increased $4.2 million,  or 2.0% to $216.6 million for
the nine months  ended  September  30,  2003,  from $212.4  million for the nine
months ended September 30, 2002. Hometown sold a Chrysler/Jeep new car franchise
on June 3, 2003.  On a same store basis  (excluding  the  Chrysler/Jeep  new car
franchise for all periods),  revenues  increased  $8.2 million or 4.0% to $213.7
million for the nine months ended  September 30, 2003,  from $205.5  million for
the nine months ended  September  30, 2002.  This  increase was primarily due to
increased new vehicle sales ($14.2 million)  partially offset by decreased sales
of  used  vehicles  ($6.1  million).  New  vehicle  sales  were  helped  by  the
continuation of consumer financing deals, such as zero percent financing,  which
in turn contributed to the decrease in used vehicle sales.

           Revenue from the sale of new vehicles  increased  $10.5  million,  or
8.1%,  to $139.7  million for the nine months ended  September  30,  2003,  from
$129.2  million for the nine months ended  September  30, 2002.  On a same store
basis, revenues increased $14.2 million, or 11.5% to $137.2 million for the nine
months ended  September 30, 2003,  from $123.0 million for the nine months ended
September 30, 2002. The increase is attributable to an additional 506 units sold
in 2003 compared to 2002 ($12.8 million) plus a 1.0% increase in average selling
price ($1.4  million).  The increase is primarily due to increases at Hometown's
Chevrolet ($5.0 million),  Lincoln Mercury ($4.4 million), Mazda ($2.2 million),
Toyota ($2.1 million) and Ford ($0.7 million) dealerships  partially offset by a
decrease at Hometown's remaining  Chrysler/Jeep  dealership ($0.2 million).  The
increase at the  Chevrolet  dealership  was  primarily due to an increase of 199
units sold in 2003 compared to 2002 ($4.8 million), combined with an increase in
the average  selling price ($0.2  million).  Included in this was an increase in
fleet sales of 42 units ($0.8 million).  Excluding fleet sales,  other Chevrolet
new vehicle sales increased $4.2 million due to the sale of 157 additional units
($3.8  million),  combined with a 2.6%  increase in average  selling price ($0.4
million).  The increase at the Lincoln Mercury  dealerships was primarily due to
an 8.4% increase in the average selling price ($3.0  million),  plus an increase
of 44 units sold in 2003 compared to 2002 ($1.4  million).  The Lincoln  Mercury
increase is net of a decrease in sales of 9 livery  units  ($0.5  million).  The
increase at the Mazda  dealership  was primarily due to an additional  102 units
sold in 2003  compared  to 2002  ($2.2  million).  The  increase  at the  Toyota
dealerships  was primarily due to an increase of 178 units sold in 2003 compared
to 2002 ($4.0  million),  partially  offset by a 3.3%  decrease  in the  average
selling price ($1.9 million).  Included in this was a decrease in fleet sales of
$0.3 million due to a 7.4% decrease in average selling price,  partially  offset
by an increase of 6 units. Excluding fleet sales, other Toyota new vehicle sales
increased  $2.4 million due to the sale of 172  additional  units ($4.1 million)
partially offset by a 3.2% decrease in average selling price ($1.7 million). The
increase at the Ford  dealership  was  primarily  due to a 3.8%  increase in the
average selling price ($0.5 million),  combined with an increase of 7 units sold
in  2003  compared  to 2002  ($0.2  million).  The  Chrysler/Jeep  decrease  was
primarily  due to a decrease of 24 units sold ($0.6  million) in the 2003 period
compared to the 2002 period, partially offset by an 8.3% increase in the average
selling price ($0.4 million).

           Revenue from the sale of used vehicles  decreased  $6.1  million,  or
10.5%,  to $52.0 million for nine months ended  September  30, 2003,  from $58.1
million for the nine months ended September 30, 2002. This was due to a decrease
of 354 units sold at retail ($5.0 million),  partially offset by a 2.8% increase
in average  selling  price ($1.1  million)  plus reduced  used vehicle  sales at
wholesale  ($2.2  million) due to lower  average  selling  price ($2.8  million)
partially  offset  by  a  increase  of  111  units  ($0.6  million).  A  Lincoln
Mercury/Mazda  dealership  accounted  for $2.2  million of the  decrease in used
vehicle  sales  at  retail  and all of the  decrease  in used  vehicle  sales at
wholesale. This was primarily due to the dealership reducing its emphasis on the
sale of high-end used cars during the 2002 period, causing an increase in retail
and  wholesale  sales of such  vehicles  in 2002.  Essentially  all  dealerships
experienced  decreased  revenue  from the sale of used  vehicles  at retail.  As
discussed  above,  new vehicle sales were helped by the continuation of consumer
financing deals,  such as zero percent  financing,  which in turn contributed to
the decrease in used vehicle sales.


                                       20
<PAGE>


           Parts and service revenue  increased $0.3 million,  or 1.6%, to $18.7
million for the nine months ended September 30, 2003, from $18.4 million for the
nine months ended September 30, 2002. As a result of the sale of a Chrysler/Jeep
new car  franchise,  that  dealerships  parts and service  business  was closed.
Excluding  this business for all periods,  parts and service  revenue  increased
$0.5 million or 2.8% for the nine months ended  September 30, 2003,  compared to
the nine months ended September 30, 2002.

           Other  dealership  revenues  decreased $0.5 million,  or 7.4% to $6.3
million for the nine months ended  September 30, 2003, from $6.8 million for the
nine months ended September 30, 2002. This decrease is primarily attributable to
decreases in other dealership  revenues  (extended service plan income,  finance
income and other income) of used  vehicles,  from decreased unit sales and lower
average other revenue per vehicle sold.

           GROSS PROFIT

           Total gross profit  increased $0.3 million,  or 1.0% to $30.5 million
for the nine months ended  September  30, 2003,  from $30.2 million for the nine
months ended September 30, 2002. Hometown sold a Chrysler/Jeep new car franchise
on June 3, 2003.  On a same store basis  (excluding  the  Chrysler/Jeep  new car
franchise  for all periods),  gross profit  increased  $0.8 million,  or 2.7% to
$30.1 million for the nine months ended  September 30, 2003,  from $29.3 million
for the nine months ended  September  30,  2002.  This  increase  was  primarily
attributable  to an increase in new vehicle  gross profit of $1.4 million and an
increase in gross profit on parts and service sales of $0.3  million,  partially
offset by a $0.5 million decrease in gross profit on other  dealership  revenues
and a  $0.4  million  decrease  in  used  vehicle  gross  profit.  Gross  profit
percentage  for  Hometown  was 14.1% in 2003 and 14.3% in 2002.  Adjusting  both
periods for Toyota and Chevrolet fleet sales,  gross profit percentage was 14.5%
in 2003 and 14.7% in 2002.

           Gross profit on the sale of new vehicles  increased $1.1 million,  or
13.9%,  to $9.0 million for the nine months ended  September 30, 2003, from $7.9
million for the nine months  ended  September  30,  2002.  On a same store basis
gross profit on the sale of new vehicles  increased $1.4 million,  or 18.7%,  to
$8.9 million for the nine months ended September 30, 2003, from $7.5 million for
the nine months  ended  September  30,  2002.  The  increase in gross  profit is
primarily  attributable to an increase of 506 units ($0.8 million) combined with
a 7.3% increase in average gross profit per vehicle ($0.6 million).  Included in
the unit  increase  are 48 units  attributable  to an  increase  in  Toyota  and
Chevrolet  fleet  sales,  which had a minimal  effect on the  increase  in gross
profit.  Most  dealerships  experienced  an increase in gross profit in the 2003
period compared to 2002.  Gross profit  percentage for 2003 was 6.5% compared to
6.1% for 2002.  Adjusting  both  periods for Toyota and  Chevrolet  fleet sales,
which generate low margins, gross profit percentage for new vehicles was 6.7% in
2003 and 6.4% in 2002.

           Gross profit on the sale of used vehicles decreased $0.4 million,  or
7.4%, to $5.0 million for the nine months ended  September  30, 2003,  from $5.4
million for the nine months ended  September 30, 2002. The decrease was due to a
decrease of 243 units ($0.3  million)  combined  with a 2.0% decrease in average
gross profit per vehicle ($0.1  million).  A Lincoln  Mercury/Mazda  dealership,
discussed in revenues above, accounted for a $0.2 million decrease. Gross profit
percentage  on the sale of used  vehicles  was 9.6% in 2003  compared to 9.2% in
2002.

           Parts and service gross profit  increased  $0.1 million,  or 1.0%, to
$10.2 million for the nine months ended  September 30, 2003,  from $10.1 million
for the nine  months  ended  September  30,  2002.  As a result of the sale of a
Chrysler/Jeep new car franchise, that dealerships parts and service business was
closed.  Excluding this business for all periods, parts and service gross profit
increased  $0.3  million,  or 3.1%,  to $10.0  million for the nine months ended
September  30, 2003,  from $9.7 million for the nine months ended  September 30,
2002. The increase was primarily attributable to the increase in revenues. Gross
profit percentage was 54.9% in 2003 compared to 54.8% in 2002.


                                       21
<PAGE>


           SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

           Selling,  general and administrative expenses increased $0.5 million,
or 1.9%,  to $26.5 million for the nine months ended  September  30, 2003,  from
$26.0  million  for the nine months  ended  September  30,  2002.  Increases  in
advertising ($0.4 million),  reserves for chargebacks ($0.3 million) and various
other costs ($0.1 million), were partially offset by a reduction in salaries and
employee benefits ($0.3 million).

           OTHER INCOME

           In  June  2003,  Hometown  sold a  Chrysler/Jeep  Sales  and  Service
Franchise  in  Waterbury,  CT  resulting  in a gain  of  approximately  $936,000
recorded in Other Income.

            INTEREST EXPENSE

           Interest expense decreased $0.1 million,  or 4.2% to $2.3 million for
the nine months ended  September 30, 2003, from $2.4 million for the nine months
ended September 30, 2002.

           PROVISION FOR INCOME TAX

           The  effective  income tax rate was 33.1% for the nine  months  ended
September  30, 2003 and 38.5% for the same period of 2002.  The rates were based
on current  forecasts of income before taxes, and current forecasts of permanent
differences  between  tax and book  income.  The 2003 rate  reflects  a $196,000
reduction  in the  valuation  allowance  associated  with  the  amortization  of
goodwill for tax purposes.

           INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE

           Income before  cumulative  effect of accounting change increased $0.7
million to $1.8 million for the nine months ended  September 30, 2003, from $1.1
million for the nine  months  ended  September  30,  2002.  The  improvement  is
primarily  due to the  gain on  sale  of the  Chrysler/Jeep  Sales  and  Service
Franchise recorded in Other Income. See above for explanation of other changes.

           CUMULATIVE EFFECT OF ACCOUNTING CHANGE

           In  accordance  with  SFAS  142,  Hometown   completed  its  goodwill
impairment testing during 2002, which resulted in Hometown recording a one-time,
non-cash charge of  approximately  $23.7 million to write-off the carrying value
of  goodwill.  This charge is  non-operational  in nature and is  reflected as a
cumulative  effect of an  accounting  change in the  accompanying  statement  of
operations  for the nine months ended  September  30, 2002.  Approximately  $9.6
million of this charge is tax deductible, resulting in a deferred tax benefit of
approximately  $3.8  million  against  which  a  full  valuation  allowance  was
recorded.  See Note 4 to the  consolidated  financial  statements.  Hometown  is
reducing  its  valuation  allowance  as  goodwill  is  being  amortized  for tax
purposes.

           NET INCOME (LOSS)

           Net income (loss)  improved $24.4 million,  to income of $1.8 million
for the nine months ended September 30, 2003, from a loss of $(22.6) million for
the nine months ended September 30, 2002. The decreased loss is primarily due to
the  write-off of the carrying  value of goodwill in the 2002 period.  See above
for explanation of other changes.

           EARNINGS PER SHARE, BASIC AND DILUTED AND WEIGHTED AVERAGE SHARES

           "Basic  earnings (loss) per share" is computed by dividing net income
(loss) by the weighted  average  common shares  outstanding.  "Diluted  earnings
(loss) per share" is  computed  by dividing  net income  (loss) by the  weighted
average  common  shares  outstanding  adjusted for the  incremental  dilution of
potentially dilutive securities.


                                       22
<PAGE>


Options and warrants to purchase approximately 1,132,000 and 1,378,000 shares of
common stock were  outstanding as of September 30, 2003 and 2002,  respectively.
The basic weighted  average shares are 7,175,105 shares for both the nine months
ended  September  30, 2003 and 2002.  The diluted  weighted  average  shares are
7,187,426  shares and 7,175,105  shares for the nine months ended  September 30,
2003 and  2002,  respectively.  Options  whose  exercise  price is less than the
average  market  price of the common  shares  during the period are  included in
weighted average shares as common stock equivalents. See Note 3.

      The basic  and  diluted  earnings  per  share  for the nine  months  ended
September  30, 2003 is $0.25 and includes  $0.08 per share from the gain on sale
of a Chrysler Sales and Service Franchise (Note 8). The basic and diluted (loss)
per share  for the nine  months  ended  September  30,  2002 is  $(3.15),  which
includes  basic  and  diluted  income  per  share  before  cumulative  effect of
accounting  change  of $0.15  and  basic  and  diluted  (loss)  per  share for a
cumulative effect of accounting  change of $(3.30),  resulting from the goodwill
impairment charge associated with the  implementation of SFAS 142. See Note 4 to
the  consolidated  financial  statements for the recognition of an impairment of
the carrying value of its goodwill in 2002, in accordance with SFAS 142.

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  Hometown's  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.

EFFECTS OF INFLATION

           Due to the relatively low levels of inflation experienced in the 2002
and 2003 periods,  inflation did not have a significant effect on the results of
Hometown during those periods.


                                       23
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

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

           Cash and Cash Equivalents

           Total cash and cash  equivalents was $5.7 million and $3.6 million at
September 30, 2003 and December 31, 2002, respectively.

           Cash Flow from Operations

           The following table sets forth the consolidated  selected information
from the unaudited statements of cash flows:

<TABLE>
<CAPTION>
                                                      Nine months ended September 30,
                                                           2003           2002
                                                          -------        -------
                                                             (in thousands)
<S>                                                       <C>            <C>
Net cash provided by operating activities                 $ 3,581        $ 4,154
Net cash provided by (used in) investing activities           349         (1,794)
Net cash (used in) financing activities                    (1,813)        (1,205)
                                                          -------        -------

Net increase in cash and cash equivalents                 $ 2,117        $ 1,155
                                                          =======        =======
</TABLE>

           For the nine months ended  September 30, 2003, net cash provided from
operations of $3.6 million  primarily  consists of: (i) net income plus non-cash
items of $2.4 million;  (ii) the decrease in inventory in excess of the decrease
in floor plan  liability  of $1.5  million;  and (iii) an  increase  in accounts
payable and accrued  expenses of $1.7  million;  partially  offset by  increased
accounts receivable of $2.1 million.  Net cash provided by investing  activities
of $0.3 million is primarily due the proceeds  from the sale of a  Chrysler/Jeep
Sales and  Service  Franchise  of $0.9  million,  partially  offset  by  capital
expenditures  of $0.6  million.  Net cash used in financing  activities  of $1.8
million is  primarily  due to principal  payments of long-term  debt and capital
lease obligations.

           For the nine months ended  September 30, 2002, net cash provided from
operations  of $4.2 million  primarily  consists of: (i) net loss plus  non-cash
items  totaling $2.7 million;  and (ii) the increase in floor plan  liability in
excess of the increase in inventory of $1.5 million.  Net cash used in investing
activities of $1.8 million is primarily due to capital  expenditures  associated
with  the  construction  of a new  showroom  at  our  Framingham,  Massachusetts
dealership.  Net cash used in financing  activities of $1.2 million is primarily
due to principal payments of long-term debt and capital lease obligations.

           Capital Expenditures

           Capital expenditures for fiscal 2003 are expected to be $0.7 million,
consisting  primarily of equipment  purchases  ($0.3  million) and the remaining
costs  associated  with the  construction  of a new showroom at our  Framingham,
Massachusetts dealership ($0.4 million).

           Receivables

           Hometown had $7.0  million in accounts  receivable  at September  30,
2003 compared to $4.9 million at December 31, 2002.  The increase in receivables
is due to the  increase  in sales  that takes  place in  September  compared  to
December. The majority of those receivables, $3.6 million and $2.8 million as of
September  30, 2003 and December 31,  2002,  respectively,  are due from finance
companies that provide or secure financing for customer purchases, and primarily
represent  contracts-in-transit.  These  amounts are typically  received  within
seven days of


                                       24
<PAGE>

the  transaction.  The allowance for doubtful  accounts is $0.3 million and $0.2
million at September 30, 2003 and December 31, 2002, respectively.

           Inventories

           Hometown had $34.2 million in inventories,  net at September 30, 2003
compared to $39.2 million at December 31, 2002. The majority of inventory, $24.5
million and $29.2  million as of  September  30,  2003 and  December  31,  2002,
respectively,  is new vehicle  inventory.  New,  used and  demonstrator  vehicle
values 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.  Hometown  assesses the lower of cost or
market reserve  requirement for vehicles,  on an individual  unit basis,  taking
into  consideration  historical  loss  rates,  the  age and  composition  of the
inventory and current market  conditions.  The lower of cost or market  reserves
were $0.7 million and $0.6 million at September  30, 2003 and December 31, 2002,
respectively.

           Floor Plan Financing

           Hometown has a floor plan line of credit at each dealership with Ford
Motor  Credit  Corporation  ("FMCC").  The FMCC  floor plan  agreement  provides
financing for vehicle  purchases  and is secured by and  dependent  upon new and
used vehicle inventory levels.  Maximum availability under the FMCC agreement is
a function of new and used car sales and is not a pre-determined amount.

           In June 2002, Hometown renewed its floor plan agreement with FMCC and
is now subject to the FMCC standard financing agreement which provides for floor
plan loans for new and used  vehicles  that have  variable  interest  rates that
increase or decrease based on movements in the prime or LIBOR borrowing rates.

Guarantees

           Hometown  guarantees  or  partially   guarantees  loans  advanced  by
financial institutions to certain customers.  It is Hometown's policy to provide
reserves for  potential  future  default  losses  based on available  historical
information.

           One of Hometown's dealerships, prior to fiscal 2000, had entered into
various  arrangements  whereby Hometown guaranteed or partially guaranteed loans
advanced by financial institutions to certain customers as follows:

      (i)   Portfolio of 8 customer's  limousine  vehicle  loans granted by Ford
            Motor  Credit  Co. As of  September  30,  2003,  Hometown  fully and
            partially    guaranteed    limousine   vehicle   loans   aggregating
            approximately $35,000.

      (ii)  Portfolio of 7 vehicle loans, granted by a financial institution, to
            various customers of the dealership with below average credit. As of
            September  30,  2003,   Hometown  fully  guaranteed   vehicle  loans
            associated with these customers aggregating approximately $11,000.

           The  guarantees  in (i) and (ii) above are  related to loans  whereby
Hometown is required  to pay the  remaining  loan  balance  upon  default by the
customer.  As of September  30, 2003,  Hometown has reserved  $13,000  against a
total maximum payout of $46,000 for these loans.  The reserve amount  represents
loans that are currently  delinquent.  Hometown would expect to realize proceeds
from the sale of these vehicles upon repossession of such vehicle. The amount of
proceeds,  if any,  is  undetermined  due to not knowing  the  condition  of the
vehicles.

           There  are  also 8 loans  whose  liens  were not  properly  perfected
totaling  approximately  $30,000 as of  September  30,  2003.  Hometown  will be
required to pay the remaining loan balance should the customers default on their
payments.  Hometown  is working to perfect  these  liens and has taken  steps to
prevent  this from  occurring in the future.  Hometown  has reserved  $3,000 for
these loans. The reserve amount represents loans that are currently


                                       25
<PAGE>

delinquent.  Hometown  would expect to realize  proceeds  from the sale of these
vehicles upon repossession of such vehicle.  The amount, if any, is undetermined
due to not knowing the condition of the vehicles.

           Hometown  will  continue  to provide a reserve for  potential  future
default  losses  associated  with the guarantees  based on available  historical
information. The reserve continues to decrease as the loans are paid off and due
to no new loan  guarantees  being  provided by Hometown to customers  with below
average credit.

           In  connection  with the  acquisition  in 1999 of real estate used by
Baystate Lincoln Mercury, Hometown guaranteed the mortgage debt of Rellum Realty
Company.  The 1999  guaranty  was  given in  substitution  for a  February  1998
guaranty of that debt by the Muller  Group,  a subsidiary  of  Hometown.  In the
event of default by Rellum  Realty  Company,  Hometown  is  required to make the
mortgage payments,  but does not take ownership of the property. As of September
30, 2003 the mortgage debt balance is $4.7 million.  Hometown makes annual lease
payments of $756,000 to the landlord.  The annual mortgage  payments made by the
landlord  total  approximately  $774,000.  The mortgage  matures March 2013. The
lease was recorded as a capital  lease.  The capital  lease  obligation  is $4.2
million at September 30, 2003.

           Warranties

           Hometown's  new vehicle  sales and certain  used  vehicle  sales have
manufacturer  warranties that specify  coverage and period.  In these instances,
Hometown is reimbursed by the  manufacturer for the cost of parts and service on
the vehicle  covered by these  warranties,  as  specified  by the  manufacturer.
Hometown also provides a limited  warranty on used vehicles sold at retail.  The
warranty  period is as  agreed  upon by the  customer  and may be  subject  to a
minimum period as mandated by the state.  The typical  warranty period ranges up
to three months.  Hometown also sells parts and service.  Manufacturer parts are
covered by limited  warranties,  as specified by the manufacturer.  Service also
has a limited  warranty;  whereby the part and  certain  labor costs are covered
under the limited manufacturer warranty.

           Hometown  records a reserve  referred to as "policy" for new and used
vehicle  warranties  and the  labor  portion  of  service  warranties  based  on
available  historical  information.  At September 30, 2003 and December 31, 2002
Hometown has a reserve of $210,000 and  $172,000,  respectively.  The reserve is
based on the  last  three  months  of new and used  vehicle  units  sold and the
average cost of repairs over the last twelve months. While Hometown believes its
estimated  liability  for product  warranties  is adequate and that the judgment
applied is appropriate,  the estimated  liability for product  warranties  could
differ materially from future actual warranty costs.
<TABLE>
<CAPTION>
                                                                              Additions To                       Balance At End
                                                           Balance At           Costs and                              of
      Reserve for Policy Work                           Beginning of Year       Expenses         Deductions         Quarter
      -----------------------                           -----------------       --------         ----------         -------
<S>                                                     <C>                   <C>               <C>              <C>
 Nine Months Ended September 30, 2003                       $172,000             599,000          (561,000)         $210,000
</TABLE>

           Other revenues generated by sales of extended service plans, finance,
insurance  and other do not have any Hometown  warranties  attached to the sale,
except for certain sales in Connecticut dealerships.

           Connecticut  dealerships  operate  under state  laws,  which make the
dealers responsible for providing warranty service and insurance in the event of
default by the insurance  carriers.  Accordingly,  commissions  on insurance and
service  contract  sales  are  required  to be  recognized  over the life of the
related insurance product.  For these dealerships,  Hometown records the revenue
as a liability and amortizes the amount into revenue over a five-year period. At
September 30, 2003 and December 31, 2002, Hometown had $1,257,000 and $1,237,000
of  related  deferred  revenue,  respectively.  During  the  nine  months  ended
September  30,  2003,  these  dealerships  generated  approximately  $405,000 of
related warranty service and insurance revenue,  which was deferred.  During the
same period,  approximately  $385,000 of deferred revenue was amortized to Other
Revenues,  net. At September  30, 2003 and December 31, 2002,  Hometown also had
other deferred revenue of $194,000 and $94,000, respectively.


                                       26
<PAGE>


SALE OF CHRYSLER/JEEP SALES AND SERVICE FRANCHISE

           On June 3, 2003  Hometown  sold the  Chrysler/Jeep  Sales and Service
Franchise  for its  Waterbury,  CT store for $950,000 in cash.  The  transaction
resulted  in Hometown  recording a $936,000  gain on the sale and is included in
Other Income in Hometown's  Consolidated  Statement of  Operations  for the nine
months ending September 30, 2003. Hometown will continue to use the property for
the sale of used cars.  The lease for the  property  expires  in 2013.  Hometown
wrote off the goodwill associated with this franchise in 2002. See Note 4.

FRANCHISE AGREEMENTS

           On September  18, 2003,  Hometown was notified by Toyota Motor Sales,
U.S.A.,  Inc.  that the  period  during  which  Hometown  must  correct  certain
operational  deficiencies or make  substantial  progress toward  rectifying such
deficiencies  was extended for an additional  ninety (90) days through  December
18, 2003. Toyota had previously  expressed concerns that the financial resources
of the Toyota  dealerships  were being used to finance the cash flow deficits of
affiliated companies and that because of this the financial health of the Toyota
dealerships  was  detrimentally  affected by a net working  capital  deficiency.
Toyota  requested and Hometown  provided a written action plan and  consolidated
financial  forecast.  Toyota also  expressed  concerns  about the impact of Ford
Motor  Credit's  financing  terms upon the Toyota  dealerships  and the existing
litigation,  including the Vergopia's as discussed above in Note 7,  Commitments
and  Contingencies  - Litigation  and in  Managements  Discussion and Analysis -
Litigation.  Hometown developed and implemented plans to correct the operational
deficiencies  that would bring Hometown into  compliance.  Hometown has obtained
written  confirmations  from Ford Motor Credit in response to Toyota's  requests
for information relating to financing  arrangements.  In addition,  Hometown has
improved  net  working  capital  through the sale of a  Chrysler/Jeep  Sales and
Service  Franchise  (Note 8) and  advances  on warranty  income from  Hometown's
Extended Service Plan vendor. In addition,  Hometown has been in regular contact
with  Toyota to review the  efforts of  Hometown  to  resolve  the  deficiencies
alleged by Toyota. The two Toyota dealerships at September 30, 2003 had combined
revenues of $81.1  million and pre-tax  income  before  allocation  of corporate
costs of $1.9 million.  As of September 30, 2003,  Hometown believes that it has
corrected the alleged net working capital deficiency for the Toyota dealerships.
Hometown  believes that it will be able to alleviate  the concerns  expressed by
Toyota;  however,  Toyota has not yet withdrawn its  reservation of the right to
terminate the Toyota Dealership Agreements if sufficient progress is not made to
correct the  alleged  deficiencies.  Should  Hometown be notified by Toyota that
they intend to terminate the Toyota Dealership Agreements,  Hometown believes it
would have a reasonable amount of time to cure the default.


                                       27
<PAGE>


LITIGATION

           In May  2001,  Hometown's  wholly-owned  subsidiary  Morristown  Auto
Sales,  Inc.  ("Morristown")  assigned the lease for the premises,  where it was
operating its Lincoln Mercury dealership in Morristown,  New Jersey to Crestmont
MM, L.P. (the "Assignee"). On or about July 12, 2002, Morristown received notice
from the landlord  that the Assignee  had not paid the  required  monthly  rent,
maintained the premises in accordance with the lease,  nor provided the required
insurance for the premises.  In September  2002,  Hometown  received notice of a
complaint filed by the landlord against Hometown,  Morristown and certain former
officers  seeking  payment of rent and other  obligations  through June 2005. In
October 2002,  Morristown filed a complaint  against the Assignee to recover any
potential damages from the Assignee as provided under the lease assignment.  The
Assignee  has  made a  claim  against  Hometown  for  breach  of the  assignment
agreement and misrepresentation of the use of the subject property. The Assignee
has also  brought  a claim  against  Morristown's  president,  Hometown's  Chief
Executive  Officer,  for  misrepresentation.  Total  anticipated  costs  for the
remainder  of the lease  term,  through  June 2005,  is  $540,000  for rent plus
certain other costs.  Hometown believes it has meritorious defenses to the claim
and cross-claim and intends to vigorously defend this action.  In addition,  the
landlord has leased the  premises to another  tenant for the period from January
29, 2003 through January 29, 2004 for a total of $120,000, thereby significantly
reducing  Morristown's  exposure to a damages  judgment for lost rent.  Hometown
does not  believe  that the  eventual  outcome  of the case will have a material
adverse  effect on  Hometown's  consolidated  financial  position  or results of
operations.

           In July 2002,  Hometown  received  notice of a complaint filed by the
Trust Company of New Jersey ("Trust Company") for payment under certain guaranty
agreements allegedly made by Hometown's wholly-owned subsidiary Westwood Lincoln
Mercury Sales, Inc.  ("Westwood") in favor of Trust Company in connection with a
sale of vehicles in 1998. Trust Company is seeking  approximately  $390,000 plus
other costs  totaling  approximately  $70,000.  Hometown  does not believe  that
Westwood  has any  obligations  under the  guaranty  agreements  due to  certain
actions taken by Trust Company in relation to the  underlying  debt,  the debtor
and other guarantors.  Hometown believes it has meritorious defenses and intends
to  vigorously  defend this action.  Hometown does not believe that the eventual
outcome  of  the  case  will  have  a  material  adverse  effect  on  Hometown's
consolidated financial position or results of operations.

           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,  for  an  unspecified  amount  as  well  as,   reinstatement,
injunctive  and other legal and  equitable  relief.  Salvatore  A.  Vergopia and
Edward A. Vergopia have also  commenced a second action for  defamation  against
Hometown and its Chief Executive  Officer,  which has been consolidated with the
action initially filed.

           Litigation  counsel has been retained by our insurers to represent us
in this action.  A motion has been  granted such that only a single  shareholder
remains  as an  individual  shareholder  defendant.  Also,  Hometown  has  filed
counterclaims  to recover  damages  associated  with the  Vergopias  breaches of
certain agreements,  as well as breaches of their fiduciary duties. Discovery is
proceeding in this action.

           We believe that the  Vergopias  commenced  this action in response to
our  dismissal of both  Salvatore A.  Vergopia and Edward A. Vergopia from their
officerships  and employment  positions with us. We believe we have  meritorious
defenses and are  vigorously  defending  this action.  Hometown does not believe
that the  eventual  outcome of the case will have a material  adverse  effect on
Hometown's consolidated financial position or results of operations.

           Universal  Underwriters  Group  ("Universal"),  Hometown's  insurance
provider,  commenced a lawsuit  against The Chubb Group of  Insurance  Companies
("Chubb"),   Hometown's  Director  and  Officer  Liability  Insurance  provider,
Hometown,  certain  officers,  directors  and  shareholders  of Hometown and the
Vergopias seeking a declaration of its coverage  obligations with respect to the
suit brought by the Vergopias  discussed above.  The suit has been  consolidated
with the  suit  brought  by the  Vergopias  for  discovery  and case  management
purposes.  Universal  originally  acknowledged  its  obligation  to  defend  and
indemnify  Hometown against the Vergopias claims and engaged separate counsel to
represent  Hometown  and its  directors.  Universal  is now seeking to limit its
obligations under the comprehensive insurance policy as well as require Chubb to
share in defense and indemnity  obligations.  Hometown  originally  commenced an
action  seeking  affirmative  declaration  of its rights  under its policy  with
Universal,  but allowed  this action to be stayed  pending a  resolution  of the
action  brought  by  Universal.   Hometown  has  brought  counterclaims  against
Universal and a cross-claim for  declaratory  judgment  against Chubb.  Hometown
maintains  that the insurers are obligated to defend and indemnify on all claims
brought by the Vergopias.  Hometown's former counsel and assistant secretary has
been added to the case as a  defendant  in the action and has made  cross-claims
against  Hometown  demanding  indemnification  for claims made by the  Vergopias
against  him in the  underlying  action.  Discovery  is ongoing on this  matter.
Hometown  believes it has  meritorious  claims and is vigorously  defending this
action and prosecuting its  counterclaims  and  cross-claims.  Hometown does not
believe  that the  eventual  outcome  of the case will have a  material  adverse
effect on Hometown's consolidated financial position or results of operations.

           Hometown  from time to time may be a defendant  in  lawsuits  arising
from normal business  activities.  Management  reviews  pending  litigation with
legal counsel and believes that the ultimate liability, if any, resulting


                                       28
<PAGE>

from  such  actions  will not  have a  material  adverse  effect  on  Hometown's
consolidated financial position or results of operations.

           New Accounting Pronouncements

           In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable  Interest  Entities.  The  objective  of this  interpretation  is to
provide  guidance  on how to  identify a variable  interest  entity  ("VIE") and
determine when the assets,  liabilities,  non-controlling interests, and results
of operations of a VIE need to be included in a company's consolidated financial
statements.  A company that holds  variable  interests in an entity will need to
consolidate  the entity if the  company's  interest  in the VIE is such that the
company will absorb a majority of the VIE's  expected  losses  and/or  receive a
majority  of  the   entity's   expected   residual   returns,   if  they  occur.
Interpretation   No.  46  also  requires   additional   disclosures  by  primary
beneficiaries and other significant variable interest holders. The provisions of
this  interpretation  became  effective  upon  issuance.  The  adoption  of this
interpretation  did not have any  effect on  Hometown's  consolidated  financial
statements.

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.


                                       29
<PAGE>


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

           We are exposed to market risk from  changes in interest  rates on our
amounts  outstanding  under our floor plan  financing  arrangement,  which bears
interest  at  variable  rates  based  on  prime.  Based on  floor  plan  amounts
outstanding  at September  30, 2003 of $34.3  million,  a 1% change in the prime
rate  would  result  in a $0.3  million  change to annual  floor  plan  interest
expense.

           At September 30, 2003, Hometown invested $3.5 million of excess cash,
of which $1.3 million was invested in money  market  accounts  paying a weighted
average  interest  rate of 0.66% at  September  30,  2003,  and $2.2 million was
invested in a Ford Motor Credit Company cash management  account paying interest
of 5.00% at September 30, 2003.  The cash  management  account  interest rate is
tied to rate charged on Hometown's floor plan financing arrangement.

ITEM 4.    CONTROLS AND PROCEDURES

           We maintain  disclosure  controls and procedures that are designed to
ensure that  information  required  to be  disclosed  in our  reports  under the
Securities Exchange Act of 1934, as amended, are recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms, and
that  such  information  is  accumulated  and  communicated  to our  management,
including our Chief Executive  Officer (CEO) and Chief Financial  Officer (CFO),
as appropriate,  to allow timely decisions  regarding  required  disclosure.  In
designing and  evaluating  the disclosure  controls and  procedures,  management
recognizes  that any  disclosure  controls  and  procedures,  no matter how well
designed and operated,  can provide only  reasonable  assurance of achieving the
desired control  objectives,  and management  necessarily is required to use its
judgment in evaluating the cost to benefit relationship of possible controls and
procedures.

           At September 30, 2003, management,  with the participation of the CEO
and  CFO,  evaluated  the  effectiveness  of the  design  and  operation  of our
disclosure  controls and  procedures.  Based upon that evaluation and subject to
the foregoing,  our  management,  including the CEO and CFO,  concluded that our
disclosure   controls  and  procedures   were  effective  to  accomplish   their
objectives.

           There have been no significant  changes in our internal controls over
financial  reporting  during the most  recently  completed  fiscal  quarter that
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.


                                       30
<PAGE>


                           PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Hometown held its Annual  Stockholders  Meeting on August 7, 2003. The following
matters were submitted to a vote of security holders.

1) The  candidates  nominated  for  election  to its Board of  Directors  are as
follows:

<TABLE>
<CAPTION>
           Candidates                   Votes For             Votes Withheld
           ----------                   ---------             --------------
<S>                                     <C>                     <C>
        Corey E. Shaker                 26,827,018              7,165,350
        William C. Muller Jr            26,829,893              7,162,475
        Joseph Shaker                   26,827,393              7,164,975
        H. Dennis Lauzon                26,829,893              7,162,475
        Timothy C. Moynahan             26,828,393              7,163,975
        Steven A. Fournier              26,829,893              7,162,475
        Bernard J. Dzinski Jr           26,829,893              7,162,475
</TABLE>

All seven nominees were elected to the Board.  Those  individuals  represent the
entire Board of Directors as no other directors had terms  continuing  after the
meeting.

2) To ratify the selection of BDO Seidman,  LLP as independent  auditors for the
year ending  December 31, 2003. The selection of BDO Seidman,  LLP was ratified.
There were  26,829,593  votes for,  18,075  votes  against and  7,144,700  votes
abstaining.

No other matter was submitted to a vote of security holders.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
a. Exhibits:
<S>                   <C>
           31.1       Chief Executive Officer Certification

           31.2       Chief Financial Officer Certification

           32.1       Chief  Executive  Officer  Certification  pursuant  to  18
                      U.S.C. Section 1350, as adopted pursuant to Section 906 of
                      the Sarbanes-Oxley Act of 2002

           32.2       Chief  Financial  Officer  Certification  pursuant  to  18
                      U.S.C. Section 1350, as adopted pursuant to Section 906 of
                      the Sarbanes-Oxley Act of 2002
</TABLE>

b. Reports on Form 8-K

           On August 14, 2003,  Hometown filed a report on Form 8-K with respect
           to Items 7 and 9 on such report,  related to the Company's announcing
           its 2003 second quarter results.


                                       31
<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.

<TABLE>
<CAPTION>

                                              Hometown Auto Retailers, Inc.

<S>                                           <C>
November 11, 2003                             By: /s/ Corey E.  Shaker
------------------------                      ----------------------------------
Date                                          Corey E. Shaker
                                              President and Chief Executive
                                                Officer

November 11, 2003                             By: /s/ Charles F. Schwartz
------------------------                      ----------------------------------
Date                                          Charles F. Schwartz
                                              Chief Financial Officer
</TABLE>


                                       32