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

                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
                         COMMISSION FILE NUMBER: 0-29182

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                      NEVADA                             11-3292094
          (STATE OR OTHER JURISDICTION OF              (I.R.S. EMPLOYER
           INCORPORATION OR ORGANIZATION)             IDENTIFICATION NO.)

           43-40 NORTHERN BOULEVARD, LONG ISLAND CITY, NEW YORK 11101
          (ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES)
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (718) 937-3700

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          COMMON STOCK, $0.01 PAR VALUE
                                (TITLE OF CLASS)

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 as
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act). YES [ ] NO [X]

The aggregate market value of the voting and non-voting equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of July 1,
2004 was approximately $5,025,691.

As of June 30, 2005, there were 9,204,228 shares of the registrant's common
stock outstanding.

                                       1

                               INDEX TO FORM 10-K

                                                                           PAGE
                                                                          ------

PART I
Item 1.    Business                                                          3
Item 2.    Properties                                                       27
Item 3.    Legal Proceedings                                                29
Item 4.    Submission of Matters to a Vote of Security Holders              32

PART II
Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters                                              33
Item 6.    Selected Financial Data                                          35
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                        36
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk       45
Item 8.    Financial Statements and Supplementary Data                      45
Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure                                         45
Item 9A.   Controls and Procedures                                          46
Item 9B.   Other Information                                                46

PART III
Item 10.   Directors and Executive Officers of the Registrant               47
Item 11.   Executive Compensation                                           49
Item 12.   Security Ownership of Certain Beneficial Owners and
           Management                                                       54
Item 13.   Certain Relationships and Related Transactions                   57
Item 14.   Principal Accountant Fees and Services                           58

PART IV
Item 15.   Exhibits and Financial Statement Schedules                       59

           Signatures                                                       71

                                       2

                                     PART I

ITEM 1. BUSINESS

The statements which are not historical facts contained in this Annual Report
are forward-looking statements that involve risks and uncertainties, including,
but not limited to, changes in the automotive market, government regulation, the
nature of possible supplier or customer arrangements which June become available
to us in the future, uncollectible accounts receivable, slow moving inventory,
lack of adequate financing, increased competition and unfavorable general
economic conditions. Our actual results may differ materially from the results
discussed in any forward-looking statement.

When used in the Annual Report on Form 10-K, 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
our future plans of operations, business strategy, results of operations and
financial condition. We wish 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 our ability to consummate, and the
terms of, acquisitions, if any. 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 our reports and
registration statements filed with the Securities and Exchange Commission (the
"Commission"). We disclaim any intent or obligation to update such
forward-looking statements.

Although we believe that the expectations in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements.

THE COMPANY

GENERAL

The Major Automotive Companies, Inc. ("we," "us," "our" or the "Company") was
incorporated in Nevada on November 7, 1995. We historically have operated as a
holding company and, accordingly, we derive our revenues solely from our
operating subsidiaries. Our first full year of operations was 1996. Unless
otherwise indicated, all references to the "Company," "we," "us," and "our"
include reference to our subsidiaries as well.

Automotive Operations

We sell new and used vehicles through the Major Dealer Group (the "Major Dealer
Group"), a leading consolidator of automobile dealerships in the New York
metropolitan area, which, in 2004, operated through six (6) retail automobile
franchises in five showrooms in three locations. Our leasing operations consist
of providing leases and other financing.

Discontinued Operations

In November 2000, we announced our intent to divest our non-automotive
activities, specifically, our former technology division, by way of sale,
merger, consolidation or otherwise. By July 2001, we completed our divestiture
of our former technology division, which was undertaken in order to maximize
shareholders' value from these operations and to maintain our focus on the
operation and consolidation of our retail automotive dealerships.

                                       3

Year 2004 Summary

The year 2004 reflected a number of significant events that significantly
affected our business and results of operation. First, our operations improved
from the prior year and we achieved near-record revenues of approximately $397
million, almost $17 million more than our revenues of $380 million in 2003. Our
gross profits were at an all-time high of approximately $65 million,
approximately $4 million more than our 2003 gross profit of $61 million.
However, in the fourth quarter of 2004, we incurred a non-cash charge of $8.1
million relating to the write-down of goodwill following our annual evaluation.
This write-down was primarily responsible for our net loss of $6.8 million in
2004 compared with a net loss of approximately $1.1 million for the year ended
December 31, 2003.

                                       4

AUTOMOTIVE OPERATIONS

Major Auto Acquisition

On April 21, 1997, we and our wholly-owned subsidiary, Major Acquisition Corp.,
entered into a merger agreement with Major Automotive Group, Inc. ("Major Auto")
and its sole stockholder, Bruce Bendell, our President, Chief Executive Officer,
Acting Chief Financial Officer, Chairman and beneficial owner of approximately
47.0% of our outstanding common stock. Pursuant to the merger agreement, Bruce
Bendell contributed to Major Auto all of his shares of common stock of Major
Chevrolet, Inc., Major Subaru, Inc., Major Dodge, Inc. and Major Chrysler,
Plymouth, Jeep Eagle, Inc. Major Acquisition Corp. then acquired from Bruce
Bendell all of the issued and outstanding shares of common stock of Major Auto
in exchange for shares of a new class of our preferred stock. Major Acquisition
Corp. purchased the remaining 50% of the issued and outstanding shares of common
stock of Major Dodge, Inc. and Major Chrysler, Plymouth, Jeep Eagle, Inc. from
Harold Bendell, Bruce Bendell's brother, for $4 million in cash pursuant to a
stock purchase agreement. In addition, Major Acquisition Corp. acquired certain
real estate components from Bruce Bendell and Harold Bendell (together, "the
Bendells") for $3 million. The foregoing acquisitions are collectively referred
to herein as the "Major Auto Acquisition."

To finance the cash portion of the Major Auto Acquisition, which aggregated $7
million ($4 million for Harold Bendell and $3 million to purchase the real
estate component), Major Acquisition Corp. borrowed $7.5 million from Falcon
Financial, LLC ("Falcon") for a 15 year term at an interest rate of 10.18%
pursuant to a loan and security agreement dated May 14, 1998 (the "Loan and
Security Agreement"). Prepayment may be made, in full only, along with the
payment of a premium. Pursuant to the Loan and Security Agreement, the
collateral securing the transaction includes the acquired real estate and,
subject to the interests of any current or prospective "floor plan or cap loan
lender," the assets of Major Acquisition Corp. Moreover, Major Acquisition Corp.
is required to comply with certain financial covenants related to its net worth
and cash flow. In addition, we provided an unconditional guarantee of the Falcon
loan pursuant to a guarantee agreement dated May 14, 1998.

General

The Major Dealer Group is one of the largest volume automobile retailers in New
York City. In 2004, Major Auto owned and operated the following five (5)
franchised automobile dealerships operating in three showrooms in Long Island
City, New York: (i) Chevrolet; (ii) Chrysler; (iii) Dodge; (iv) Jeep and (v)
Kia. In addition, the Major Dealer Group owns two (2) other franchised
dealerships in the New York metropolitan area: (i) Dodge, in Orange, New Jersey,
and (ii) Nissan, in Hempstead, Long Island. Major Auto also distributes General
Motors' vehicles to Eastern European countries. Through its dealerships, the
Major Dealer Group sells new and used automobiles, provides related financing,
sells replacement parts and provides vehicle repair service and maintenance. See
"Sale and Termination of Franchise Agreements."

Our President, Chief Executive Officer, Acting Chief Financial Officer and
Chairman, Bruce Bendell, has more than 32 years experience in the automobile
industry. Mr. Bendell began selling and leasing used vehicles in 1972 and has
owned and managed franchised automobile dealerships since he acquired Major
Auto's Chevrolet dealership in 1985. Under Mr. Bendell's leadership, the Major
Dealer Group has expanded from a single-franchise dealership having
approximately $10 million in revenues and 25 employees in 1985 to a seven (7)
franchise dealership group having almost $397 million in revenues and more than
500 employees in 2004.

Industry Background

According to industry data from the National Automobile Dealers Association
("NADA Data"), on average in 2004, new vehicle sales constituted 60.9% of a
franchised dealership's total sales. Unit sales of new vehicles increased 1.6%
in 2004 to a total of 16.9 million units sold. At an average retail-selling
price of $28,060 per vehicle, new vehicle sales totaled approximately $473.1
billion in 2004. From 2000 to 2004, sales revenue from the sale of new

                                       5

vehicles increased approximately 9.1%. The average dealership's gross profit as
a percentage of selling price for new vehicles was 5.2% in 2004.

According to NADA Data, on average in 2004, used vehicle sales constituted 27.5%
of a franchised dealership's total sales. In 2004, franchised new vehicle
dealers sold approximately 11.8 million retail used vehicles. At an average
selling price of $14,247 per vehicle, used vehicle retail sales totaled
approximately $168.1 billion in 2004. From 2000 to 2004, sales revenue from the
retail sale of used vehicles decreased approximately 2.3%. The average
dealership's gross profit as a percentage of selling price for used vehicles was
11.2% in 2004.

The following table sets forth information regarding vehicle sales by franchised
new vehicle dealerships for the periods indicated:

UNITED STATES FRANCHISED DEALERS' VEHICLES SALES

<TABLE>

                                          2000         2001      2002        2003        2004
                                         -------     -------    -------     -------     -------
                                               (Units in millions; dollars in billions)

     New vehicle unit sales                 17.4        17.1       16.8        16.6        16.9
     New vehicle sales revenue (1)       $ 433.7     $ 441.1    $ 439.5     $ 434.3     $ 473.1
     Used vehicle unit sales                12.6        12.9       11.6        11.6        11.8
     Used vehicle sales revenue (1)      $ 172.0     $ 179.8    $ 160.6     $ 160.0     $ 168.1
</TABLE>

     (1) Sales revenue figures were generated by multiplying the total unit
     sales by the average retail-selling price of the vehicle for the given
     year. Source: NADA Data, 2004.

In addition to revenues from the sale of new and used vehicles, automotive
dealerships derive revenues from repair and warranty work, sale of replacement
parts, financing and credit insurance and the sale of extended warranty
coverage. According to NADA Data, revenues resulting from service and parts
sales increased approximately 0.2% in 2004 for franchised dealerships. In 2004,
revenue from parts and services constituted, on average, approximately 11.5% of
a franchised dealership's total sales.

Automotive dealerships' profits vary widely and depend in part upon the
effective management of inventory, marketing, quality control and responsiveness
to customers. According to NADA Data, in 2004, total franchised dealership gross
profits were, on average, $4.4 million, with an average net profit before taxes
of $560,000.

Over the past several years, to reduce the costs of owning a new vehicle,
automobile manufacturers have offered favorable short-term lease terms. This
attracted consumers to short-term leases and resulted in consumers returning to
the new vehicle market sooner than if they had purchased a new vehicle with
longer-term financing. In addition, the previous expansion of the short-term
lease market provided new car dealerships with a continuing source of off-lease
vehicles and also enabled dealerships' parts and service departments to provide
repair service under factory warranty for the lease term. In more recent years,
however, this trend has diminished and continues to do so in part due to other
favorable alternatives being offered by automobile manufacturers such as zero
percent financing and rebates.

The automotive dealership industry has been consolidating in recent years. Until
the 1960s, automotive dealerships were typically owned and operated by a single
individual who controlled a single franchise. However, because of competitive
and economic pressures in the 1970s and 1980s, particularly the oil embargo of
1973 and the subsequent loss of market share experienced by United States
automobile manufacturers to imported vehicles, many automotive dealerships were
forced to close or to sell to better-capitalized dealer groups. Continued
competitive and economic pressure faced by automotive dealers and an easing of
restrictions imposed by automobile manufacturers on multiple-dealer ownership

                                       6

have led to further consolidation. According to NADA Data, the number of
franchised dealerships has declined from 36,336 in 1960 to 21,640 at the end of
2004.

We believe that franchised automobile dealerships will continue to consolidate
because the capital required to operate dealerships continues to increase, many
dealership owners are approaching retirement age and certain automobile
manufacturers want to consolidate their franchised dealerships to strengthen
their brand identity. For example, General Motors Corporation and Ford Motor
Company have been reducing the number of their franchises to upgrade their
retail networks and increase dealer profitability. We believe that dealership
groups that have significant equity capital and experience in acquiring and
running dealerships will have an opportunity to acquire additional franchised
dealerships. Additionally, while we believed that the increased percentages of
leased versus owned vehicles that was the trend several years ago, may have
provided some protection against the history of decreased motor vehicle
purchasers during periods of economic downturns, the decline of such leased
vehicles in recent years has reduced that level of protection, if, in fact, such
a downturn occurs.

Operating Strategy

Our operating strategy is to continually increase customer satisfaction and
loyalty and to increase operating efficiencies. Key elements of this operating
strategy are as follows:

Focus on Used Vehicle Sales. A key element of our operating strategy is to focus
on the sale of used vehicles. According to NADA data, in 2004, approximately
11.8 million used cars were sold retail by dealers, which is approximately the
same number of such sales in 2003. Sales of used vehicles are generally more
profitable than sales of new vehicles. For the industry as a whole, average
gross profit on used vehicles sales was 11.2%, compared with new vehicle average
gross profits of 5.2%. In 2004, our dealerships' average gross profit on used
vehicles was approximately 19.4% and on new vehicles was approximately 9.4%.

We believe that the New York metropolitan area is one of the largest markets for
used vehicle sales in the United States and that we sell more used vehicles in
the New York metropolitan area than any other automobile dealership or
dealership group. We strive to attract customers and enhance buyer satisfaction
by offering multiple financing and leasing options and competitive warranty
products on every used vehicle we sell. We believe that a well-managed used
vehicle operation affords us an opportunity to: (i) generate additional customer
traffic from a wide variety of prospective buyers; (ii) increase new and used
vehicle sales by aggressively pursuing customer trade-ins; (iii) generate
incremental revenues from customers financially unable or unwilling to purchase
a new vehicle; and (iv) increase ancillary product sales to improve overall
profitability. To maintain a broad selection of high-quality used vehicles and
to meet local demand preferences, we acquire used vehicles from trade-ins and a
variety of sources nationwide, including direct purchases from individuals and
fleets, and manufacturers' and independent auctions. We believe that the price
at which we acquire used vehicles, our success in providing non-recourse
financing to prospective buyers who may otherwise find it difficult to obtain
financing and selling high priced quality used cars are the most significant
factors contributing to the profitability of our used vehicle operations. We
believe that, because of the large volume of used vehicles that we sell each
month and our experienced management team, we are able to identify quality used
vehicles, assess their value, purchase them for a favorable price and sell them
profitably to a diverse customer base.

Major World Branding. We have established and continue to focus on maintaining
the strength of our Major World brand and www.majorworld.com Internet brand for
our current used car operations and those of the Major Dealer Group's
participating regional dealerships. With centralized buying and advertising as
its focus, Major World is a catalyst in used car sales through our dealerships
in the New York metropolitan area.

Provide a Broad Range of Products and Services. We offer a broad range of
products and services, including an extensive selection of new and used cars and
light trucks, vehicle financing, replacement parts and service. In 2004, at our
various locations, we offered six (6) makes of new vehicles- Chevrolet,
Chrysler, Dodge, Jeep, Kia, and

                                       7

Nissan. In addition, we sold a variety of used vehicles at a wide range of
prices. We believe that offering numerous makes and models of vehicles, both new
and used, appeals to a broad cross section of customers, minimizes dependence on
any one automobile manufacturer and helps reduce our exposure to supply problems
and product cycles.

Operate Multiple Dealerships in Target Market. Our goal is to become the leading
automotive dealer in our target market, the New York metropolitan area, by
operating multiple dealerships in that market. To accomplish this, we had sought
to acquire new franchises at favorable prices in our existing market and to
expand our existing franchises to new markets, where practicable. We believed
this strategy would enable us to achieve economies of scale in advertising,
inventory management, management information systems and corporate overhead. We
still believe that the operation of multiple dealerships provides synergies and
economies, and our concentrations of dealerships in Long Island City, New York,
Orange, New Jersey, and Hempstead, Long Island, give us effective geographic
coverage. However, individual dealership profitability has become our primary
focus and our strategies are designed to enhance the profitability of our
highest potential dealerships and to close or divest non-performing or
under-performing dealerships. No assurances can be given that such strategy will
be successful.

Emphasize Sales of Higher Margin Products and Services. We generate substantial
incremental revenue and achieve increased profitability through the sale of
certain ancillary products and services such as financing, extended service
contracts and vehicle maintenance. We provide our employees with special
training and compensate them, in part, with commissions based on their sales of
such products and services. We believe that these ancillary products and
services enhance the value of purchased or leased vehicles and increase customer
satisfaction.

Employ Professional Management Techniques. We employ professional management
techniques in all aspects of our operations, including information technology,
employee training, profit-based compensation and cash management. Each of our
dealership locations, our centralized used vehicle operation and our service and
parts operations is managed by a trained and experienced general manager who is
primarily responsible for decisions relating to inventory, advertising, pricing
and personnel. We compensate our general managers based, in part, on the
profitability of the operations they control rather than on sales volume. Our
senior management meets weekly with our general managers and utilizes
computer-based management information systems to monitor each dealership's
sales, profitability and inventory on a daily basis and to identify areas
requiring improvement. We believe that the application of our professional
management techniques provides us with a competitive advantage over other
dealerships and dealership groups.

Internet Sales and Other Innovations. We believe that we have achieved a
competitive advantage through the use of technology. We generate revenues
of more than $1 million each month from our Internet website,
www.majorworld.com, and other websites such as www.autotrader.com,
www.nytimes.com, www.newsday.com and www.yahoo.com. Additionally, we presently
enable our customers to obtain credit approvals over the telephone via a
customized telephone interactive voice response system that operates 24 hours
per day, seven days per week, in multiple languages and permits customers to
obtain answers to the most frequently asked questions, obtain price quotes,
place orders, schedule and confirm service appointments, obtain directions to
the dealership and request faxes of product and price information. We continue
to seek to take advantage of new innovations that will enable us to provide
better customer service and enhance customer satisfaction.

Target Sales to Ethnic Groups. Because the New York metropolitan area, our
primary market, is ethnically diverse, we target our selling efforts to a broad
range of ethnic groups. We employ a multi-lingual sales force, advertise in
ethnic media and intend to further expand our electronic-related media to
accommodate multiple languages.

Growth Strategy

Historically, our strategy for growth was focused on expanding our dealership
group by making acquisitions of non-performing or underperforming dealerships in
the New York metropolitan area. When this strategy was formulated,

                                       8

our common stock price was relatively attractive and thus, a key component of
the purchase price was the use of our common stock. Since the price of our stock
has significantly declined from its levels at the time our acquisition strategy
was conceived, the use of payment in the form of our common stock as
consideration in acquiring automotive dealerships would be extremely dilutive to
our shareholders. Additionally, we believe that the prices being sought for
dealerships, at this time, make their acquisition unattractive. Consequently, we
have postponed our plans for growth through acquisition. Instead, our focus is
on maximizing revenues and profitability in our existing dealerships. However,
while we are not presently seeking dealerships to acquire, if a particularly
attractive opportunity should present itself, we would evaluate an acquisition.

We seek to grow our volume and hope to achieve profitability by focusing on our
core dealership group and expanding and enhancing those operations. Part of this
focus will be to continue to build on our new and used vehicle sales. In
particular, we believe that we can enhance used vehicle sales by capitalizing on
our Major World brand and by continuing and expanding our successful sales
efforts. In addition to thorough training of our sales and service staff and
attentive customer service at the dealership level, we expect to expand our
advertising in all media outlets. In addition, we continuously look to find
attractive and viable financing products for our customers. We will look to
improve upon our used car vehicle choices for our customers and maintain and
augment our already wide range of late model used vehicles, which go from entry
level to luxury and include custom vans and specialty vehicles.

To attain profitability, we will continue to utilize our expertise, buying power
and facilities to take advantage of opportunities to obtain substantial numbers
of quality used vehicles at attractive prices from public auctions and off-lease
programs. Additionally, we will continue to use our substantial buying power to
lower costs for equipment, supplies and outside vendor services.

Dealership Operations

In 2004, we owned and operated five (5) automobile franchises at three (3)
locations in Long Island City, New York, one (1) franchise at one (1) location
in Hempstead, New York and one (1) franchise at one (1) location in Orange, New
Jersey. We offered the following six (6) makes of new vehicles: Chevrolet,
Chrysler, Dodge, Jeep, Kia and Nissan. Each of our locations is run by a
separate manager who is responsible for overseeing all aspects of the business
conducted at that location. Each of the parts and service locations has two (2)
managers, one for parts and one for service. Each manager meets with our senior
management on a weekly basis.

Bruce Bendell, our President, Chief Executive Officer, Acting Chief Financial
Officer and Chairman, and Harold Bendell, a key employee and the brother of
Bruce Bendell, are responsible for management of our dealerships. The Bendells'
management control is accomplished through (i) their ownership of 100 shares of
our 1997A-Major Automotive Group Series of Preferred Stock (of which shares
Bruce Bendell had a proxy to vote the 50 shares of the 1997A-Major Automotive
Group Series of Preferred Stock owned by Harold Bendell for a seven-year period
which ended on January 7, 2005) which carries voting rights allowing them to
elect a majority of the board of directors of Major Auto and (ii) a related
management agreement with us. See "Certain Relationships and Related
Transactions." Should either of the Bendells cease managing the dealerships, his
respective management rights under the management agreement will be
automatically transferred to the other, and should both cease managing the
dealerships for any reason, the shares and management rights will be
automatically transferred to a successor manager designated in a successor
addendum to each dealership agreement or, failing such designation, to a
successor manager designated by us (subject to approval by the applicable
manufacturers). In March 2004, we extended the term of the management agreement
until December 31, 2005. The management agreement had been previously extended
from its initial term upon the mutual oral agreement of the parties.

New Vehicle Sales. In 2004, we sold a complete product line of cars, sport
utility vehicles, minivans and light trucks manufactured by Chevrolet, Chrysler,
Dodge, Jeep, Kia and Nissan. For the year ended December 31, 2004, our
dealerships sold new vehicles generating revenue of approximately $155.6
million, which constituted approximately

                                       9

39.2% of our total dealerships' revenues. Our gross profit margin on new vehicle
sales for the year ended December 31, 2004 was approximately 9.4%, as compared
to the industry average of 5.2%. Included in our gross profit is approximately
$2.7 million of factory dealer incentives, primarily interest and advertising
credits. The relative percentages of our new vehicle sales among the makes of
vehicles we sold for the year ended December 31, 2004 was as follows:

                                                     Percentage of
         Manufacturer                                New Vehicle Sales
         ------------                                -----------------

         Chevrolet                                   42.5%
         Dodge, Chrysler and Jeep                    22.3%
         Kia                                          3.2%
         Nissan                                      32.0%

The following table sets forth information with respect to our new vehicle sales
for the year ended December 31, 2004:

          NEW VEHICLE SALES
        (dollars in millions)

-----------------------------------
Unit sales                 5,340
-----------------------------------
Sales revenue             $155.6
-----------------------------------
Gross profit              $ 14.6
-----------------------------------
Gross profit margin          9.4%
-----------------------------------

We purchase substantially all of our new vehicle inventory directly from the
respective manufacturers, who allocate new vehicles to dealerships based upon
the amount of vehicles sold by the dealership and the dealership's market area.
As required by law, we post the manufacturer's suggested retail price on all new
vehicles, but the final sales price of a new vehicle is typically determined by
negotiation between the dealership and the purchaser.

In addition to our dealership operations, we have a distributorship agreement
with General Motors pursuant to which we distribute new vehicles manufactured by
General Motors to a number of Eastern European and Western and Central Asian
countries, primarily, Ukraine, Belarus and Kazakhstan and, to a lesser extent
Uzbekistan, Turkmenistan, Georgia, Armenia and others. We generally receive a
deposit on the purchase price of the vehicle from the local dealer and release
the vehicle to the dealer upon full payment of the balance of the wholesale
purchase price plus a percentage of the dealer's profit on the sale. We have
started, on a limited basis, the sale of used vehicles to these countries.
Amounts of such new vehicle sales have not been material in relation to our
aggregate revenues and such used vehicle sales have been insignificant. We are
considering initiatives and additional areas in which to expand our overseas
sales.

Used Vehicle Sales. We offer a wide variety of makes and models of used
vehicles, retail and wholesale, for sale. For the year ended December 31, 2004,
we sold 14,898 used vehicles, retail and wholesale, generating revenues of
approximately $222.9 million, which constituted approximately 56.1% of our total
dealerships' revenues. Our gross profit margin on used vehicle sales for the
year ended December 31, 2004 was approximately 19.4%, as compared with the
industry average of 11.2%. We believe we are one of the largest sellers of used
vehicles in the New York metropolitan area.

Our primary location for used vehicle sales is at a single site at Long Island
City, New York. We also sell used vehicles at dealerships located in Hempstead,
New York and Orange, New Jersey. We acquire the used vehicles we sell through
customer trade-ins, at "closed" auctions, which may be attended by only new
vehicle dealers and which

                                       10

offer off-lease, rental and fleet vehicles, and at "open" auctions, which offer
repossessed vehicles and vehicles being sold by other dealers.

We believe that the market for used vehicles is driven by the relationship of
the purchase price of new vehicles to those of used vehicles and the quality and
selection of used vehicles, as well as the availability of financing
alternatives for purchasers at all credit levels.

The following table sets forth information with respect to our used vehicle
sales for the year ended December 31, 2004:

         USED VEHICLE SALES
        (dollars in millions)

------------------------------------------
Unit sales                        14,898
------------------------------------------
Sales revenue                  $   222.9
------------------------------------------
Gross profit                   $    43.3
------------------------------------------
Gross profit margin                 19.4%
------------------------------------------

Parts and Service. We provide parts and service for new and used vehicles that
we sell, and also service other makes of vehicles. For the period ended December
31, 2004, our parts and service operations generated revenues of approximately
$16.8 million, which constituted approximately 4.2% of our total dealerships'
revenues at a gross profit margin of approximately 29.8%.

The increased use of electronics and computers in vehicles makes it more
difficult for independent repair shops to retain the expertise to perform major
or technical repairs. In addition, because motor vehicles are increasingly more
complex and are subject to longer warranty periods, we believe that repair work
will increasingly be performed at dealerships, like ours, that have the
sophisticated equipment and skilled personnel necessary to perform the repairs.

We consider our parts and service departments to be integral to our customer
service efforts and a valuable opportunity to strengthen customer relations and
deepen customer loyalty. We attempt to notify owners of vehicles purchased at
our dealerships when their vehicles are due for periodic service, thereby
encouraging preventative maintenance rather than post-breakdown repairs.

Our parts and service business provides a stable, recurring revenue stream to
our dealerships. In addition, we believe that, to a limited extent, these
revenues are counter-cyclical to new vehicle sales since vehicle owners may
repair their existing vehicles rather than purchasing new vehicles. We believe
that this revenue stream helps mitigate the effects of a downturn in the
new-vehicle sales cycle.

We do not operate a body shop, but instead contract with third parties for body
repair work.

The following table sets forth information with respect to our sales of parts
and services for the year ended December 31, 2004:

         SALES OF PARTS AND SERVICES
            (dollars in millions)

------------------------------------------
Sales revenue                  $    16.8
------------------------------------------
Gross profit                   $     5.0
------------------------------------------
Gross profit margin                 29.8%
------------------------------------------

                                       11

Vehicle Financing. We provide a wide variety of financing and leasing
alternatives for our customers. We believe that our customers' ability to obtain
financing at our dealerships significantly enhances our ability to sell new and
used vehicles. We believe that our ability to provide our customers with a
variety of financing options provides us with an advantage over many of our
competitors, particularly smaller competitors that do not have sufficient sales
volumes to attract the diversity of financing sources available to us.

In most instances, we assign our vehicle finance contracts and leases to third
parties, instead of directly financing vehicle sales or leases, which minimizes
our credit risk. We typically receive a finance fee or commission from the third
party, which provides the financing. In certain limited instances in which we
determine that our credit risk is manageable, estimated by us to be less than 1%
of our vehicles sales and leases, we directly finance the purchase or lease of a
vehicle. In such instances, we bear the credit risk that the customer will
default, but will have the right to repossess the vehicle upon default. We
maintain relationships with a wide variety of financing sources, including
commercial banks, automobile finance companies and other financial institutions.
We also utilize the financial services of our subsidiary, Major Fleet & Leasing
Corp. ("Major Fleet"), which purchases less than 1% of our leases and none of
our finance contracts. See "Leasing Operations."

Sales and Marketing

We believe that marketing and advertising are significant to our operations. As
is typical in our industry, we receive a subsidy for a portion of our expenses
from the automobile manufacturers with which we have franchise agreements. The
automobile manufacturers also assist us by providing us with market research to
develop our own advertising.

Our marketing effort is conducted over numerous forms of media including
television, radio, newspaper, direct mail, billboards and the Internet. Our
advertising seeks to promote our image as a reputable dealer offering quality
products at affordable prices and with attractive financing options. Each of our
dealerships periodically offers price discounts or other promotions to attract
additional customers. The individual dealerships' promotions are coordinated by
us and, because we own and operate several dealerships in the metropolitan New
York market, we realize cost savings through volume discounts and other media
concessions.

Our operations have been fostered by our ability to achieve economies of scale
with respect to our marketing and advertising. Although advertising costs in the
New York metropolitan area are generally higher than the national average,
historically, we believe our cost of marketing and advertising per new vehicle
sold has been less than the national average. Combined with a substantial
increase in media exposure, which resulted in increased volume, our costs show
the economies that we have achieved. These lower costs result from the fact that
we: (i) have favorable contracts with four (4) major area daily newspapers; (ii)
advertise in lower-cost niche markets (such as local ethnic markets, employee
purchase programs and discount buying services); and (iii) utilize telephonic
marketing and electronic marketing via services such as the Internet.

Relationships with Manufacturers

Each of our dealerships operates under a separate franchise or dealer agreement,
which governs the relationship between the dealership and the relevant
manufacturer. In general, each dealer agreement specifies the location of the
dealership for the sale of vehicles and for the performance of certain approved
services in the specified market area. The designation of such areas, the
allocation of such areas and the allocation of new vehicles among dealerships is
discretionary with the relevant manufacturer. Dealer agreements do not generally
provide a dealer with an exclusive franchise in the designated market area. A
dealer agreement generally requires that a dealer meet specified standards
regarding showrooms, the facilities and equipment for servicing vehicles, the
maintenance of inventories, the maintenance of minimum net working capital,
personnel training and other aspects of the dealer's business. The dealer
agreement also gives the relevant manufacturer the right to approve the dealer's
general manager and any

                                       12

material change in management or ownership of the dealership. The dealer
agreement provides the relevant manufacturer with the right to terminate the
dealer agreement under certain circumstances, such as: (i) a change in control
of the dealership without the consent of the relevant manufacturer; (ii) the
impairment of the financial condition or reputation of the dealership; (iii) the
death, removal or withdrawal of the dealership's general manager; (iv) the
conviction of the dealership or the dealership's general manager of certain
crimes; (v) the dealer's failure to adequately operate the dealership or to
maintain wholesale financing arrangements; (vi) the bankruptcy or insolvency of
the dealership; or (vii) the dealer's or dealership's material breach of other
provisions of the dealer agreement. Many of the dealership agreements require
the consent of the relevant manufacturer to the dealer's acquisition of
additional dealerships. In addition, our dealership agreement with General
Motors, with respect to our Chevrolet dealership, provides General Motors with a
right of first refusal to purchase such a dealership.

The dealership agreement with General Motors imposes on us several additional
restrictions. As a consequence of the Major Auto Acquisition, our Chevrolet
franchise, and any other General Motors' franchises that we may subsequently
acquire, could be at risk if: (i) any person or entity acquires more than 20% of
our voting stock with the intention of acquiring additional shares or effecting
a material change in our business or corporate structure; or (ii) if we take any
corporate action that would result: (a) in any person or entity owning more than
20% of our voting stock for a purpose other than passive investment; (b) an
extraordinary corporate transaction such as a merger, reorganization,
liquidation or transfer of assets; (c) a change in the control of our board of
directors within a rolling one-year period; or (d) the acquisition of more than
20% of our voting stock by another automobile dealer or such dealer's
affiliates. If General Motors determines that any of such actions could have a
material or adverse effect on its image or reputation in the General Motors'
dealerships, or be materially incompatible with General Motors' interests, we
must either (x) transfer the assets of the General Motors' dealerships to
General Motors or a third party acceptable to General Motors for fair market
value or (y) demonstrate that the person or entity will not own 20% of our
voting stock or that the actions in question will not occur.

We have also agreed that our dealerships offering new vehicles manufactured by
General Motors will not sell new vehicles of other manufacturers.

New York law, and many other states' laws, limit manufacturers' control over
dealerships. In addition to various other restrictions imposed upon
manufacturers, New York law provides that, notwithstanding the terms of the
dealer agreement with the relevant manufacturer, the manufacturer may not: (i)
except in certain limited instances, terminate or refuse to renew a dealership
agreement except for due cause and with prior written notice; (ii) attempt to
prevent a change in the dealer's capital structure or the means by which the
dealer finances dealership operations; or (iii) unreasonably withhold its
consent to a dealer's transfer of its interest in the dealership or fail to give
notice to the dealer detailing its reasons for not consenting.

Competition

We believe that the market for new and used vehicle sales in the New York
metropolitan area is one of the most competitive in the nation. In the sale of
new vehicles, we compete with other new automobile dealers that operate in the
New York metropolitan area. Some competing dealerships offer some of the same
makes as our dealerships and other competing dealerships offer other
manufacturer's vehicles. Some competing new vehicle dealers are local,
single-franchise dealerships, while others are multi-franchise dealership
groups. In the sale of used vehicles, we compete with other used vehicle
dealerships and with new vehicle dealerships that operate in the New York
metropolitan area that also sell used cars. In addition, we compete with used
car "superstores" that have inventories that are larger and more varied than
ours.

We believe that the principal competitive factors in vehicle sales are the
marketing campaigns conducted by automobile manufacturers, the ability of
dealerships to offer a wide selection of popular vehicles, pricing (including
manufacturers' rebates and other special offers), the location of dealerships,
the quality of customer service,

                                       13

warranties, customer preference for particular makes of vehicles and the
availability of financing. We believe that our dealerships are competitive in
all of these areas.

In addition, we, due to the size and number of automobile dealerships we own and
operate, are larger than most of the independent operators with which we
compete. Our size has historically permitted us to attract experienced and
professional sales and service personnel and has provided us with the resources
to compete effectively. However, should we enter other markets, we may face
competitors that are larger and that have access to greater resources.

We believe that our principal competitors within the New York metropolitan area
are United Auto Group, a publicly traded company, and Potamkin Auto Group,
Burn's Auto Group, Paragon, Koeppel and Auto-Land, each of which is privately
held.

We also compete though our Internet vehicle purchasing services against a
variety of Internet and traditional vehicle purchasing services and automotive
brokers. Entities that maintain similar commercial websites include Autoweb.com,
Autobytel.com, Carsdirect.com, eBay and Microsoft Corporation's Carpoint and
Stoneage Corporation. Additionally, we compete indirectly against vehicle
brokerage firms and affinity programs offered by several companies, including
Costco Wholesale Corporation and Wal-Mart Stores, Inc. Moreover, our major
vehicle manufacturers have their own websites and many have launched online
buying services. We also compete with vehicle insurers, lenders and lessors as
well as other dealers that are not part of our network. Such companies may
already maintain or may introduce websites, which compete with ours.

In addition, the automobile industry is subject to seasonal variations in
revenues. Demand for vehicles is generally lower during the winter months than
in other seasons, particularly, in regions of the United States, which
experience potentially severe winters.

Governmental Regulation

Automobile dealers and manufacturers are subject to various federal and state
laws established to protect consumers, including the so-called "Lemon Laws,"
which require a dealer or manufacturer to replace a new vehicle or accept it for
a full refund within a specified period of time, generally one (1) year after
the initial purchase, if the vehicle does not conform to the manufacturer's
express warranties and the dealer or manufacturer, after a reasonable number of
attempts, is unable to correct or repair the defect. Federal laws require that
certain written disclosures be provided on new vehicles, including mileage and
pricing information. In addition, our financing activities are subject to
certain statutes governing credit reporting and debt collection. In recent
years, a number of state governments have limited or are seeking to limit the
amounts that dealerships may make from introducing credit providers to
customers. Although this has not yet occurred in our areas of operation, if it
does come to pass in any of our operating regions, it will have an adverse
effect on our revenues and profitability.

As with automobile dealerships generally, and parts and service operations in
particular, our business involves the use, handling and contracting for
recycling or disposal of hazardous or toxic substances or wastes, including
environmentally sensitive materials such as motor oil, waste motor oil and
filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner,
batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels.
Accordingly, we are subject to federal, state and local environmental laws
governing health, environmental quality, and remediation of contamination at
facilities we operate or to which we send hazardous or toxic substances or
wastes for treatment, recycling or disposal. We believe that we are in material
compliance with all environmental laws and that such compliance will not have a
material adverse effect on our business, financial condition or results of
operations.

                                       14

Leasing Operations

Our subsidiary, Major Fleet, has historically provided lease financing solely
for motor vehicles. Major Fleet typically arranges for the sale or lease to its
customers of new or used vehicles of all makes and models. Major Fleet will
purchase the desired vehicle from an automobile dealer and either resell it to
its customer for a markup over its cost, or lease the vehicle to the customer
and provide the related lease financing. If a customer of Major Fleet wants to
purchase or lease a new vehicle that is available from one of our dealerships,
in almost all cases, Major Fleet will acquire the vehicle from us and then
resell or lease it to its customer. Major Fleet estimates that it acquires
approximately 50% of the vehicles it sells and leases from us.

In most instances, Major Fleet will broker vehicle finance contracts for, or
assign its leases to, third parties instead of directly financing vehicle sales
or leases. This minimizes our credit risk. In these instances, Major Fleet
typically receives a finance fee or commission from the third party who provides
the financing. In certain instances, Major Fleet directly finances the lease of
a vehicle. When Major Fleet provides lease financing, it bears the credit risk
that its customers will default in the payment of the lease installments. In
order to minimize its risk of loss, Major Fleet carefully evaluates the credit
of its lease customers. It also requires that its lease customers have adequate
collision and liability insurance on the leased vehicle and that Major Fleet be
named as loss payee and additional insured on the customer's collision and
liability insurance policies. Major Fleet does not finance the purchase of the
vehicles, so if a customer desires purchase financing, the customer will need to
obtain financing from a third party; however, as discussed above, Major Fleet
will broker financing contracts.

Acquisition Strategy

Our prior acquisition strategy contemplated that a key component of the purchase
price would be paid in our common stock. Since the price of our stock has
significantly declined from its levels at the time our acquisition strategy was
conceived, it is no longer practicable for us to consider using our common stock
as consideration in acquiring automotive dealerships. Additionally, we believe
that the current prices being sought for dealerships at this time makes their
acquisition unattractive. Consequently, we have postponed our plans for growth
through acquisition. Instead, our focus is on maximizing revenues and
profitability in our existing dealerships. However, while we are not seeking
dealerships to acquire, if a particularly attractive opportunity should present
itself, we would evaluate an acquisition.

RECENT DEVELOPMENTS

Floor Plan Financing

In prior years, in order to obtain floor plan financing for our various
dealership's at favorable rates, each of the Bendells agreed to either guarantee
certain of our floor plan debt or provide certain collateral in connection with
our floor plan or other borrowings. Our Board of Directors agreed to obtain
independent valuations of such credit enhancement and collateral usage and
compensate each of the Bendells the fair value of his respective contributions.
We engaged an independent valuation firm to value the credit enhancement and
have received a preliminary valuation from such firm of $160,000 for the
economic risk value of the credit enhancement. Accordingly, we accrued such
amount as a liability in the third quarter of 2002. In the third quarter of
2003, our Board of Directors received additional indications that the value of
the Credit Enhancement may approximate $450,000. As such, we accrued an
additional $290,000 in the third quarter of 2003. In March 2004, our Board of
Directors concluded that the $450,000, as accrued, is the appropriate value of
the Credit Enhancement. Subsequently, our Board of Directors approved the
continuation of payments of $450,000 per year to Bruce Bendell so long as the
Credit Enhancement remains in effect.

                                       15

Sale and Termination of Franchise Agreements

In February 2004, we sold our Subaru franchise, which included certain parts, to
an unrelated third party for a cash purchase price of $450,000. Additionally,
the purchaser received our inventory of new 2004 Subaru vehicles and assumed the
related floor plan liability.

In March 2004, we received notice from American Suzuki Motor Corporation, the
franchisor of our Suzuki dealership in Hempstead, New York, that they had
terminated our franchise agreement.

Neither the Subaru nor Suzuki dealerships was material to our operations and
the sale and termination of such dealerships will not have a significant effect
on our results of operations or cash flow.

EMPLOYEES

As of April 4, 2005, we had 513 employees, of whom 18 are part-time employees.
We believe that we have good relations with our employees.

RISK FACTORS

The following risk factors should be reviewed carefully, in conjunction with the
other information in this Form 10-K and our consolidated financial statements.
These factors, among others, could cause actual results to differ materially
from those currently anticipated and contained in forward-looking statements
made in this Form 10-K and presented elsewhere by our management from time to
time. These factors are not intended to represent a complete list of the general
or specific factors that may affect us. Other factors, including general
economic factors and business strategies, may have a significant effect on our
business, financial condition and results of operations.

CONTINUED LOSSES MAY AFFECT THE VIABILITY OF OUR BUSINESS.

We experienced net losses of approximately $6.8 million in 2004 and
approximately $1 million in 2003. While the loss in 2004 was attributable,
primarily, to the $8.1 million non-cash charge associated with the write-down of
our goodwill and we believe that we are taking the necessary steps to maintain
the profitability of our dealerships, there is no assurance that we will be able
to do so. If we continue to incur significant losses in the future, for any
reason, our business could be materially and adversely affected.

OUR LIMITED CASH AND WORKING CAPITAL COULD HAVE AN ADVERSE EFFECT ON OUR
BUSINESS.

At December 31, 2004, our total cash and cash equivalents was approximately $3.7
million and our working capital was approximately $1.9 million. If we continue
to incur net losses in 2005 or subsequent years, then we may have insufficient
working capital to maintain our current level of operations or provide for
unexpected contingencies. In such event, we will need to seek additional capital
from public or private equity or debt funding sources and we may not be able to
raise needed cash on terms acceptable to us or at all. Financings, if available,
may be on terms that are dilutive or potentially dilutive to our stockholders.
If sources of financing are required, but are insufficient or unavailable, we
will be required to modify our growth and operating plans or curtail our
operations to the extent of available funding, which could have an adverse
effect on our business.

AUTOMOBILE MANUFACTURERS EXERCISE SIGNIFICANT CONTROL OVER OUR OPERATIONS AND WE
ARE DEPENDENT ON THEM TO OPERATE OUR BUSINESS.

Like other franchised new vehicle dealers, we are significantly dependent upon
our relationships with, and the success of, the manufacturers with which we have
franchised dealerships. We are also dependent on the manufacturers to provide us
with an inventory of new vehicles. The most popular vehicles tend to provide us
with the highest profit margin and are the most difficult to obtain from the
manufacturers. In order to obtain sufficient quantities of these vehicles, we
may be required to purchase a larger number of less desirable makes and models
than

                                       16

we would otherwise purchase. Sales of less desirable makes and models may result
in lower profit margins than sales of more popular vehicles. If we are unable to
obtain sufficient quantities of the most popular makes and models, our
profitability may be adversely affected. We may become dependent on additional
manufacturers in the future as a result of our acquisition strategy and changes
in our sales mix.

As is typical of franchised new vehicle dealers, the success of our franchises
depend to a great extent on the success of the respective manufacturers. Our
success will, therefore, be linked to many factors affecting the manufacturers
such as:

     o   financial condition;
     o   marketing strategy;
     o   vehicle demand;
     o   production capabilities;
     o   management;
     o   events such as labor strikes; and
     o   negative publicity, including safety recalls of a particular vehicle
         model.

To a certain extent, our dealerships also depend on the manufacturers for sales
incentives, warranties and other programs that are intended to promote and
support new vehicle sales by our dealerships. Some of these programs include
customer rebates on new vehicles, dealer incentives on new vehicles, special
financing or leasing terms, warranties on new and used vehicles and sponsorship
of used vehicle sales by authorized new vehicle dealers. Manufacturers have
historically made many changes to their incentive programs during each year. A
reduction or discontinuation of a manufacturer's incentive programs could
adversely affect our new vehicle sales volume and our profitability.

OUR FRANCHISE AGREEMENTS CONTAIN GEOGRAPHIC AND OTHER RESTRICTIONS, WHICH COULD
LIMIT OUR FUTURE GROWTH.

Our franchise agreements with the manufacturers, like those of other franchised
new vehicle dealers, do not grant us the exclusive right to sell that
manufacturer's vehicles within a given geographical area. Accordingly, a
manufacturer could grant another dealer a franchise to start a new dealership or
permit an existing dealer to relocate to a geographic location that would be
directly competitive with us. Such an event could have a material adverse effect
on our business, financial condition and results of operations.

Historically, manufacturers have exercised significant control over dealerships
through the terms and conditions of the franchise agreements pursuant to which
our dealerships operate. These franchise agreements restrict dealerships to
specific locations and retain for the manufacturers approval rights over changes
in the dealerships' ownership and management. Our ability to expand through the
acquisition of new dealerships requires the consent of the manufacturers. To
date, our acquisitions have been approved by the respective manufacturers and we
have not been materially adversely affected by other limitations imposed by the
manufacturers. However, there can be no assurance that in the future we will be
able to obtain necessary approvals on acceptable terms or that we will not be
materially adversely affected by other limitations.

The franchise agreements between the manufacturers and us are for fixed terms
with no renewal obligation on the part of the manufacturers and permit the
manufacturers to terminate the agreements for a variety of causes. Each of these
agreements includes provisions for the termination or non-renewal of the
manufacturer-dealer relationship for a variety of causes including any
unapproved change of ownership or management and other material breaches of the
franchise agreement. We believe that we have been and continue to be in material
compliance with the terms of our franchise agreements. While none of the
manufacturers have terminated or failed to renew our franchise agreements, other
than our Suzuki franchise which was immaterial to our results of operations, any
such termination or failure to renew could have a material adverse effect on us
and our business, financial condition and results of operations.

                                       17

THE AUTOMOBILE INDUSTRY IS A MATURE INDUSTRY WITH LIMITED GROWTH POTENTIAL IN
NEW VEHICLE SALES AND AUTOMOBILE SALES ARE CYCLICAL AND SUBJECT TO DOWNTURNS.

The United States automobile industry is generally considered to be a mature
industry in which minimal growth is expected in unit sales of new vehicles. In
addition, the market for automobiles, particularly new vehicles, is subject to
substantial cyclical variation and has experienced significant downturns
characterized by oversupply and weak demand. Many factors affect the automobile
industry, including:

     o   general and local economic conditions
     o   taxes
     o   consumer confidence
     o   interest rates
     o   credit availability
     o   levels of personal discretionary income

Although we believe that our access to new and used vehicles over a wide range
of price points provides us some measure of stability in a potentially cyclical
market, a material decrease in vehicle sales from the historical level of
vehicle sales achieved by us would materially adversely affect our business,
financial condition and results of operations.

THE AUTOMOTIVE INDUSTRY IS SUBJECT TO SEASONAL VARIATIONS.

The automobile industry is subject to seasonal variations in revenues. Demand
for vehicles is generally lower during the winter months than in other seasons,
particularly in regions of the United States, which experience potentially
severe winters. Accordingly, revenues and operating results may be lower in our
first and fourth quarters than in our second and third quarters.

IMPORTED PRODUCTS MAY AFFECT OUR OPERATIONS.

A portion of our new vehicle business involves the sale of vehicles, parts or
vehicles composed of parts that are manufactured outside the United States. As a
result, our operations will be subject to customary risks of importing
merchandise, including fluctuations in the value of currencies, import duties,
exchange controls, trade restrictions, work stoppages and general political and
economic conditions in foreign countries. The United States or the countries
from which our products are imported may, from time to time, impose new quotas,
duties, tariffs or other restrictions, or adjust presently prevailing quotas,
duties or tariffs, which could affect our operations and our ability to purchase
imported vehicles and/or parts.

OUR AUTOMOBILE OPERATIONS ARE GEOGRAPHICALLY CONCENTRATED AND SUBJECT TO LOCAL
ECONOMIC CONDITIONS.

We believe that the automotive retail industry is influenced by general economic
conditions and particularly by consumer confidence, the level of personal
discretionary spending, interest rates, fuel prices, unemployment rates and
credit availability. Historically, unit sales of motor vehicles, particularly
new vehicles, have been cyclical, fluctuating with general economic cycles.
During economic downturns, retail new vehicle sales tend to experience periods
of decline characterized by oversupply and weak demand. The automotive retail
industry may experience sustained periods of decline in vehicle sales in the
future. In addition, changes in interest rates could significantly impact our
vehicle sales because a significant portion of vehicle buyers finance their
purchases. Any decline in vehicle sales as a result of changes in any of the
factors described, could have a material adverse effect on our business,
revenues and profitability.

                                       18

In addition, all of our dealerships are located in the greater New York
metropolitan area. As a consequence, our results of operations depend
substantially on general economic conditions and consumer spending habits and
preferences in the New York metropolitan area, as well as various other factors,
such as tax rates and applicable state and local regulation. There can be no
assurance that we will be able to adequately insulate ourselves from the adverse
effects of local or regional economic conditions.

OUR FUTURE OPERATING RESULTS WILL BE DIRECTLY RELATED TO THE AVAILABILITY AND
COST OF CAPITAL TO US.

The principal sources of financing for new and used automobile inventories have
historically been lines of credit from commercial lenders and other financial
institutions and from cash generated from operations. For instance, during 2001,
we were notified by Chrysler Financial Company, LLC ("CFC") that it was
terminating its financing. In order to obtain floor plan financing for our
various dealership's at favorable rates, each of Bruce Bendell and Harold
Bendell agreed to either guarantee certain of our floor plan debt or provide
certain collateral in connection with our floor plan or other borrowings.
Although we were successfully able to replace CFC and our other floor plan
lenders, there can be no assurance that we will be able to continue to obtain
capital for our current or expanded operations on terms and conditions that are
acceptable to us.

If we choose to pursue growth through the acquisition of additional dealerships,
it will require substantial capital. In such case, our expansion and new
acquisitions may involve cash, the need to incur debt or the need to issue
equity securities, which could have a dilutive effect on our then outstanding
capital stock. We may seek to obtain funds through borrowings from institutions
or by the public or private sale of our securities. There can be no assurance
that we will be able to obtain capital to finance our growth on terms and
conditions acceptable to us.

RISKS ASSOCIATED WITH EXPANSION MAY HINDER OUR ABILITY TO INCREASE REVENUES AND
EARNINGS.

Our future growth may depend, in part, on our ability to acquire additional
automobile dealerships. If we pursue such a strategy of acquiring additional
dealerships, we would face risks commonly encountered with growth through
acquisitions. These risks include:

     o   incurring significantly higher capital expenditures and operating
         expenses;
     o   failing to assimilate the operations and personnel of the acquired
         dealerships;
     o   disrupting our ongoing business;
     o   dissipating our limited management resources;
     o   failing to maintain uniform standards, controls and policies;
     o   impairing relationships with employees and customers as a result of
         changes in management; and
     o   diluting ownership percentages of current and future shareholders.

There can be no assurance that we will be successful in overcoming these risks
or any other problems encountered with such acquisitions. In addition, acquiring
additional dealerships could have a significant impact on our financial
condition and could cause substantial fluctuations in our quarterly and annual
operating results. Acquisitions could result in significant goodwill and
intangible assets, which could result in substantial impairment charges to us
that would reduce stated earnings, if any.

THERE EXIST RISKS RELATING TO THE FAILURE TO MEET MANUFACTURERS' CUSTOMER
SATISFACTION SCORES.

Many manufacturers attempt to measure customers' satisfaction with automobile
dealerships through a customer satisfaction index ("CSI") score, or customer
satisfaction index, rating system. These manufacturers may use a dealership's
CSI scores as a factor in evaluating applications for additional dealership
acquisitions and participation by a dealership in incentive programs. The
dealerships operated by us currently meet or exceed their manufacturers' CSI
standards. However, there can be no assurance that either our dealerships or
other subsequently acquired

                                       19

dealerships will continue to meet such standards. Moreover, from time to time,
the components of the various manufacturer CSI scores have been modified and
there is no assurance that such components will not be further modified or
replaced by different systems in the future, which make it more difficult for
our dealerships to meet such standards.

THE LOSS OF KEY PERSONNEL AND OUR LIMITED MANAGEMENT AND PERSONNEL RESOURCES
COULD ADVERSELY AFFECT OUR OPERATIONS AND GROWTH.

Our future success will depend to a significant extent on key personnel and on
the continued services of our senior management and other key personnel,
particularly Bruce Bendell and Harold Bendell, a senior executive of the Major
Dealer Group. Bruce Bendell's employment is pursuant to a renewable employment
agreement which currently expires on June 30, 2005. Harold Bendell's employment
is pursuant to an oral employment agreement. The loss of the services of these
employees, or certain other key employees, are likely have a material adverse
effect on our business. See "Executive Compensation: Employment Contracts,
Termination of Employment and Change-In-Control Arrangements." We do not
maintain "key person" life insurance for any of our personnel. Our future
success will depend on our continuing ability to attract, retain and motivate
other highly skilled employees. Competition for such personnel in our industry
is intense. We may be unable to retain our key employees or attract, assimilate
or retain other highly qualified employees in the future. If we do not succeed
in attracting new personnel or retaining and motivating our current personnel,
our business, financial condition and operations may be adversely affected.

POTENTIAL CONFLICTS OF INTEREST BETWEEN OUR MANAGEMENT PERSONNEL AND US COULD
ADVERSELY AFFECT OUR FUTURE PERFORMANCE.

We have entered into, or contemplate that we may enter into, several
transactions with the Bendells. Such transactions include the following:

     o   In 1996, we acquired Major Fleet from the Bendells. In exchange, the
         Bendells received (i) 100 shares of our 1996-Major Series of
         Convertible Preferred Stock, (ii) warrants for 45,000 shares of our
         common stock, which have been exercised, and (ii) the right to manage
         the operations Major Fleet pursuant to a management agreement with
         Major Fleet. In March 2004, the management agreement was extended until
         December 31, 2005 with automatic additional one-year extensions unless
         notice is given by either party. The term of the management agreement
         had been previously extended upon the mutual oral agreement of the
         parties.

     o   We acquired Major Auto from the Bendells in May 1998. In this
         transaction, the Bendells received shares of our 1997A-Major Automotive
         Group Series of Preferred Stock and Bruce Bendell received a proxy to
         vote the 50 shares of the 1997A-Major Automotive Group Series of
         Preferred Stock owned by Harold Bendell for a seven-year period, which
         ended on January 7, 2005. These shares allow the Bendells to elect a
         majority of the directors of Major Auto. The Bendells are also parties
         to a management agreement with us that gives them control over the
         day-to-day operations of Major Auto. Should the Board of Directors of
         Major Auto and we disagree as to a particular course of action, the
         Board of Directors of Major Auto will be able to take that action over
         our objection. Conflicts could arise between our Board of Directors and
         the Board of Directors of Major Auto as to the appropriate course of
         action to be taken in the future. However, the management agreement
         does prohibit certain actions from being taken without the prior
         approval of our Board of Directors, including: (i) disposition of any
         of the Major Auto dealerships; (ii) acquisition of new dealerships; and
         (iii) our incurring liability for Major Auto indebtedness.

                                       20

     o   The management agreement between the Bendells and us provides that,
         should either of the Bendells cease managing the dealerships, ownership
         of his 1997A-Major Automotive Group Series of Preferred Stock shares
         and his management rights under the management agreement will be
         automatically transferred to the other, and should both cease managing
         the dealerships for any reason, the shares and management rights will
         be automatically transferred to a successor manager designated in a
         successor addendum to each dealership agreement or, failing such
         designation, to a successor manager designated by us (subject to
         approval by the applicable manufacturers).

     o   In connection with the acquisition of our Nissan dealership in
         Hempstead, New York, we obtained an option to acquire that dealership's
         land and building from the landlord who held the lease on that
         property. We exercised our option, but were unable to obtain the
         financing necessary to effect the purchase. The lease expiration was
         concurrent with the required property acquisition date and we were
         unsuccessful in obtaining an extension of the lease term. In order to
         ensure continuity of the dealership's operations, in a transaction
         approved by our Board of Directors, the Bendells agreed to personally
         acquire the property through a company they formed and lease it back to
         us. As a result, in 2002, we eliminated the capitalized lease of
         approximately $3.6 million and the related liability of $3.0 million
         that we had recorded in connection with this property. The difference
         of $637,000, the book value of the purchase option, was recorded as a
         long-term related party receivable, which is included in other
         non-current assets. We entered into a lease with the new landlord for
         five (5) years with a five-year renewal option for approximately the
         same monthly rental we were previously paying. The receivable will be
         repaid, ratably, through monthly payments over the remaining term of
         the lease, together with related interest at a market rate. Based on
         the report of an independent appraiser, the purchase option was
         recorded at its fair value and the monthly rent is at a market rate.

     o   In unrelated transactions, in order to obtain floor plan financing at
         favorable rates, each of the Bendells has agreed to either guarantee
         certain of our floor plan debt or provide certain collateral in
         connection with our floor plan or other borrowings. Our Board of
         Directors has obtained independent valuations of such credit
         enhancement and collateral usage (together, "the Credit Enhancements")
         and agreed to pay each of the Bendells the fair value of his respective
         contributions. We engaged an independent valuation firm and received a
         preliminary valuation from such firm of $160,000 for the economic risk
         value of the Credit Enhancement. Accordingly, we accrued such amount as
         a liability in the third quarter of 2002. In the third quarter of 2003,
         the Company's Board of Directors received additional indications that
         the value of the Credit Enhancement may approximate $450,000. As such,
         the Company accrued an additional $290,000 in the third quarter of
         2003. In March 2004, our Board of Directors concluded that the
         $450,000, as accrued, was the appropriate value of the Credit
         Enhancement. Subsequently, our Board of Directors approved the
         continuation of payments to Mr. Bendell, which is expected to
         approximate $450,000, annually, for the continuation of his credit
         enhancement to us through the provision of his personal guarantee on
         our floor plan financing.

     o   Harold Bendell has acquired the rights to an off premises storage
         facility that was previously leased by us, on a month-to-month basis,
         from an independent third party. Accordingly, we are now leasing such
         facility from Mr. Bendell for $15,000 per month, approximately the same
         monthly rental we were paying to the prior landlord.

     o   Each of the Bendells has total or partial ownership interests in
         dealerships that are not owned by us. We have ongoing business
         relationships with each of these unrelated dealerships, whereby we sell
         vehicles to them and they sell vehicles to us. In 2004, we had sales
         aggregating $6.0 million to dealerships owned by the Bendells and had
         purchases aggregating $7.0 million from such dealerships. We believe
         that all such purchases and sales were made at prices approximating
         those that would otherwise obtained in arms-length transactions.
         However, there is a potential for conflicts of interest in pricing of
         vehicles and

                                       21

         referral of customers and, although our internal controls are designed
         to identify situations where adverse consequences to us may occur due
         to conflicts of interests, we cannot provide absolute assurance that
         such consequences will not occur.

OUR FOCUS ON EXISTING DEALERSHIPS CHANGE MAY AFFECT OUR OPERATIONS.

In the past, our strategy for growth was principally focused on expanding our
dealership group through acquisitions of non-performing or underperforming
dealerships in the New York metropolitan area. When this strategy was
formulated, our stock price was relatively attractive and thus, a key component
of the purchase price was our common stock. Since the price of our stock has
significantly declined from its levels at the time our acquisition strategy was
conceived, the use of payment in the form of our common stock as consideration
in acquiring automotive dealerships at this time would be extremely dilutive to
our shareholders. Additionally, we believe that the current prices being sought
for dealerships makes their acquisition unattractive. Consequently, we have
postponed our plans for growth through acquisition. Instead, our focus is on
maximizing revenues and profitability in our existing dealerships. There can be
no assurance our adoption of such a strategy will not adversely affect our
business, financial condition and operations.

THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE
TO COMPETE EFFECTIVELY, ESPECIALLY AGAINST ESTABLISHED INDUSTRY COMPETITORS WITH
SIGNIFICANTLY GREATER FINANCIAL RESOURCES.

The automobile dealership business is highly competitive. Our competitors
include:

     o   automobile dealers;
     o   private sellers of used vehicles;
     o   used vehicle dealers;
     o   other franchised dealers;
     o   service center chains; and
     o   independent service and repair shops.

Gross profit margins on the sale of new vehicles have been decreasing over the
past two decades and the used car market faces increasing competition from
independent leasing companies and from used vehicle "superstores" that may have
inventories that are larger and more varied than ours. Some of our competitors
may be larger, have access to greater financial resources and be capable of
operating on smaller gross margins than we do. There can be no assurance that we
will continue to compete effectively or that manufacturers will not modify the
historical automobile franchise system in a manner that increases competition
among dealers or market and sell their vehicles through other distribution
channels.

GOVERNMENT REGULATION AND ENVIRONMENTAL REGULATION COMPLIANCE COSTS MAY
ADVERSELY AFFECT OUR PROFITABILITY.

Our operations are subject to various federal, state and local laws and
regulations including those relating to local licensing and consumer protection.
While we believe that we maintain all requisite licenses and permits and that we
are in substantial compliance with all applicable laws and regulations, there
can be no assurance that we will be able to continue to maintain all requisite
licenses and permits or to comply with applicable laws and regulations, and our
failure to do so may have a material adverse effect on our business, financial
condition and results of operations. In addition, the adoption of any new laws
or regulations and the cost to us of complying with any new laws or regulations,
could have a material adverse effect on our business, financial condition and
results of operations.

In addition, as with automobile dealerships generally, and parts and service
operations in particular, our business involves the use, handling and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials such as:

                                       22

     o   motor oil;
     o   waste motor oil and filters;
     o   transmission fluid;
     o   antifreeze;
     o   freon;
     o   waste paint and lacquer thinner;
     o   batteries;
     o   solvents;
     o   lubricants;
     o   degreasing agents; and
     o   gasoline and diesel fuels.

Accordingly, we are subject to federal, state and local environmental laws
governing health, environmental quality, and remediation of contamination at
facilities we operate or to which we sends hazardous or toxic substances or
wastes for treatment, recycling or disposal. We believe that we are in material
compliance with all environmental laws and that such compliance will not have a
material adverse effect on our business, financial condition or results of
operations. However, environmental laws are complex and subject to frequent
change. There can be no assurance that compliance with amended, new or more
stringent laws, stricter interpretations of existing laws or the future
discovery of environmentally hazardous conditions will not require material
expenditures by us.

WE FACE RISKS IN OUR INTERNATIONAL OPERATIONS.

We are considering the expansion of our new and used vehicle purchasing service
to additional foreign markets by establishing relationships with vehicle dealers
and strategic partners located in certain foreign markets.

If we expand our operations to various other countries, we may become subject to
laws or treaties that regulate the marketing, distribution and sale of motor
vehicles. In addition, the laws of other countries may impose licensing, bonding
or similar requirements on us as a condition to doing business therein. In
addition, there are certain risks inherent in doing business in international
markets, such as:

     o   changes in political conditions;
     o   regulatory requirements;
     o   potentially weaker intellectual property protections;
     o   tariffs and other trade barriers;
     o   fluctuations in currency exchange rates;
     o   potentially adverse tax consequences;
     o   difficulties in managing or overseeing foreign operations;
     o   seasonal reductions in business activities during summer months in
         Europe and other areas; and
     o   educating consumers and dealers who may be unfamiliar with the benefits
         of online marketing and commerce.

One or more of such factors may have a material adverse effect on our current or
future international operations and, consequently, on our business, results of
operations and financial condition.

                                       23

WE FACE RISKS IN CONNECTION WITH LEGAL PROCEEDINGS IN WHICH WE ARE INVOLVED.

We are subject to a number of lawsuits. While we believe that we have
substantial defenses to the asserted claims and intend to vigorously defend the
active suits, judgments against us with respect to the active actions could have
a material adverse effect on our financial condition. See "Legal Proceedings."

THE SALE OF AUTOMOBILES OVER THE INTERNET IS HIGHLY COMPETITIVE AND INCREASED
COMPETITION COULD ADVERSELY AFFECT OUR OPERATIONS AND GROWTH.

Our Internet vehicle purchasing services compete against a variety of Internet
and traditional vehicle purchasing services and automotive brokers. The market
for Internet-based commercial services is fairly new, and competition among
commercial websites is expected to increase significantly in the future. The
Internet is characterized by minimal barriers to entry, and new competitors can
launch new websites at relatively low cost. To compete successfully over the
Internet, we must significantly increase awareness of our services and brand
name.

We compete with other entities, which maintain similar commercial websites,
including:

     o   Autoweb.com;
     o   Autobytel.com;
     o   Carsdirect.com;
     o   eBay; and
     o   Microsoft Corporation's Carpoint and Stoneage Corporation.

Some of these entities may have greater financial, marketing and personnel
resources and/or lower overhead or sales costs than we do. We also compete
indirectly against vehicle brokerage firms and affinity programs offered by
several companies, including Costco Wholesale Corporation and Wal-Mart Stores,
Inc. In addition, our major vehicle manufacturers have their own websites and
launched online buying services. We also compete with vehicle insurers, lenders
and lessors as well as other dealers that are not part of our network. Such
companies may already maintain or may introduce websites, which compete with
ours.

We cannot assure you that we can compete successfully against current or future
competitors, many of which have substantially more capital, existing brand
recognition, resources and access to additional financing. In addition,
competitive pressures may result in increased marketing costs, decreased website
traffic or loss of market share or otherwise may materially and adversely affect
our business, results of operations and financial condition. Further, there can
be no assurance that our strategy will be more effective than the strategies of
our competitors.

WE COULD FACE LIABILITY FOR INFORMATION RETRIEVED FROM OR TRANSMITTED OVER THE
INTERNET AND LIABILITY FOR PRODUCTS SOLD OVER THE INTERNET.

We could be exposed to liability with respect to third-party information that
may be accessible through our website, or content and materials that may be
posted by consumers through www.majorworld.com. Such claims might assert, among
other things, that, by directly or indirectly providing links to websites
operated by third parties, we should be liable for copyright or trademark
infringement or other wrongful actions by such third parties through such
websites. It is also possible that, if any third-party content information
provided on our website contains errors, consumers could make claims against us
for losses incurred in reliance on such information.

We also may enter into agreements with other companies under which any revenue
that results from the purchase of services through direct links to or from our
website is shared. Such arrangements may expose us to additional legal risks and
uncertainties, including local, state, federal and foreign government regulation
and potential liabilities to consumers of these services, even if we do not
provide the services ourselves. There can be no assurances that any
indemnification provided to us in our agreements with these parties, if
available, will be adequate.

                                       24

Even to the extent such claims do not result in liability to us, we could incur
significant costs in investigating and defending against such claims. The
imposition on us of potential liability for information carried on or
disseminated through our system could require us to implement measures to reduce
our exposure to such liability, which might require the expenditure of
substantial resources or limit the attractiveness of our services to consumers,
member dealers, automotive-related vendors and others.

Our general liability insurance and our communications liability insurance may
not cover all potential claims to which we are exposed and may not be adequate
to indemnify us for all liability that may be imposed. Any imposition of
liability that is not covered by insurance or is in excess of insurance coverage
could have a material adverse effect on our business, results of operations and
financial condition.

CONCENTRATION OF VOTING POWER AND ANTI-TAKEOVER PROVISIONS IN OUR CHARTER
DOCUMENTS MAY REDUCE STOCKHOLDER VALUE IN ANY POTENTIAL CHANGE OF CONTROL.

Bruce Bendell is the beneficial owner of approximately 47.0% of our common
stock. This concentration of voting power may severely limit the ability of
other of our stockholders to elect directors or influence other corporate
decisions and may, among other things, have the effect of delaying or preventing
a change in control of the Company or preventing our stockholders from realizing
a premium on the sale of their shares upon an acquisition of the Company. In a
letter dated June 9, 2004, Bruce Bendell contemplated a transaction pursuant to
which an entity to be formed by him would be merged into the Company for cash
consideration of approximately $0.70 per share (the "Offer"). Such Offer was
extended on June 17, 2004, July 6, 2004 and July 23, 2004. On September 7, 2004,
the Offer expired.

Our Board of Directors has the authority to issue shares of preferred stock and
to determine the price, rights, preferences and privileges, including voting
rights, of those shares without any further action by our stockholders. The
rights of holders of our common stock will be subject to and may be adversely
affected by the rights of the holders of any preferred stock. Any future
designation and issuance of preferred stock could have the effect of making it
more difficult for a third party to acquire control of us. We are also subject
to the provisions of the Nevada Revised Statutes regulating business
combinations, takeovers and control share acquisitions, which also might hinder
or delay a change in control of us. Anti-takeover provisions that could be
included in the preferred stock when designated and issued and the Nevada
statutes can have a depressive effect on the market price of our common stock
and can prevent our stockholders from realizing a premium on the sale of their
shares by discouraging takeover and tender offer bids. In addition, under our
dealer agreement with General Motors, we may be at risk of losing the Chevrolet
franchise if any person or entity acquires 20% or more of our voting stock
without the approval of General Motors.

Moreover, our Articles of Incorporation, as amended, provide for the
classification of our Board of Directors into three classes of directors with
staggered terms of office. This classified board significantly extends the time
required to effect a change in control of our Board of Directors and may
discourage hostile takeover bids for us. Because of the additional time required
to change control of our Board of Directors, the classified board structure
tends to perpetuate present management. Without the ability to obtain immediate
control of our Board of Directors, a takeover bidder will not be able to take
action to remove other impediments to its acquisition of us. The classified
board structure also makes it more difficult for the shareholders to change the
composition of our Board of Directors even if the shareholders believe such a
change would be desirable.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

Future sales of shares of common stock by existing shareholders under Rule 144
of the Securities Act of 1933, as amended (the "Securities Act") or through the
exercise of outstanding registration rights or the issuance of shares of our
common stock upon the exercise of options or warrants or the conversion of our
outstanding Preferred Stock

                                       25

could materially adversely affect the market price of the common stock and could
materially impair our future ability to raise capital through an offering of
equity securities. A substantial number of shares of our common stock is
available for sale pursuant to certain registration rights and under Rule 144 in
the public market or will become available for sale in the near future and no
predictions can be made as to the effect, if any, that market sales of such
shares or the availability of such shares for future sale will have on the
market price of our common stock prevailing from time to time.

Holders of our outstanding options and warrants are likely to exercise them
when, in all likelihood, we can obtain additional capital on terms more
favorable than those provided in the options and warrants. Our ability to obtain
additional financing may also be adversely affected by our obligation to
register shares of common stock under the Securities Act. Castle Trust and
Management Services Limited, as Trustee under the Millennium I Trust created
under that certain Deed of Settlement dated October 2, 1996, has the right (on
an unlimited number of occasions) to require us to register all or any portion
of the common stock, aggregating 147,784 shares, into which the 125,000 shares
of our 1996-Major Series of convertible preferred stock has been converted.

WE HAVE NEVER PAID CASH DIVIDENDS ON OUR COMMON STOCK.

We have never paid cash dividends on our common stock. We intend to retain any
future earnings to finance our growth. In addition, dividends on our common
stock are subject to the preferences for dividends on our preferred stock. Any
future dividends will depend upon our earnings, if any, our financial
requirements, and other factors.

WE MAY BE SUBJECT TO THE SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF
1990.

The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure and documentation related to the market for penny stock
and for trades in any stock defined as a penny stock. Unless we can acquire
substantial assets and trade at over $5.00 per share on the bid, it is more
likely than not that our securities, for some period of time, would be defined
under that Act as a "penny stock." As a result, those who trade in our
securities may be required to provide additional information related to their
fitness to trade our shares. Also, there is the requirement of a broker-dealer,
prior to a transaction in a penny stock, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. Further, a broker-dealer must provide the customer
with current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. These requirements present a substantial burden on any person or
brokerage firm who plans to trade our securities and would thereby make it
unlikely that any liquid trading market would ever result in our securities
while the provisions of this Act might be applicable to those securities.

WE MAY BE SUBJECT TO BLUE SKY COMPLIANCE.

The trading of penny stock companies may be restricted by the blue sky laws of
several states. We are aware that a number of states currently prohibit the
unrestricted trading of penny stock companies absent the availability of
exemptions, which are in the discretion of the states' securities
administrators. The effect of these states' laws would be to limit the trading
market, if any, for our shares and to make resale of shares acquired by
investors more difficult.

OUR COMMON STOCK HAS BEEN DE-LISTED FROM THE NASDAQ STOCK MARKET AND TRADES ON
THE OTC BULLETIN BOARD.

On April 29, 2004, we received a Notification of Deficiency from the Nasdaq
Stock Market, Inc. ("Nasdaq") indicating that we were not in compliance with
Nasdaq Marketplace Rule 4310(c)(4), relating to minimum bid price per share
($1.00) for continued listing on The Nasdaq SmallCap Market.

We had until October 26, 2004 to demonstrate compliance with this rule (and
maintain compliance with all other listing requirements) or face possible
delisting from The Nasdaq SmallCap Market. Such compliance was not

                                       26

achieved by the deadline date and, accordingly, our common stock was delisted
from the Nasdaq SmallCap Market. On November 10, 2004, our common stock
commenced trading on the Over-the-Counter Bulletin Board.

WE MAY BE SUBJECT TO A SALES TAX ASSESSMENT, WHICH COULD MATERIALLY AFFECT OUR
OPERATIONS

In February 2004, we were notified by the New York State Department of Taxation
& Finance of an assessment of $4,000,000, including interest and penalties,
after their audit concluded that certain of our subsidiaries had failed to pay
sales and use taxes of approximately $2,000,000 from February 1999 through
August 2001. We believed that all sales taxes due were properly paid and that if
any additional sales taxes were due they would be minimal. Accordingly, in prior
periods, we did not accrue any liability in connection with this matter. We
appealed the findings of the taxing authorities. After investigation, the taxing
authorities and we agreed on a final aggregate amount due of $65,383.66,
including 19,106.69 of interest. This amount is reflected in accrued expenses at
December 31, 2004. Had we not prevailed on a substantial portion of our appeal,
the resulting assessment could have had a material adverse effect on our results
of operations and cash position.

WE MAY BE LIMITED IN OUR ABILITY TO DERIVE REVENUES FROM THE PROVISION OF
FINANCING TO OUR CUSTOMERS.

A number of states' attorneys general have investigated the amounts of money car
dealers have derived by securing financing for vehicle purchasers ("finance
reserves") and, in some cases, deemed them "excessive." Consequently, several
states, as well as banks and other institutions, have limited, or are seeking to
limit, such finance reserves. It is possible that this will be the case in New
York State and New Jersey and among some of our consumer finance sources. If
restrictions are placed on our ability to generate revenues from finance
reserves, it could have the effect of limiting our future revenues and gross
profits.

ITEM 2. PROPERTIES

We own an approximately 12,000 square foot facility consisting of office and
automobile showroom space in Long Island City, New York, an approximately 40,000
square foot service facility in Long Island City, New York and a vehicle storage
facility in Orange, New Jersey. All of our other operations and subsidiaries are
conducted from leased locations.

One of our subsidiaries, Major Motors of Long Island City, Inc. (formerly,
Subaru, Inc.), was a sublessee from an unrelated third party approximately 2,500
square feet of office and automobile showroom space in Woodside, New York. This
lease expired on December 31, 2004. The annual rent under such lease was
$128,000.

In addition, we have an interest in the following leases, under which we
presently make annual rental payments aggregating $1,419,700:

     o   Major Chrysler Jeep Dodge, Inc. leases approximately 17,400 square feet
         of office and automobile showroom and storage space in Long Island
         City, New York from an unrelated third party at an annual rent of
         $95,500. This lease expires on October 31, 2011.

     o   Major Auto leases approximately 2,000 square feet of lot space in
         Astoria, New York adjacent to the main Major Fleet (formerly, Major
         Dodge) showroom from an unrelated third party. This lease expired on
         June 30, 1997 at which time the annual rent was $33,000. Major Auto
         remains in possession of the premises on a month-to-month basis.

     o   One of our subsidiaries, Compass Dodge, Inc. ("Compass"), leases from
         Ford Motor Car Company, an unrelated third party, approximately 30,000
         square feet used for showroom, office, service department

                                       27

         and storage facilities in Orange, New Jersey. This lease is currently
         on a month-to-month basis at an annual rental of $90,000. Additionally,
         our inactive subsidiary, Compass Lincoln Mercury, Inc., had a lease for
         7,000 square feet of showroom, office and storage space in Orange, New
         Jersey, from an unaffiliated third party, at an annual rent of $90,000,
         which was the subject of litigation. The litigation was settled and
         the lease canceled during the second quarter of 2004 for a payment by
         us of $115,000. See "Legal Proceedings - Tillroe Realty Co. vs. Compass
         Lincoln Mercury, Inc. and Fidelity Holdings Co., Inc." Compass also
         leases space for a service department and storage facilities in Orange,
         New Jersey, at an annual rent of $150,000. This lease expires on August
         31, 2006. Finally, Compass leases additional space for storage
         facilities, on a month-to-month basis, from an unaffiliated third party
         at an annual rent of $19,200.

     o   Major Chevrolet leased approximately 250,000 square feet of adjacent
         automobile dealership facilities in Long Island City, New York, from an
         unrelated third party at an annul rate of $300,000 through February 1,
         2004. We exercised our option and extended this lease to February 1,
         2009 at an annual rental of $330,000. Major Chevrolet has the
         additional option to extend the lease for up to two additional
         five-year terms. Major Chevrolet also leases storage space in Long
         Island City from an unaffiliated third party at an annual rent of
         $84,000, pursuant to a one-year lease, which expired in October 2004,
         after which it continued on a month-to-month basis.

     o   One of our subsidiaries, Hempstead Mazda, Inc., whose franchise was
         voluntarily surrendered, leases from its former owner, an unrelated
         third party, on behalf of our subsidiary, Major Nissan of Garden City,
         Inc. ("Major Nissan"), approximately 140,000 square feet of land and
         buildings in Hempstead, New York, that is used for showroom, office and
         storage space. The lease expires on September 30, 2009. The current
         annual rent is $234,000. This property has been subleased to Harold
         Bendell through his ownership of HB Automotive, Inc, under the same
         terms as our original lease.

     o   Major Nissan leases from 316 N. Franklin LLC, a company owned by the
         Bendells, approximately 105,000 square feet used for showroom, office,
         service department and storage facilities. The property is located on
         the borderline of Hempstead, New York and Garden City, New York. The
         current annual rent is $384,000 and the lease expires on June 30, 2007.
         We originally had an option on the purchase of the property, but were
         unable to obtain financing to consummate the purchase. The Bendells
         agreed to buy the property and lease it to Major Nissan at a fair
         market rent and pay us the fair value of the purchase option,
         approximately $637,000, over the initial term of the lease. An
         independent appraiser whom we retained determined the fair values.
         Accordingly, the amount due for the option is being repaid by reducing
         the actual monthly lease payment to 316 N. Franklin LLC by
         approximately $6,000 per month (See Note 12 of Notes to Consolidated
         Financial Statements included elsewhere in this Form 10-K).

                                       28

ITEM 3. LEGAL PROCEEDINGS

Daniel Tepper v. Fidelity Holdings, Inc; Fidelity Holdings, Inc. (Third Party
Plaintiff) v. InvestAmerica et al.

In and around July 10, 2001, Daniel Tepper commenced suit in the Southern
District of New York against Bruce Bendell, Doron Cohen and Richard Feinstein,
our former Chief Financial Officer. While the initial complaint had eight (8)
causes of action, three (3) remain: (i) conversion; (ii) breach of fiduciary
duty and (iii) negligence. The claims allege that we failed to remove
restrictive legends that appeared on certain stock certificates held by Mr.
Tepper. This action mirrors a Nevada action brought by Mr. Tepper several years
ago for which he obtained a judgment of $553,000, which has been satisfied. In
light of the satisfaction of the Nevada judgment, the Court directed that a
motion be made to dismiss the New York action to ban a double recovery. The
motion was made in July 2003 and was denied in lieu of a settlement conference.
Such conference was held and failed. A second motion to dismiss was filed and in
the third quarter of 2004 this case was adjudicated in our favor and,
consequently, dismissed. However, plaintiff filed a notice of appeal of the
court's decision on November 3, 2004. We believe that plaintiff's appeal will
not prevail and that, in any event, Mr. Tepper's allegations have no merit and
we intend to vigorously defend this suit.

Fidelity Holdings, Inc., IG2, Inc and 786710 Ontario, Ltd. v. Michael Marom and
M.M. Telecom, Corp.

We and our former subsidiaries IG2, Inc. ("IG2") and 786710 Ontario, Ltd. are
plaintiffs in a legal action against Michael Marom and M.M. Telecom, Corp. in
the Supreme Court of the State of New York, County of Queens, Index No.
25678/96. We filed a complaint on December 23, 1996 against the defendants
alleging: (i) breach of a letter agreement between the parties; (ii) tortuous
interference with business opportunities; and (iii) slander. Defendants filed an
answer with counterclaims, which included, inter alia: (i) fraud; (ii) breach of
contract; (iii) tortious interference with business opportunities; and (iv)
tortuous interference with contract. Both parties have completed discovery and
the collective plaintiffs, including us, have made a motion for summary judgment
against the defendants seeking to have the defendants' counterclaims dismissed
entirely and with prejudice. A decision was rendered by the court, which
dismissed the claims for tortuous interference with business opportunities and
contract, but denied the remainder of the motion. The case had been stayed as a
result of IG2 filing for bankruptcy protection in January 2003. The stay was
subsequently lifted. In March 2004, we reached a settlement agreement with the
defendants whereby we are required to pay an aggregate of $250,000, as follows:
$50,000 on April 1, 2005 and the balance of $200,000 over the next 24 months at
the rate of $8,333.33 per month. In addition, we are required to pay to
defendants any amounts we receive from IG2, until such time as an additional
$250,000 has been paid to defendants. To the extent the amounts we receive from
IG2 and, in turn, pay to the defendants by February 28, 2009 (the "IG2
Payments"), is less than $250,000, we will be liable for the difference between
$250,000 and the aggregate IG2 Payments at that time. The effects of this
settlement have been recorded in our financial statements as of December 31,
2004.

Sanford Goldfarb v. Robert LeRea, Doron Cohen, Bruce Bendell, Kimberly Peacock
and The Major Automotive Companies, Inc. f/k/a Fidelity Holdings, Inc.

On September 23, 2002, a lawsuit was commenced by Ira Hochman and Sanford
Goldfarb against us, Robert LaRea, a former consultant to us, Doron Cohen, Bruce
Bendell and Kimberly Peacock, our former employee. The suit seeks damages of up
to $10,000,000 for breach of contract, quantum merit, unjust enrichment,
conversion and fraud. Plaintiffs contend that they entered into agreements with
us and the other defendants to promote our company in exchange for stock.
Plaintiffs further contend that, in spite of their substantial time and efforts,
we and the other defendants failed to compensate plaintiffs as per the
agreements. Plaintiffs also allege that they provided a bridge loan to
defendants in the sum of $1,830,000, which has not been repaid. On January 28,
2005, the parties agreed to settle this by our paying an aggregate of $400,000
to the plaintiffs in exchange for the aggregate of 120,820 shares of

                                       29

common stock owned by the plaintiffs. An initial payment of $200,000 was made on
February 1, 2005, an additional payment of $20,000 was made on March 1, 2005 and
nine additional monthly payments are scheduled for each of the succeeding
months. The shares to be returned to us will be returned, ratably, as payments
are received by the plaintiff. Accordingly, a liability of $400,000 was accrued
in the fourth quarter of 2004 and we recorded the acquisition of treasury stock
for $144,984, based on the closing price of our common stock on the day prior to
the settlement, and $255,016 was charged to litigation expense, representing the
difference between the total amount to be paid and the fair value of the shares
received.

GELCO Corporation, et al. v. Major Chevrolet, Inc.

On December 19, 2001, GELCO Corporation ("GELCO") filed a complaint against
Major Chevrolet, Inc. in the United States District Court for the Northern
District of Illinois, Eastern Division. The lawsuit alleged breach by Major
Chevrolet, Inc. of the terms and conditions of the purchase of automobiles and
automobile leases under that certain dealer lease plan agreement and alleged
breach arising out of the purchaser of retail sales contracts under that certain
dealer retail agreement by and between the parties. GELCO was seeking $2,767,000
in damages. On January 24, 2003, the action was settled for $900,000, consisting
of an initial payment of $300,000 and a 20-month promissory note for $600,000,
which was paid in full by September 2004.

Steel City Telecom, Inc. v. The Major Automotive Companies, Inc., et al

In and around September 2002, an action was commenced against us and our former
subsidiary, Computer Business Sciences, Inc., in Pennsylvania, Allegheny County
by Steel City Telecom, Inc. ("Steel City") for up to $300,000. The complaint
alleged that certain software sold to Steel City was defective and that we were
negligent in its production. We are in the process of requesting a removal of
this case to Federal court, while continuing with the discovery phase. We
believe that the plaintiff's allegations have no merit and we intend to
vigorously defend this suit.

Zvi Barak v. The Major Automotive Companies, Inc.

An application to the Ontario Superior Court (Toronto Court File No.
02-CV-229810CM2) was filed by Zvi Barak on May 23, 2002 seeking an Order of that
court directing us to proceed with arbitration in Toronto, Canada regarding Dr.
Barak's claims that we failed to pay him $546,249.99 under an alleged letter
dated June 5, 1996 to that certain Master Agreement dated April 18, 1996 between
us and Dr. Barak. We brought a motion before the Ontario Superior Court of
Justice seeking a permanent stay of Dr. Barak's application on grounds which
include, but are not limited to: (a) Ontario is not a convenient forum for the
hearing of the application; and (b) the Ontario Superior Court of Justice does
not have jurisdiction over the subject matter of the parties. The motion was
heard by the Court in Toronto on February 18, 2003. At that time, our motion was
denied and we subsequently filed a motion for leave to appeal. In July 2003, our
motion for leave to appeal was denied. On February 2, 2005, we agreed to settle
this case by purchasing from Mr. Barak and his wife Sarah Barak all of the
shares of our common stock that they own, aggregating 167,808 shares for the
purchase price of $250,000 and the forgiveness of a promissory note due to one
of our inactive subsidiaries in the principal amount of $119,500. Inasmuch as
the promissory note was fully reserved and written off in prior years, we
accrued a liability of $250,000 for this settlement in the fourth quarter of
2004 and have recorded the transaction as the acquisition of treasury stock of
$206,404, the fair market value of the shares based on the closing price on the
day prior to the agreement, and litigation expense of $43,596, representing the
difference between the amount to be paid and the fair value of the shares.

                                       30

Tillroe Realty Co. vs. Compass Lincoln Mercury, Inc. and Fidelity Holdings Co.,
Inc.

On September 4, 2003, an action was commenced against us and our subsidiary
Compass Lincoln Mercury, Inc. in the Superior Court of New Jersey, Essex County
by a landlord of our former Compass Lincoln Mercury showroom in Orange, New
Jersey. The suit alleged that current rent and damages to the showroom space at
170 Central Avenue, Orange New Jersey are presently due and owing by us. The
suit alleged damages in the amount of $123,556 and rent of approximately $7,900
per month. This case was settled during the second quarter of 2004 for $115,000.

GRIT, LLC vs. Major Automotive Companies, Inc.

On September 24, 2003 we received notice of a default judgment in the Superior
Court of the State of California, Los Angeles, for an aggregate amount of
$66,718 stemming from the plaintiff's purchase in 1998 of a Talkie Communication
Server from a former subsidiary. In the third quarter of 2004 this case was
adjudicated in our favor and, consequently, dismissed. In the fourth quarter of
2004, the plaintiff refiled its complaint under a slightly different theory from
its initial suit. It is our belief that this claim is also without merit and we
intend to vigorously defend this suit.

Justin Jung et al. v. Major Automotive Companies, Inc.

In December 2004, we were served with a Summons and Complaint, (filed in New
York State Supreme Court, County of the Bronx) alleging the sale of defective or
otherwise dangerous vehicles. Named plaintiff bases his suit on a single-vehicle
accident. The action includes provisions for the possible promulgation of a
class action lawsuit regarding the previous accusations. We believe that the
suit has no merit and we intend to vigorously defend this action.

Maryann Cerbo, et al. v. Ford of Englewood, Inc., et al.

In November 2004, we received notice of a pending class action in the state of
New Jersey for the above action in the Superior Court of the State of New
Jersey. The lead plaintiff had alleged the systematic overcharge by all New
Jersey Licensed Automotive Dealers for the documentation fees for the
registration of new/used vehicles. Under advice of counsel, we, through our
Compass Dodge, Inc. franchise, agreed to accept the proposed settlement offer by
the plaintiff's counsel. Using a complex set of guidelines, including total
sales and ratio of new and used vehicles sold, we agreed to comply with the
settlement provisions. The current estimated cost of settlement is approximately
$30,000, which has been accrued in the fourth quarter of 2004. The settlement
proposal awaits approval by the New Jersey Superior Court.

Various claims against our subsidiaries.

Various claims and lawsuits arising in the normal course of business are pending
against our subsidiaries. The results of such litigation are not expected to
have a material or adverse effect on our combined financial position or results
of operations.

                                       31

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

On December 17, 2004, we held our Annual Meeting of Shareholders. Proxies were
solicited by us pursuant to Regulation 14A under the Exchange Act. On October
29, 2004, the record date for the Annual Meeting, there were approximately
9,492,856 shares of common stock outstanding and entitled to vote, of which
8,229,436 shares of common stock were present in person or by proxy and voted at
the meeting. At the Annual Meeting, our shareholders approved the following
proposals:

1.   To elect two (2) Class I Directors, Bruce Bendell and Alan Pearson, for
     terms ending in 2007.

<TABLE>

         -----------------------------------------------------------------------------------------------------
                                             FOR             WITHHELD           AGAINST          NOT VOTED
         -----------------------------------------------------------------------------------------------------

         Bruce Bendell                    8,199,961           334,583              0              958,312
         -----------------------------------------------------------------------------------------------------
         Alan Pearson                     8,229,336           305,208              0              958,312
         -----------------------------------------------------------------------------------------------------
</TABLE>

The terms of Steven Hornstock, the Class II Director, and David Edelstein and
Jeffrey Weiner, the Class III, Directors, continued after the Annual Meeting.

2.   To ratify the appointment of BDO Seidman, LLP as our independent registered
     public accounting firm for the year 2005.

         -----------------------------------------------
         For .......................       8,493,056
         -----------------------------------------------
         Against ..................           26,352
         -----------------------------------------------
         Abstain ..................           15,046
         -----------------------------------------------
         Not Voted ...............           958,402
         -----------------------------------------------

                                       32

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock trades on the Over-the-Counter Bulletin Board under the symbol
"MAJR.OB," since November 10, 2004 after being delisted from the Nasdaq
SmallCap. The quarter-end high and low sales prices of our common stock were as
reported by the Nasdaq Stock Market and the Over-the-Counter Bulletin Booard,
which quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission, and may not reflect actual transactions:

         Quarter Ended              High             Low
         -------------              ----             ---
         June 30, 2005              $1.13            $0.93
         March 31, 2005             $1.24            $0.86
         December 31, 2004          $0.95            $0.70
         September 30, 2004         $1.05            $0.84
         June 30, 2004              $1.00            $0.60
         March 31, 2004             $1.37            $0.58
         December 31, 2004          $0.81            $0.72
         September 30, 2003         $0.80            $0.80
         June 30, 2003              $0.87            $0.80
         March 31, 2003             $0.91            $0.73

Shareholders

As of June 30, 2005 there were approximately 479 holders of record of our
common stock.

Dividends

We have never declared cash dividends on any class of our securities and have no
present intention to declare any dividends on any class of our securities in the
future.

Securities Authorized for Issuance Under Equity Compensation Plans.

Item 12 of Part III contains information concerning securities authorized for
issuance under our equity compensation plans.

Recent Sales of Unregistered Securities

The securities described below were sold by us during the fiscal year 2004
without being registered under the Securities Act. All such sales made in
reliance on Section 4(2) and/or Rule 506 promulgated thereunder of the
Securities Act were, to the best of our knowledge, made to investors that,
either alone or together with a representative that assisted such investor in
connection with the applicable investment, had such sufficient knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks connected with the applicable investment.

1.   On April 30, 2004, we issued 4,500 shares of common stock to David
     Edelstein, at a per share price of $0.79, as compensation for services as a
     member of our Board of Directors.

                                       33

2.   On April 30, 2004, we issued 4,500 shares of common stock to Jeffrey
     Weiner, at a per share price of $0.79, as compensation for services as a
     member of our Board of Directors.

3.   On April 30, 2004, we issued 4,500 shares of common stock to Steven Nawi,
     at a per share price of $0.79, as compensation for services as a member of
     our Board of Directors.

4.   On April 30, 2004, we issued 4,500 shares of common stock to Steven
     Hornstock, at a per share price of $0.79, as compensation for services as a
     member of our Board of Directors.

                                       34

ITEM 6. SELECTED FINANCIAL DATA

The selected data presented below for, and as of the end of, each of the years
in the five-year period ended December 31, 2004, are derived from our audited
financial statements. The data set forth below should be read in connection
with, and are qualified by reference to, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our financial statements
and the related notes included elsewhere in this Form 10-K.

<TABLE>

                                                                        As at and for the year ended December 31,
                                                    2004             2003             2002             2001             2000
                                                -------------    -------------    -------------    -------------   -------------

STATEMENT OF OPERATIONS DATA
Revenues                                        $ 396,981,562    $ 380,298,852    $ 397,947,494    $ 375,114,505   $ 322,142,231

Income (loss) from continuing operations*          (6,837,962)      (1,130,264)         (84,772)       2,089,524       1,302,247

Income (loss) from discontinued operations               --               --           (206,000)         590,000     (22,427,322)

Net income (loss)                                  (6,837,962)      (1,130,264)        (290,772)       2,679,524     (21,125,075)

Income (loss) per common share
   Income from continuing operations
      Basic                                     $       (0.72)   $       (0.12)   $       (0.01)   $        0.32   $        0.26
      Diluted                                           (0.72)           (0.12)           (0.01)            0.24            0.19

   Income (loss) from discontinued operations
     Basic                                               --               --              (0.02)            0.09           (4.40)
     Diluted                                             --               --              (0.02)            0.07           (4.40)

   Net income (loss)
     Basic                                              (0.72)           (0.12)           (0.03)            0.41           (4.14)
     Diluted                                            (0.72)           (0.12)           (0.03)            0.31           (4.14)

Average number of shares used in computation
     Basic                                          9,486,905        9,436,969        8,947,332        6,558,356       5,101,829
     Diluted                                        9,486,905        9,436,969        8,947,332        8,662,979       6,791,104

BALANCE SHEET DATA
Total assets                                    $  86,014,467    $  87,612,939    $  87,247,341    $  82,329,517   $  86,781,397
Long-term liabilities, less current portion         6,910,269        7,156,125        7,701,700        9,853,587      10,411,463
Total stockholders' equity                          9,695,524       16,870,654       17,947,597       17,948,321      15,599,970
</TABLE>

*  Includes a write-off of goodwill of $8.1 million in the fourth quarter of
   2004. Also, see Notes 1, 9, 15 and 16 to Consolidated Financial Statements
   for discussions of business acquisitions and divestitures, restatements,
   stockholders' equity, earnings (loss) per share, restructuring and
   impairment charges, discontinued operations and their effects on
   comparability of year-to-year data. See "Item 5. Market for Registrant's
   Common Equity and Related Stockholder Matters" for a discussion of our
   dividend policy.

                                       35

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of our and our subsidiaries' operations, financial
condition, liquidity and capital resources should be read in conjunction with
our audited Consolidated Financial Statements and related notes thereto included
elsewhere herein.

This annual report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. Our actual
results could differ significantly from the results discussed in the
forward-looking statements.

THE COMPANY

On May 14, 1998, The Major Automotive Companies, Inc., a holding company
involved in the acquisition and development of synergistic technological and
telecommunications businesses and the regional consolidation of the retail
automotive industry, acquired, from a related party, Major Auto, and related
real property and leases. We have historically operated in two divisions:
Automotive and Technology.

On November 3, 2000, our Board of Directors determined to sell our
non-automotive operations, including our Technology division, by the most
appropriate economically viable means, in order to maximize shareholders' value
from those operations and to maintain our focus on the regional consolidation of
retail automotive dealerships. Accordingly, all non-automotive operations had
been classified collectively as "Discontinued Operations." Continuing operations
are represented by our automotive dealerships activities, including our Major
Auto subsidiary and other dealerships, as well as our automotive leasing
subsidiary, Major Fleet.

The year 2004 saw an increase in our revenues and gross profits. Our management
believes that the strong growth of new vehicle unit sales and the increase in
average sales prices of such vehicles were the significant contributors to our
increase in dealership revenues and gross profits. Revenues and gross profits
increased approximately $16.7 million and $3.9 million, respectively. The retail
automotive business is, generally, subject to the effects of economic inflation.
In recent years, however, inflation has been relatively low and, therefore, has
not significant impacted either our revenues, costs or results of operations.

Pursuant to the rules for accounting for long-lived assets, such as goodwill, as
more fully described, below, we determined that we had an impairment of such
asset. This was based, in part, on future projections of our operating results,
which assume certain continuing trends in our product mix and profitability.
Accordingly, in the fourth quarter of 2004, we wrote down our goodwill and,
thereby, incurred a non-cash charge of $8.1 million. This resulted in a net loss
of $6.8 million for the year ended December 31, 2004 compared with a net loss of
$1.1 million in the prior year.

CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in conformity with accounting
principles generally accepted in the United States. Such principles require that
we make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Operating results in the future could vary from the
amounts derived from those estimates and assumptions. We have identified the
policies below that are critical to our business operations and the
understanding of our results of operations and involve significant estimates.
For detailed discussion of other significant accounting policies see Note 1,
Nature of Business and Summary of Significant Accounting Policies, of the Notes
to Consolidated Financial Statements.

Inventory. Our inventory policy determines the valuation of inventory, which is
a significant component of our consolidated balance sheets. Our inventory
consists primarily of retail vehicles held for sale valued at the lower of cost
or market with new vehicles valued on the first-in, first-out basis and used
vehicles and vehicles held for lease with cost determined using the specific
identification method, net of reserves. Cost includes the actual price paid for

                                       36

each vehicle plus reconditioning and transportation expenses. We establish
reserves based on vehicle inventory aging and management's estimate of market
values. While we believe that our estimates of market value are appropriate, we
are subject to the risk that our inventory may be overvalued from time to time
primarily with respect to used vehicles, which could require additional reserves
to be recorded.

Long-lived Assets. Our policies related to long-lived assets, such as goodwill
and property and equipment, which constitute a significant component of our
consolidated balance sheets, require that we evaluate such assets for impairment
when events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable through the estimated undiscounted future
cash flows resulting from the use of those assets. If any impairment is found to
exist, the related assets will be written down to fair value. Additionally,
these policies affect the amount and timing of future amortization. Intangible
assets consist primarily of the cost of businesses acquired in excess of the
fair value of net assets acquired. In accordance with Statements of Financial
Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and
Statements of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"), goodwill and intangible assets deemed to have
indefinite lives are no longer amortized but, instead, are subject to impairment
tests at least annually. We have applied the new rules on accounting for
goodwill beginning in the first quarter of 2002. During 2003, we performed the
required impairment tests of goodwill as of December 31, 2003, and concluded,
based, in part, on the analysis performed and conclusions reached by an
independent valuation appraiser we retained, that there was no impairment of
goodwill at that time. During 2004, we performed the required impairment tests
of goodwill as of December 31, 2004. We have concluded, based, in part, on the
analysis performed and conclusions reached by an independent valuation appraiser
we retained, that there is an impairment of goodwill as of December 31, 2004
aggregating approximately $8.1 million. Accordingly, we incurred a non-cash
charge of this amount in the fourth quarter of 2004 as we wrote down goodwill to
its estimated fair value. We remain, however, subject to financial statement
risk to the extent that intangible assets become additionally impaired due to
decreases in the fair market value of the related underlying business.

Account classifications. In order to maintain consistency and comparability of
financial information between periods presented, certain reclassifications have
been made to our prior year financial statements.

Floor plan and advertising assistance received from manufacturers are recorded
as offsets to the cost of the vehicle and recognized as income upon the sale of
the vehicle or when earned under a specific manufacturer's program, whichever is
later. Floor plan assistance payments have been included as offsets to cost of
sales. Floor plan interest expense is included as a component of operating
expense in the accompanying consolidated statement of operations.

For the years ended December 31, 2004, 2003 and 2002, aggregate floor plan
interest included in operating expense was approximately $2.0 million, $2.2
million and $1.7 million, respectively. The increase in 2003 of interest expense
relative to decreased sales volume is primarily attributable to the higher
levels of inventory, i.e. reduced turnover, caused by the lower sales levels
during 2003, most significantly during the first two quarters.

For the years ended December 31, 2004, 2003 and 2002, aggregate floor plan
assistance included as a reduction of cost of sales was approximately $1.8
million, $1.2 million and $1.3 million, respectively.

Advertising assistance received from manufacturers for the years ended December
31, 2004, 2003 and 2002, included as a reduction of cost of sales was
approximately $944,000, $723,000 and $714,000, respectively.

Commitments and Contingencies. As further discussed in "Note 12, Commitments and
Contingencies, of Notes to Consolidated Financial Statements," we are involved,
and will continue to be involved, in a number of legal proceedings arising out
of the conduct of our business, including litigation with customers, current and
former business associates, employment-related lawsuits and class actions. We
intend to vigorously defend ourselves and assert available defenses with respect
to each of these matters. Where necessary, we have accrued our estimate of the
probable costs for the resolution of these proceedings based on consultation
with outside counsel, assuming various strategies. Further, we have certain
insurance coverage and rights of indemnification with respect to certain aspects
of these matters. However, a settlement or an adverse resolution of one or more
of these matters may result in the

                                       37

payment of significant costs and damages, which could have a material adverse
effect on our business, financial condition, results of operations, cash flows
and prospects.

Furthermore, in February 2004, the New York State taxing authorities notified us
of an assessment of $4,000,000, including interest and penalties. We were
confident that we had paid all sales taxes that are due and notified the taxing
authorities that we were appealing their findings. After investigation, the
taxing authorities and we agreed on a final aggregate amount due of
approximately $65,000, including $19,000 of interest. This amount is reflected
in accrued expenses at December 31, 2004.

Revenue Recognition. The majority of our revenue is from the sales of new and
used vehicles, including any commissions from related vehicle financings. We
recognize revenue upon delivery of the vehicle to the customer. At time of
delivery, all financing arrangements between and among the parties have been
concluded. Commission revenue on warranty and insurance products sold in
connection with vehicle sales is recognized upon sale. Additionally, we record
income from direct financing leases based on a constant periodic rate of return
on the net investment in the lease. Income earned from operating lease
agreements is recorded evenly over the term of the lease.

Income Taxes. Our income tax policy requires that we compute the provision for
income taxes on the pretax income (loss) based on the current law. We provide
for deferred income taxes to show the effect of tax consequences in future years
of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates. We use valuation allowances to reduce the value of deferred
tax assets when we believe that their recovery is in doubt.

                                       38

SELECTED OPERATING DATA

<TABLE>

                                                                Years Ended December 31,
                                     ----------------------------------------------------------------------------------------
($ in millions, except per vehicle data)                            2004 vs. 2003                           2003 vs. 2002
                                                                   -------------                            -------------
                                                                Variance -                             Variance -
                                                                Favorable           %                   Favorable         %
                                         2004         2003    (Unfavorable)    Variance      2002     (Unfavorable)    Variance
                                         ----         ----    -------------    --------      ----     -------------    --------

Revenues
       New vehicles                    $ 155.6      $ 131.7      $  23.9          18.1      $ 140.7      $ (9.0)         (6.4)
       Used vehicles                     222.9        231.6         (8.7)         (3.8)       236.8        (5.2)         (2.2)
       Service and parts                  16.8         15.5          1.3           8.4         19.3        (3.8)        (19.7)
       Other                               1.7          1.5          0.2          13.3          1.1         0.4          36.4
                                   -------------  ------------  -------------  ---------  -----------  -------------  ----------
            Total revenues             $ 397.0      $ 380.3      $  16.7           4.4      $ 397.9      $(17.6)         (4.4)
                                   =============  ============  =============  =========  ===========  =============  ==========

GROSS PROFIT
       New vehicles                    $  14.6      $  13.6      $   1.0           7.4      $  14.4      $ (0.8)         (5.6)
       Used vehicles                      43.3         40.3          3.0           6.7      $  42.4        (2.1)         (5.0)
       Service and parts                   5.0          5.2         (0.2)         (3.8)     $   6.2        (1.0)        (16.1)
       Other                               1.6          1.5          0.1          13.3          1.1         0.4          36.4
                                   -------------  ------------  -------------  ---------  -----------  -------------  ----------
            Total gross profit         $  64.5      $  60.6      $   3.9           6.1      $  64.1      $ (3.5)         (5.5)
                                   =============  ============  =============  =========  ===========  =============  ==========
NEW VEHICLES
Unit sales                               5,340        4,997          343           6.9        5,557        (560)        (10.1)
Revenue per vehicle                    $29,146      $26,351      $ 2,795         10.56      $25,320      $1,031           4.1
Gross profit per vehicle               $ 2,729      $ 2,712      $    17           0.6      $ 2,590      $  122           4.7
Gross profit percentage                    9.4%        10.3%        -0.9%         (8.7)        10.2%        0.1%          1.0

USED VEHICLES

Unit sales                              14,898       16,555       (1,657)        (10.0)      16,050         505           3.1
Revenue per vehicle                    $14,965      $13,988      $   977           7.0      $14,754      $ (766)         (5.2)
Gross profit per vehicle               $ 2,906      $ 2,435      $   471          18.6      $ 2,644      $ (209)         (7.9)
Gross profit percentage                   19.4%        17.4%         2.0%         10.9         17.9%       -0.5%         (2.8)

PERCENTAGE OF TOTAL REVENUES
New vehicles                              39.2%        34.6%         4.6%         13.3         35.4%       -0.8%         (2.3)
Used vehicles                             56.1%        60.9%        -4.8%         (7.9)        59.5%        1.4%          2.4
Service and parts                          4.2%         4.1%         0.1%          2.4          4.9%       -0.8%        (16.3)
Other                                      0.5%         0.4%         0.1%         25.0          0.2%        0.2%        100.0
                                   -------------  ------------  -------------  ---------  -----------  -------------  ----------
                                         100.0%       100.0%         0.0%          0.0%       100.0%        0.0%          0.0%
                                   =============  ============  =============  =========  ===========  =============  ==========

OTHER OPERATING DATA
Total operating expenses               $  62.3      $  60.9      $   1.4           2.3      $  63.1      $ (2.2)         (3.5)
Goodwill write-down                        8.1           -0-         8.1           N/A      $    -0-     $   -0-          N/A
Floor plan interest*                       2.0          2.2         (0.2)         (9.1)         1.7         0.5          29.4
Advertising expense*                      11.8         15.8         (4.0)        (25.3)        14.5         1.3           9.0
</TABLE>
* Included in operating expenses

                                       39

RESULTS OF CONTINUING OPERATIONS YEAR ENDED DECEMBER 31, 2004 AND YEAR ENDED
DECEMBER 31, 2003

Revenues. Revenues for the year ended December 31, 2004 increased to
approximately $397.0 million, which is $16.7 million, or 4.4%, more than the
prior year's revenues of $380.3 million. The primary reasons for the increase in
total revenue were (1) the significant increase in unit sales of new vehicles
and (2) the large increase in average selling prices for new vehicles. New car
unit sales increased by 343 units, or 6.9%, in 2004 from 2003. At the same time,
average revenue for each new vehicle sold increased by $2,795. This increase in
revenues generated by new vehicle sales was partially offset by a decrease in
revenues from used vehicles of $8.7 million. Used vehicle units sold decreased
by 1,657 units, or 10.0% in 2004. While the average revenue per used vehicle
sold increased by $977, or 7.0%, it was not sufficient to overcome the decline
in units and resulted in overall decrease in used vehicle revenues in 2004. We
believe that these results are reflective of the trend that continues whereby
new vehicle manufacturers are offering customer incentives that are wide-ranging
and deep. This has created a situation where our dealerships are selling more
new vehicles, but at the expense of used vehicle sales. With the prices of new
vehicles reaching levels that are attractive to buyers who would have previously
purchased used vehicles, many more new vehicle buyers have been created. Because
our dealerships have only a limited number of new vehicle brands to sell,
customers who previously may have come to our centers because of the large
selection of used vehicles available may go elsewhere for a new vehicle
purchase. As a consequence, the customers who do buy used vehicles tend to be
(a) those who still cannot afford an entry level new vehicle and are, therefore,
buying the lower priced used vehicles, which tends to reduce the average sales
price per unit and (b) those who can afford to buy higher end vehicle and either
prefer used vehicles or have difficulty in qualifying for credit at new vehicle
dealerships. The significant decrease of used vehicles sold in 2004 is
reflective of the trend whereby some of our potential used vehicle customers
have become new vehicle customers. This can also be seen in our sales mix where,
in 2004, 39.2% of our total revenue was generated by new vehicle sales and 56.1%
of our total revenue came through used vehicle sales. In 2003, the comparable
percentages were 34.6% and 60.9% for new and used vehicles, respectively.

New vehicle sales revenue was approximately $155.6 million in 2004, an increase
of $23.9 million or 18.1% from 2003 new vehicle sales revenue of $131.7 million.
This increase is significantly attributable to incentives given consumers by new
vehicle manufacturers, including cash rebates and attractive financing options
which has increased customer demand by lowering the average net cost to
consumers, while leaving gross selling prices high.

Used vehicle sales revenue was $222.9 million in 2004 and $231.6 million in
2003, a decrease of approximately $8.7 million or 3.8%. The most significant
factor in this decrease was the decrease in unit sales. As noted above, our
average sales price per used vehicle unit sold increased, but the volume
decrease more than offset the average sales price increase. We believe that both
the migration of the used vehicle buyer to new vehicles and the very competitive
marketplace in the New York metropolitan area, contributed significantly to our
volume decline.

Cost of sales. The cost of sales increased $12.8 million, or 4.0%, to $332.5
million in the year 2004 from $319.7 million in the year ended December 31,
2003. The percentage increase is 0.4% less than the revenues percentage increase
and reflects both the disproportionately higher cost of new vehicles, which
increased by 19.4% and the disproportionately lower cost of used vehicles, which
decreased by 6.1%. The average cost of a new vehicle increased by $2,778, or
11.8%, and the average cost of a used vehicle increased by $506, or 4.4%,
resulting in the increase in cost of sales. As noted, above, the cost of sales
in both years reflects the net effect of automotive manufacturers' floor plan
assistance incentives and advertising incentives.

Gross profit. Our automotive dealership operations generated almost all of the
total gross profit of $64.5 million for the year ended December 31, 2004
compared with the 2003 amount of $60.6 million, an increase of $3.9 million or

                                       40

6.4%. The gross profits of new vehicles increased by $1.0 million, or 7.4%, and
the gross profits of used vehicles increased by $3.0 million, or 7.4%. Other
gross profits were relatively flat.

New vehicle unit sales and revenue per vehicle each increased substantially.
However, as discussed previously, the costs of such sales increased at a
disproportionately higher rate, which resulted in a decrease in new vehicle
gross profit percentage, but a small increase in gross profit per new vehicle
sold and an overall increase in new vehicle gross profit. Total gross profit
from new vehicles sales increased $1.0 million, or 7.4%, from $13.6 million in
2003 to $14.6 million in 2004. Gross profit per new vehicle sold increased $17,
or 0.6%, from $2,712 in 2003 to $2,729 in 2004. The gross profit percentage
decreased to 9.4% in 2004 from 10.3% in 2003. We believe that the manufacturers
incentives have permitted customers to purchase more expensive new vehicles and
brought in more first-time new vehicle buyers. The competitive environment for
new vehicle purchasers in the New York metropolitan area has not allowed us to
maintain the higher profit margins that we enjoyed in the past.

The gross profit percentage for used vehicles increased substantially, from
17.4% to 19.4%. The increase in the average selling price of used vehicles,
retail and wholesale, from $13,988 to $14,965 resulted in the amount of such
increase being $977 per vehicle, an increase of 7.0%. The increase in the
average cost of used vehicles sold was only 4.4%. The effect of this was to
increase total used vehicle gross profit to $43.3 million in 2004 from $40.3
million in 2003, an increase of $3.0 million, or 7.4%. We believe that the trend
towards our sales of lower sales volume, but increased sales of higher priced
used vehicles contributed substantially to these results and expect this trend
to continue.

We expect that this environment and the manufacturers' incentive will continue
in the foreseeable future. Furthermore, we believe that the change our product
mix, i.e., our somewhat reduced concentration on the more profitable used
vehicle segment, will also continue. However, our ability to buy, at favorable
prices, quality used vehicles, ranging from entry level to luxury, and our
ability to find competitive financing sources for our customers, we believe,
will enable us to attract used vehicle purchasers and will be significant
factors in our ability to maintain our relatively high gross profit percentages.

Operating expenses. In the year ended December 31, 2004, operating expenses
increased approximately $1.4 million to approximately $62.3 million, from $60.9
million in 2003. In addition to the normal increase in selling, general and
administrative expenses relative to the growth of sales, this increase is
attributable, in large part, to the compensation earned by HB Automotive, Inc.
and Bruce Bendell, aggregating approximately $3.6 million in 2004 as compared
with approximately $1.2 million in 2003, an increase of approximately $2.4
million. A substantial offset to such increases was attributable to the
cost-cutting efforts initiated throughout our dealership group, with the most
significant decreases resulting from reductions in advertising expenditures,
which declined approximately $4.0 million to approximately $11.8 million in 2004
from approximately $15.8 million in 2003. Interest expense, related to our floor
plan and included in operating costs, also decreased by approximately $200,000
in 2004.

Goodwill write-down. As discussed under the caption "Critical Accounting
Policies - Long-lived Assets," above, we incurred a non-cash charge of $8.1
million in the fourth quarter of 2004. There was no comparable such charge in
any of our prior periods.

Interest expense. Interest expense had a net decrease of approximately $42,000
to approximately $738,000 in 2004, which represents a decline in interest as we
continue to repay our long-term debt obligations.

Income tax expense. For 2004, the effective tax rate is lower than the normal
effective tax rate, primarily, as a result of the tax effects of the
non-deductibility of the write-off of goodwill and a change in the valuation
allowance of the deferred tax asset of approximately $5.0 million and $1.0
million, respectively. Income tax expense is comprised of $88,000 of local
income taxes and $141,000 of federal income taxes. Deferred taxes, including
valuation allowances, are reviewed throughout fiscal 2004. In 2003, local income
tax expense of approximately $82,000 for the year ended December 31, 2003 was
calculated on pre-tax income from continuing operations.

                                       41

RESULTS OF CONTINUING OPERATIONS YEAR ENDED DECEMBER 31, 2003 AND YEAR ENDED
DECEMBER 31, 2002

Revenues. Revenues for the year ended December 31, 2003 decreased to
approximately $380.3 million, which is $17.6 million, or 4.4%, less than the
prior year's revenues of $397.9 million. Such decrease was solely attributable
to the revenues of our automotive dealership operations. The primary reasons for
the decrease in total revenue were (1) the significant decrease in unit sales of
new vehicles and (2) the large decrease in average selling prices for used
vehicles. New car unit sales decreased by 560 units, or 10.1% in 2003 from 2002,
while used car unit sales increased by 505 units, or only 3.1%, in the 2003 year
over the prior year. We believe that approximately one-third of the decrease in
new vehicle unit sales is attributable to our dealerships that were closed
during the prior year and the balance to our performance in the first half of
2003. Although the average sales price per new vehicle sold increased by $1,031
or 4.1% from the prior year, such increase was not sufficient to offset the
steep decline in unit sales. We believe that the exceptionally severe weather
conditions in our operating area in the first quarter of 2003, combined with the
negative effects on consumer spending caused by the anticipation and then the
realization of the war with Iraq during the first half of 2003 were the
significant contributory factors in our decreased revenues. Further, while in
2003 we increased the average number of used vehicles sold per month by 42 units
to 1,380 from 1,338 used vehicles, retail and wholesale, that were sold during
each of the months in the 2003 year, an increase of 3.1%, such increase was not
sufficient to offset the decline in the average sales price per used vehicle
sold of $766 or 5.2% from the prior year's average sales price per used vehicle.

New vehicle sales revenue was approximately $131.7 million in 2003, a decrease
of $9.0 million or 6.4% from 2002 new vehicle sales revenue of $140.7 million.
This decrease is significantly attributable to decreases in revenue from the
dealerships we closed during the 2002 fiscal year whose aggregate new vehicle
sales revenue decrease of approximately $4.5 million represents approximately
half of the total new vehicle revenue decrease.

Used vehicle sales revenue was $231.6 million in 2003 and $236.8 million in
2002, a decrease of approximately $5.2 million or 2.2%. The most significant
factor in this decrease was a decrease in sales at our Chevrolet dealership in
Long Island City, New York, whose used vehicle sales revenues decreased by 5.8%,
which was partially offset by increases in other dealerships, primarily our
Suzuki dealership located in Hempstead, Long Island. As noted above, our overall
used vehicle unit sales volume increased, but the average sales price decrease
more than offset the unit increase. We believe that the very competitive
marketplace in the New York metropolitan area contributed significantly to the
sales price decline.

Cost of sales. The cost of sales decreased $14.1 million, or 4.2%, to $319.7
million in the year 2003 from $333.8 million in the year ended December 31,
2002. The percentage decrease is approximately the same as the revenues
percentage decrease and reflects both the closed dealerships and an increase of
$909 or 4.0% in the average cost of new vehicles and a decrease of $557 or 4.6%
in the average unit cost of used vehicles. Because of the significantly greater
volume of used vehicle unit sales, this results in a net decrease in cost of
sales. As noted, above, the cost of sales in both years reflects the net effect
of floor plan interest and automotive manufacturers' floor plan assistance
incentives and advertising incentives.

Gross profit. Our automotive dealership operations generated almost all of the
total gross profit of $60.6 million for the year ended December 31, 2003
compared with the 2002 amount of $64.1 million, a decrease of $3.5 million or
5.5%. The gross profits decrease was generally attributable to the lower
percentage of decrease of cost of sales as compared with the overall percentage
decrease in sales revenue and, specifically, to (i) the decrease in new units
sold with a higher gross profit per vehicle and (ii) the correspondingly higher
number of used vehicles sold but with a significantly lower gross profit per
unit. In other words, we sold 560 fewer new vehicles in 2003 than we did in 2002
and although each had, on average, a gross profit in 2003 of $122 more than in
2002, the decreased volume led to a decrease in new vehicle gross profit.
Similarly, while we sold 505 more used vehicles in 2003 than we did in 2002,
each had an average decrease of $209 in gross profit. This resulted in a net
decrease in used vehicle gross profit. Our dealerships' overall gross profit as
a percentage of sales was 15.9%, compared with the industry average of 13.4%.

                                       42

Our gross profit percentage on new vehicles of 10.3% is above the industry
average of 5.4%, while our gross profit percentage on used vehicle sales of
17.4%, is significantly over the industry average used vehicle gross profit of
11.5%. We believe that our product mix, i.e., our concentration on the more
profitable used vehicle segment, our ability to buy, at favorable prices,
quality used vehicles, ranging from entry level to luxury, and our ability to
find competitive financing sources for our customers are the significant factors
in our relatively high gross profit percentages.

Operating expenses. In the year ended December 31, 2003, operating expenses
decreased approximately $0.8 million to approximately $60.9 million, from $61.7
million in 2002. We believe we have been successful in our efforts to generally
reduce operating expenses in light of the decline in revenues, the general
reductions we achieved was significantly offset by an increase of $1.3 million
in advertising expenses incurred to stimulate lagging sales.

Interest expense. Interest expense had a net decrease of approximately $180,000
to approximately $780,000 in 2003, which represents a decline in interest as we
continue to repay our long-term debt obligations.

Income tax expense. Local income tax expense of approximately $82,000 and
$190,000 for the years ended December 31, 2003 and 2002, respectively, was
calculated on pre-tax income from continuing operations. In 2002, we recorded
tax benefits of $138,000 in connection with our discontinued operations.

Discontinued operations. We had no loss from discontinued operations in the year
ended December 31, 2003, compared with a loss from discontinued operations of
$206,000 (net of $138,000 of income tax benefits) in the comparable prior
period. We believe that all potential expenses that could arise from our
previously discontinued operations have been provided for and anticipates that
no future such losses will be incurred.

LIQUIDITY AND CAPITAL RESOURCES - DECEMBER 31, 2004

At December 31, 2004, our total assets were approximately $86.0 million, a
decrease of approximately $1.6 million, or 1.8%, from our assets of $87.6
million at December 31, 2003. The significant changes among the components
included decreases of $8.1 million in goodwill and an $800,000 decrease in due
from related parties as partially offset by net increases in cash, accounts
receivable and inventories of $2.7 million, $1.8 million and $3.2 million,
respectively.

Our cash increase of $2,720,363 in the year ended December 31, 2004 was
primarily attributable to our operating activities, which provided cash of
$3,321,951. This increase is primarily attributable to our net loss of
$6,837,962, as adjusted for non-cash charges of $8,884,458, aggregating
$2,046,496, plus a net increase in liabilities, aggregating $5,296,957
(significantly, increases in accounts payable and accrued expenses totaling
$841,408, accrued expenses - related parties of $2,693,702 and floor plan notes
payable of $1,780,944), as partially offset by a net increase in assets of
$4,021,502 (principally, increases in accounts receivable and inventories of
$1,696,621 and $3,461,889, respectively, as partially offset by a decrease in
due from related parties of $805,079). Our inventories increased, primarily, as
a result of our taking advantage of favorable buying opportunities in
anticipation of the spring selling season and our accounts receivable increased,
primarily, as a result of our significantly higher sales volume in the fourth
quarter of 2004 as compared to the same quarter in the prior year.

Our investing activities used $549,400 of cash, with $600,356 used for additions
to property and equipment. We do not anticipate any significant increases in
spending for property and equipment in 2005.

Our financing activities used cash of $52,188. This was attributable to payments
of long-term debt of $302,188, net of an additional long-term obligation of
$250,000 we incurred in connection with the settlement of litigation.

The foregoing activities, i.e., operating, investing and financing, resulted in
a net cash increase of $2,720,363 for the year ended December 31, 2004.

                                       43

In September 2001, CFC, one of our primary floor plan credit sources for
approximately $30 million for the financing of our vehicle inventory, notified
us that CFC had re-evaluated its credit and lending relationship with us and was
requiring us to seek a replacement lending institution to refinance and replace
all existing CFC credit facilities. Consequently, in March 2002, we entered into
a floor plan financing arrangement with GMAC for GMAC to provide the floor plan
credit for the financing of our Chevrolet dealership's new and used vehicle
inventory. This is the flagship dealership of our operations and accounted for
more than 30% of our new vehicle revenues and more than 80% of our consolidated
used vehicle revenues in the year 2004. Additionally, in March 2002, we entered
into a credit agreement with HSBC pursuant to which HSBC is providing the floor
plan credit for the financing of our Chrysler/Jeep, Dodge and Kia dealerships'
new and used vehicle inventory. As a result of the GMAC and HSBC credit
facilities, we completed the replacement of financing for all of the dealerships
that were previously financed by CFC.

In May 2002, entered into an agreement with NMAC pursuant to which NMAC replaced
the then existing floor plan credit for the financing of our Nissan dealership's
new and used vehicle inventory up to an aggregate of $8.5 million. Subsequently,
in December 2002, NMAC took over the floor plan financing for our Suzuki
dealership up to an aggregate of $2 million.

In January 2003, we entered into an agreement with Primus pursuant to which
Primus replaced the then existing floor plan credit for the financing of our
Compass Dodge dealership's new and used vehicle inventory up to an aggregate of
$1.5 million.

We believe that the terms of each of these new floor plan lines, including
interest rates, are more favorable than those of each of the lines they replace.
In order to obtain floor plan financing at favorable rates, each of Bruce
Bendell and Harold Bendell agreed to either guarantee certain of our floor plan
debt or provide certain collateral in connection with our floor plan or other
borrowings. Our Board of Directors agreed to obtain independent valuations of
such credit enhancement and collateral usage and compensate each of the Bendells
the fair value of his respective contributions. Consequently, we engaged an
independent valuation firm to value the credit enhancement and received a
preliminary valuation from such firm of $160,000 for the economic risk value of
the credit enhancement. Accordingly, we accrued such amount as a liability in
the third quarter of 2002. In the third quarter of 2003, our Board of Directors
received additional indications that the value of the Credit Enhancement may
approximate $450,000. As such, we accrued an additional $290,000 in the third
quarter of 2003. In March 2004, our Board of Directors concluded that the
$450,000, as accrued, was the appropriate value of the portion of the Credit
Enhancement and, subsequently, agreed to extend the annual $450,000 Credit
Enhancement payments to Bruce Bendell as long-long as such Credit Enhancements
commitments remain in place at the levels at which they are currently
maintained.

We believe that the cash generated from existing operations, together with cash
on hand, available credit from our current lenders, including banks and floor
planning, will be sufficient to finance our current operations and internal
growth for at least the next twenty-four months. However, if we elect to expand
our dealership network through acquisitions, we will require additional
financing. There can be no assurance that, for such growth, funding will be
available. Nor can we be certain that we will have sufficient cash in the event
that we continue to incur losses and/or some or all of our significant
litigation and taxes issues are resolved in a manner that is negative to our
interests. We are exploring financing alternatives with respect to our projected
cash requirements.

<TABLE>

                                       TOTAL             < 1 YEAR         1 - 3 YEARS         4 - 5 YEARS        > 5 YEARS
                                 ------------------ -------------------------------------- ------------------ -----------------

CONTRACTUAL OBLIGATIONS:

Floor Plan Notes                    $ 51,380,310       $51,380,310       $          -       $           -       $         -

Interest                               2,866,070           698,302          1,368,020             587,119           212,629

Long-term Debt                         7,805,677           895,408          3,394,583           1,367,040         2,148,646

Operating Lease Obligations            4,321,583         1,193,500          2,654,500             394,000            79,583
                                 ------------------ -------------------------------------- ------------------ -----------------

                                    $ 66,373,640       $54,167,520       $  7,417,103        $  2,348,159       $ 2,440,858
                                 ================== ====================================== ================== =================
</TABLE>

                                       44

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

Although we sell some vehicles in certain Eastern European and other countries,
principally, Ukraine, Belarus and Kazakhstan, substantially all our revenues
come from sales of vehicles in the United States. Consequently, foreign sales
constitute a minimal amount of our revenues. Even so, our financial results
could be affected by changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Because substantially all our revenues are
currently denominated in U.S. dollars, a strengthening of the dollar could make
our vehicles less competitive in foreign markets. Due to the nature of our
investments and operations, we believe that there is not a material risk
exposure.

INTEREST RATE RISK

Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since all of our investments are in short-term
instruments, including money market funds. Our interest rate expense is also
sensitive to changes in the general level of U.S. interest rates because the
interest rate charged varies with the prime rate. Due to the nature of our
operations, we believe that there is not a material risk exposure.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this Item 8 are set forth in Item 15 of
this Form 10-K. All information which has been omitted is either inapplicable or
not required.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We carried out an evaluation under the supervision and with the participation of
our Chief Executive Officer, who is also our Chief Financial Officer, of the
design and effectiveness of our disclosure controls and procedures, as defined
in the Exchange Act Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as of the end of the period covered by
this report (the "Evaluation Date"). Based on this evaluation of our disclosure
controls and procedures, we have concluded that, as of the Evaluation Date, our
disclosure controls and procedures were not effective in timely alerting us to
material information required to be included in our periodic SEC reports. We
have insufficient accounting personnel who can analyze, record and resolve
complex transactions and accounting matters, including certain inventory
reconciliations, on a timely basis. With respect to a relatively small portion
of our inventory, specifically, certain vehicles not covered by floor plan
financing, we have recognized some weaknesses in financial reporting procedures.
However, the error which did occur during 2004 with respect to this inventory
was less than 1% of the total inventory and not material to the financial
statements.

In response to the matters discussed above, we intend to take the following
steps to strengthen our internal controls over financial reporting:

     Expand our accounting and reporting resources by adding a
     full-time chief financial officer and such other accounting personnel, as
     required.

     Strengthen our inventory reporting controls by providing more
     frequent period-end reconciliations of physical to book inventory
     differences.

CHANGES IN INTERNAL CONTROLS

There were 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 financing reporting.

                                       45

ITEM 9B. OTHER INFORMATION

The Company did not have any reportable events during the fourth quarter of the
fiscal year ended December 31, 2004 which were be required to be filed on Form
8-K which were not so reported.

                                       46

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

As of June 30, 2005, our current directors and executive officer and their
respective ages are as follows:

NAME                               AGE   POSITION
----                               ---   --------

Bruce Bendell  ................... 51    Chairman of the Board, President,
                                         Chief Executive Officer and
                                         Acting Chief Financial Officer

David Edelstein  (1)(2)........... 51    Director

Steven Hornstock (1)(2)........... 55    Director

Alan A. Pearson (1)(2) ........... 60    Director

Jeffrey Weiner  .................. 47    Director

(1) Member of the Audit Committee
(2) Member of the Compensation Committee

The following is a brief description of the professional experience and
background of our directors and executive officer:

Bruce Bendell. Mr. Bendell has served as the Chairman of our Board of Directors
since our formation in November 1995, our President and Chief Operating Officer
since September 2001, and as our Acting Chief Financial Officer since October
2003. Mr. Bendell served as our Chief Executive Officer from May 1998 until
February 2000, as our President from May 14, 1998 to December 1998, and as our
Chief Executive Officer since July 2000. Mr. Bendell has also served as the
President and a Director of Major Auto and its affiliates since December 1985.

David Edelstein. Mr. Edelstein has served as our Director since May 1998. Mr.
Edelstein has been in the real estate development business since 1979. Currently
Mr. Edelstein is the Managing Member of Sutton East Associates LLC, a real
estate development limited liability company and is involved in several sizable
real estate projects in New York and Florida.

Steven Hornstock. Mr. Hornstock has served as our Director since December 2002.
Mr. Hornstock is a senior partner at Altman\Burack Partners, LLC, an affiliate
of Murray Hill Properties, TCN, since April 2000. From October 1994 to April
2000, Mr. Hornstock served as director of investment sales at Helmsley Spear
Inc. Mr. Hornstock was also founding partner in Sutton East Associates, where he
worked from 1982 to 1993. Mr. Hornstock has been active in the real estate
business for the past 25 years as a developer, owner and investment sales
broker. Mr. Hornstock is a licensed real estate broker in the state of New York,
a member of the Real Estate Board of New York (REBNY), a member of the REBNY
Sales Brokers Committee and a founding board member of the New York Owners
Council.

Alan A. Pearson. Mr. Pearson has served as our director since July 2004. Mr.
Pearson has been the Chief Financial Officer of Conesko Doka, Ltd., a
construction supply company, since August 1977, and served as a member of its
board of directors from 1985 to 2000.

Jeffrey Weiner. Mr. Weiner has served as our Director since May 1998. Mr. Weiner
is a certified public accountant and has been with the accounting firm of Marcum
& Kliegman LLP, where he is currently Managing Partner, since 1981.

                                       47

Key Employee

The following person, although not an executive officer or director, is regarded
by us as a key employee:

Harold Bendell. Mr. Bendell, age 56, has served as a senior executive of Major
Dealer Group since December 1985. He, together with his brother, Bruce Bendell,
is responsible for the day-to-day operations of the Major Dealer Group.

COMMITTEES OF THE BOARD OF DIRECTORS

We have the following standing committees: a Compensation Committee and an Audit
Committee. The Compensation Committee is comprised of Mr. Edelstein, Mr.
Hornstock and Mr. Pearson, each of whom is a non-employee director. The
Compensation Committee determines the compensation of our Chief Executive and
recommends to the Board of Directors the compensation of other principal
executive officers.

The Audit Committee reviews, acts on and reports to our Board of Directors with
respect to various auditing and accounting matters, including selecting our
independent auditors, the scope of the annual audits, fees to be paid to the
auditors, the performance of our independent auditors and our accounting
practices. The members of the Audit Committee currently are Mr. Edelstein, Mr.
Hornstock and Mr. Pearson, each of whom is a non-employee director.

We do not currently have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole. In making its nominations, the Board of Director identifies candidates
who meet the current challenges and needs of the Board of Directors. In
determining whether it is appropriate to add or remove individuals, the Board of
Directors will consider issues of judgment, diversity, age, skills, background
and experience. In making such decisions, the Board of Directors considers,
among other things, an individual's business experience, industry experience,
financial background and experiences.

Audit Committee Financial Expert

Our Board of Directors has determined that Mr. Pearson, the Chairman of our
Audit Committee, is an audit committee financial expert, as that term is defined
under Regulation S-K, Item 401(h).

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our officers and directors, and
persons who own more than ten percent (10%) of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the
Commission. Officers, directors and greater than ten percent (10%) stockholders
are required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file. Based solely on our review of the copies of such forms received
by us, or written representations from certain reporting persons, we believe
that all required reports have been filed timely during 2004 except for Forms 4
that should have been filed on behalf of Messrs. Edelstein, Hornstock, Weiner
and Pearson relating to an option each of whom was granted on December 17, 2004
to purchase 4,500 shares of our common stock pursuant to our 2001 Outside
Director Stock Option Plan.

Code of Ethics

We have adopted a "Code of Ethics," as defined by regulations promulgated under
the Securities Act and the Exchange Act and a "Code of Conduct," as defined by
qualitative listing requirements promulgated by the Nasdaq National Market, that
apply to all of our directors, officers and employees, including our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. We collectively refer to
these codes as our Code of Conduct and Ethics, a current copy of which was filed
as an exhibit to our Annual Report on Form 10-K for the year ended December 31,
2003. A copy of the Code of Conduct and Ethics is available on our website at
www.majorworld.com and print copies are available to any shareholder who

                                       48

requests a copy. Any amendment to the Code of Conduct and Ethics or any waiver
of the Code of Conduct and Ethics will be disclosed on our website promptly
following the date of such amendment or waiver.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information for each of our fiscal years ended
December 31, 2004, 2003 and 2002 concerning compensation of our sole executive
officer (the "Named Executive Officer"):

SUMMARY COMPENSATION TABLE

<TABLE>

                                                                                                        LONG-TERM
                                                                   ANNUAL COMPENSATION                 COMPENSATION
                                                                   -------------------                 ------------
                                                                                                       SECURITIES
                                                                                                       UNDERLYING
NAME AND PRINCIPAL POSITION                        YEAR       SALARY        BONUS        OTHER         OPTIONS (#)
---------------------------                        ----       ------        -----        -----         -----------

Bruce Bendell (1) .............................     2004     $500,000       $386,455        0               0
Chairman of the Board, President,
Chief Executive Officer and Acting                  2003     $500,000       $ 77,336        0               0
Chief Financial Officer
                                                    2002     $500,000      $ 461,379        0               0
</TABLE>

(1) In May 2001, the Compensation Committee of our Board of Directors approved
    an adjustment to Mr. Bendell's compensation package that included an
    increase in his base salary to $500,000 per year for the period July 1, 2001
    to June 30, 2004 and, effective April 1, 2001 a bonus equal to 10% of the
    net income attributable to our automotive operations after all expenses,
    including bonus amounts paid to other employees. The amounts shown for each
    of the years reflect those terms. In addition to his compensation for
    services, in March 2004, Mr. Bendell received $450,000 for a credit
    enhancement arrangement through which he provided personal guarantees in
    connection with our various floor plan credit lines. In 2004, an additional
    $450,000 has been accrued as compensation to Mr. Bendell in connection with
    the continuation of such credit enhancement arrangement. See "Certain
    Relationships and Related Transactions."

OPTION/SAR GRANTS IN LAST FISCAL YEAR

No stock options were granted to the Named Executive Officer during 2004. We
have never granted any stock appreciation rights.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

No options were exercised by the Named Executive Officer during the fiscal year
ended December 31, 2004. There were no unexercised "in-the-money" options held
by the Named Executive Officer as of December 31, 2004.

COMPENSATION OF DIRECTORS

Non-employee Directors each received 4,500 shares of our common stock and
options to purchase 4,500 shares of common stock in 2004 under our 2001 Outside
Directors Stock Plan. We reimburse directors for their expenses of attending
meetings of the Board of Directors.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

On July 24, 2003, we entered into an employment agreement effective January 1,
2003 with Bruce Bendell, pursuant to which he serves as our President, Chief
Executive Officer and Acting Chief Financial Officer. The agreement extended
automatically for an additional one-year period at the end of the initial term,
June 30, 2004, and extends

                                       49

for an additional one-year period on each anniversary thereafter, unless 90-day
prior notice of termination is provided by either Mr. Bendell or us. The
agreement provides for an annual base salary of $500,000 and a quarterly bonus
equal to 10% of the net income of our automotive operations after all expenses,
including any other bonuses paid or accrued. In the event that Mr. Bendell's
employment is terminated prior to June 30, 2004, he will continue to receive his
base salary and a guaranteed annual bonus of $250,000 per year until that date.

In March 2004, we agreed in principal with Harold Bendell that, effective
January 1, 2004, he would serve as a manager of operations of Major Auto. The
agreement extends automatically for an additional one-year period at the end of
the initial term and on each anniversary thereafter, unless 90-day prior notice
of termination is provided by either Mr. Bendell or us. The agreement provides
for an annual base salary of $500,000. Additionally, in March 2004, we agreed in
principal to a consulting agreement with HB Automotive, Inc. ("HB Automotive"),
a company owned by Harold Bendell, that, effective January 1, 2004, HB
Automotive provide dealership management consulting services to us and for us to
compensate HB Automotive. The agreement provides for a $200 fee for each used
vehicle sold at our Chevrolet dealership and to a participation in the pre-tax
profits of Major Auto. Had the per-vehicle fee provision been in effect on
January 1, 2003, HB Automotive would have earned an additional $2 million in
2003. In 2004, we accrued $2,484,000 as due to HB Automotive pursuant to this
agreement. We believe that definitive agreements memorializing such terms will
be executed by both parties.

On March 3, 1997, in connection with the acquisition of Major Auto from the
Bendells, we entered into a management agreement with the Bendells, which gave
them control over the day-to-day operations of Major Auto. In March 2004, we
extended the term of the management agreement until December 31, 2005. The
management agreement had been extended from its initial termination upon the
mutual oral agreement of the parties.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of our Board of Directors consists of Messrs.
Edelstein, Hornstock and Pearson, none of whom has been an officer or employee
at any time since our inception. Our executive officer does not serve as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our Board of Directors
or Compensation Committee. Prior to the formation of the Compensation Committee,
the Board of Directors as a whole made decisions relating to the compensation of
our executive officers.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee of the Board of Directors is responsible for
establishing, monitoring, and implementing the policies of governing the
compensation of the Company's executives. The Compensation Committee believes
that the compensation programs for our executive officers should reflect our
performance and the value created for our stockholders. In addition, the
compensation programs should support our short-term and long-term strategic
goals and values and should reward individual contribution to our success. The
Compensation Committee, which is comprised entirely of non-employee members of
our Board of Directors, has furnished the following report on executive
compensation.

General Compensation Policy. The Compensation Committee's policy is to provide
our executive officers with compensation opportunities that are based upon their
personal performance, our financial performance and their contribution to that
performance and which are competitive enough to attract and retain highly
skilled individuals. Each executive officer's compensation package is comprised
of a base salary, bonus and long-term incentive awards. We review compensation
levels of other companies in its industry to ensure that our executive
compensation is appropriate in light of industry practices.

Base Salary. The salary for our executive officer for 2004 was generally
determined by the Board of Directors by taking into account the individual's
experience and performance and our specific needs. For 2005, the

                                       50

Compensation Committee will review the base salaries of executive officers by
evaluating each executive's scope of responsibility, performance, prior
experience and salary history, as well as the salaries for similar positions at
comparable companies.

Bonus. We award bonuses as a reward for performance based principally on our
overall financial results and or achievements of specified business objectives.
We believe that bonuses properly motivate the officers to perform to the
greatest extent of their abilities to generate the highest attainable profits
for us. In 2004, a bonus of $386,455 was accrued for Bruce Bendell.

Long Term Incentive Awards. The Compensation Committee believes that
equity-based compensation in the form of stock options links the interests of
executives with the long-term interests of our stockholders and encourages
executives to remain in our employ. We grant stock options in accordance with
our various stock option plans. Grants are awarded based on a number of factors,
including the individual's level of responsibility, the amount and term of
options already held by the individual, the individual's contributions to the
achievement of our financial and strategic objectives, and industry practices
and norms.

Compensation of Chief Executive Officer. Bruce Bendell was paid a base salary of
$500,000 for the year ended December 31, 2004. See "Employment Contracts,
Termination of Employment and Change-In-Control Arrangements."

Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
publicly held companies for compensation exceeding $1 million paid to certain of
our executive officers. The limitation applies only to compensation that is not
considered to be performance-based. The non-performance based compensation paid
to our executive officers in 2004 did not exceed the $1 million limit per
officer and the Compensation Committee does not anticipate that the
non-performance based compensation to be paid to our executive officers in 2005,
if any, will exceed that limit. Our stock option plans are structured so that
any compensation deemed paid to an executive officer in connection with the
exercise of option grants made under that plan will qualify as performance-based
compensation which will not be subject to the $1 million limitation. The
Compensation Committee currently intends to limit the dollar amount of all other
compensation payable to our executive officers to no more than $1 million. The
Compensation Committee is aware of the limitations imposed by Section 162(m),
and the exemptions available therefrom, and will address the issue of
deductibility when and if circumstances warrant.

                                       51

STOCK PRICE PERFORMANCE GRAPH

Our common stock commenced trading on the Nasdaq Small Cap Market on October 7,
1998 and on the Nasdaq National Market under the symbol "FDHG" on August 3,
1999. Our symbol was changed to "MAJR" on May 2, 2001. Subsequently, our common
stock was transferred back to the Nasdaq SmallCap Market on January 2, 2003 and
then transferred to the Over-the-Counter Bulletin Board.on November 10, 2004
with the symbol "MAJR.OB."

The stock price performance graph below compares the cumulative total
stockholder return on our common stock with the Total Return Index for Nasdaq
Stock Market U.S. Companies and the Nasdaq Non-Financial Index for the period
commencing on December 31, 1999 and ending December 31, 2004. The graph assumes
that $100.00 was invested in the common stock and in each index on December 31,
1997. The total return for the common stock and the indices used assumes the
reinvestment of dividends, even though dividends have not been declared on the
common stock. The information contained in the graph does not reflect present
performance of our stock.

The information contained in the performance graph shall not be deemed
"soliciting material" or to be "filed" with the Commission nor shall such
information be deemed incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that we specifically
incorporate it by reference into such filing.

                                       52

                 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
                   AMONG THE MAJOR AUTOMOTIVE COMPANIES, INC.,
                      THE NASDAQ STOCK MARKET (U.S.) INDEX
                       AND THE NASDAQ NON-FINANCIAL INDEX

                               [GRAPHIC OMITTED]

* $100 invested on 12/31/99 in stock or index - including reinvestment of
  dividends. Fiscal year ending Decmeber 31.

                                       53

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Stock Option Plans

Our currently active stock option plans include the 1999 Employee Stock Option
Plan (the "1999 Plan") and the 2001 Outside Director Option Plan (the "2001
Plan").

The 1999 Plan is intended to enhance our ability to provide individuals with
awards and incentives commensurate with their contributions and compete with
those offered by other employers, and to increase stockholder value by further
aligning the interests of these individuals with the interests of our
stockholders by providing an opportunity to benefit from stock price
appreciation that generally accompanies improved financial performance. The 1999
Plan provides for the granting of options to purchase up to an aggregate of
1,100,000 shares of our authorized but unissued common stock to our officers,
directors, employees, consultants and independent contractors.

The 2001 Plan is intended to attract and retain the best available personnel for
service as our outside directors, to provide additional incentive to our outside
directors to serve as Directors and to encourage their continued service on the
Board of Directors. The 2001 Plan provides for automatic and nondiscretionary
grants of options and share grants to outside directors. Specifically, on each
date of our annual stockholders' meetings, each outside director who served as a
member of the Board of Directors shall be automatically granted an option to
purchase 4,500 shares of our common stock. The term of the option is for ten
(10) years. The option is exercisable only while the outside director remains on
the Board. Additionally, on April 30 and on each anniversary thereafter, each
outside director who served as a member of the Board of Directors shall be
automatically granted 4,500 shares of our common stock. The shares issued
pursuant to a share grant vest fully and immediately upon issuance. The 2001
Plan provides for the granting or issuance of 250,000 shares of our authorized
but unissued common stock.

Securities Authorized for Issuance Under Equity Compensation Plans.

The following table sets forth information as of December 31, 2004 with respect
to compensation plans under which our equity securities are authorized for
issuance.

<TABLE>

-------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Number of securities
                                                                                                   remaining available for
          Plan Category      Number of securities to be                                         future issuance under equity
                              issued upon exercise of         Weighted-average exercise              compensation plans
                               outstanding options,         price of outstanding options,           (excluding securities
                                warrants and rights              warrants and rights              reflected in column (a))
-------------------------------------------------------------------------------------------------------------------------------
                                       (a)                              (b)                                 (c)
--------------------------------------------------------------------------------------------------------------------------------

Equity compensation
plans approved by
security holders                   280,888 (1)                       $3.38                            1,069,112 (2)
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by                   -                              -                                    -
security holders
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Total                                280,888                         $3.38                              1,069,112
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 213,388 options issued and outstanding under the 1999 Plan with an
average exercise price of $4.24 per share, and 67,500 options issued and
outstanding under the 2001 Outside Director Plan with an average exercise price
of $0.68 per share.

                                       54

(2) Includes 886,612 shares available for issuance under the 1999 Plan and
182,500 shares available for issuance under the 2001 Plan.

As of April 12, 2005, 1,100,000 options were authorized under the 1999 Plan and
options to purchase 213,388 shares were outstanding and 886,612 options were
available for future grants. As of April 12, 2005, 250,000 options were
authorized under the 2001 Plan, 67,500 options to purchase shares had been
granted and 182,500 options were available for future grants.

Security Ownership Of Certain Beneficial Owners And Management

The following tables sets forth information with respect to the beneficial
ownership of each class of our securities as of June 30, 2005, respectively, by
(i) each of our directors, (ii) each of our executive officers, (iii) all of our
directors and executive officers as a group and (iv) each person known to us to
own more than 5% of any class of our securities:

<TABLE>

      ---------------------------------------------------------------------------------------------------
      NAME AND ADDRESS OF BENEFICIAL OWNER                      NUMBER OF SHARES          PERCENT OF
                                                                                          CLASS (1)
      ---------------------------------------------------------------------------------------------------

      Executive Officers and Directors:
      ---------------------------------------------------------------------------------------------------
      Bruce Bendell.......................................         4,459,235 (2)              48.35%
      ---------------------------------------------------------------------------------------------------
      David Edelstein.....................................            64,580 (3)(4)            *
      ---------------------------------------------------------------------------------------------------
      Steven Hornstock ...................................            27,090 (5)               *
      ---------------------------------------------------------------------------------------------------
      Alan Pearson........................................             9,000 (6)               *
      ---------------------------------------------------------------------------------------------------
      Jeffrey Weiner......................................           128,090 (7)              1.37%
      ---------------------------------------------------------------------------------------------------
      All directors and executive officers as a group.....         4,687,995 (8)(9)          49.45%
      ---------------------------------------------------------------------------------------------------

      ---------------------------------------------------------------------------------------------------
      Other 5% Stockholders:
      ---------------------------------------------------------------------------------------------------
      None
      ---------------------------------------------------------------------------------------------------
</TABLE>

*    Represents less than 1% of the outstanding shares of common stock.

(1)  Based on 9,222,228 shares of common stock outstanding on June 30, 2005.

(2)  Includes: (i) 5 shares of common stock owned by Mr. Bendell's wife and the
     following shares of common stock which Mr. Bendell has the right to acquire
     within 60 days: 22,500 shares of common stock which Mr. Bendell has the
     right to acquire upon the exercise of warrants; and (ii) options for 80,000
     shares of common stock which are immediately exercisable.

(3)  Includes options for 43,700 shares of common stock, which are immediately
     exercisable.

(4)  Includes 1,980 shares of common stock owned by Mr. Edelstein's children.

(5)  Includes 90 shares of common stock owned by Mr. Hornstock's wife and
     options for 13,500 shares of common stock, which are immediately
     exercisable.

(6)  Includes options for 4,500 shares of common stock, which are immediately
     exercisable.

(7)  Includes options for 93,700 shares of common stock, which are immediately
     exercisable and 900 shares of common stock owned by Mr. Weiner's wife.

(8)  Includes (i) 2,975 shares of common stock owned by immediate family members
     of directors and executive officers as a group, (ii) 22,500 shares of
     common stock that the directors and executive officers as a group have the

                                       55

     right to acquire within 60 days and (iii) options for 248,900 shares of
     common stock which are immediately exercisable.

(9)  The address for each executive officer and director is c/o The Major
     Automotive Companies, Inc., 43-40 Northern Boulevard, Long Island City, NY
     11101.

                                       56

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have retained the accounting firm of Marcum & Kliegman LLP to provide certain
accounting and tax services for our subsidiary, Major Fleet, and us. In 2004, we
were billed approximately $87,500 by Marcum & Kliegman LLP for its services. Mr.
Weiner, one of our directors, is the Managing Partner of Marcum & Kliegman LLP.

The Bendells have interests in several non-affiliated auto dealerships,
including Five Towns Nissan, Bronx Automotive Group, HB Automotive, Mitsubishi
of Hempstead and Major of Pennsylvania, for which we purchase cars and provide
other services, and from which we buy vehicles. We charge a fee to offset any
expenses incurred in providing our services. The volume of such transactions is
immaterial to our operations, with such related-party sales aggregating
approximately $6.0 million and such related-party purchases aggregating
approximately $7.0million in 2004. At December 31, 2004, these affiliated
dealerships were indebted to us in an aggregate amount of approximately $1.7
million.

On December 11, 2000, we issued to M&K Equities, Ltd., a New York corporation
("M&K"), which is an affiliate of Jeffrey Weiner, a member of our Board of
Directors, a senior subordinated secured promissory note in the principal amount
of $2,000,000 in consideration for a $2,000,000 loan from M&K. The note was
initially due on December 11, 2002 (the "Maturity Date") at a rate per annum of
ten percent (10%). The Maturity Date of the note has been extended until January
2, 2006. The total amount outstanding at December 31, 2004 was $1,270,000.
Interest under the note is payable in monthly installments with all outstanding
principal and interest due on the Maturity Date. In order to induce M&K to make
the loan, we also agreed to grant a lien on and security interest in all of our
assets, other than our technology assets, as collateral security for the due
payment and performance of all indebtedness, liabilities and obligations under
the note, which collateral is set forth in a security agreement, subject to
prior senior liens. Mr. Weiner also received options under the 1999 Plan to
purchase 50,000 shares of our common stock at an exercise price of $2.35. The
fair value ascribed to the options was approximately $95,000, based on the
Black-Scholes option-pricing model. Such amount was recorded as a deferred
charge and as additional paid-in-capital of stockholders equity. The amount of
the deferred charge has been amortized over the initial term of the note, with
the Company having charged $47,500 to operations in each of the years 2002 and
2001.

We purchase from and sell vehicles to Nawi Leasing, Inc., a company of which
Steven Nawi is President. Mr. Nawi was a member of our Board of Directors until
July 2004. During the year 2004, there were no sales to Nawi Leasing, Inc. and
purchases from Nawi Leasing, Inc. and its affiliates represented approximately
$218,000.

In connection with the acquisition of our Nissan dealership in Hempstead, New
York, we obtained an option to acquire that dealership's land and building from
the landlord who held the lease on that property. We exercised our option, but
were unable to obtain the financing necessary to effect the purchase. Since the
lease expiration was concurrent with the required property acquisition date and
we were unsuccessful in obtaining an extension of the lease term, it became
imperative to the Nissan dealership's operations to maintain its presence at
that location. In order to ensure continuity of the dealership's operations, in
a transaction approved by our Board of Directors, the Bendells agreed to
personally acquire the property through a company they formed and lease it back
to us. The result of this transaction was to eliminate the capitalized lease of
approximately $3.6 million and the related liability of $3.0 million that we had
recorded in connection with this property. The difference of $637,000, the book
value of the purchase option, was recorded as a long-term related party
receivable, which is included in other non-current assets. We entered into a
lease with the new landlord for five years with a five-year renewal option for
approximately the same monthly rental we were previously paying. The receivable
will be repaid, ratably, through monthly payments over the remaining term of the
lease, including extensions to the initial term, together with related interest
at a market rate. Bruce Bendell has guaranteed payment in the event the lease is
prematurely terminated. Based on the report of an independent appraiser, the
purchase option was recorded at its fair value and the monthly rent is at a
market rate.

In unrelated transactions, in order to obtain floor plan financing at favorable
rates, each of the Bendells has agreed to either guarantee certain of our floor
plan debt or provide certain collateral in connection with our floor plan or
other borrowings. Our Board of Directors agreed to obtain independent valuations
the Credit Enhancements and

                                       57

pay each of the Bendells the fair value of his respective contributions. We
engaged an independent valuation firm and received a preliminary valuation from
such firm of $160,000 for the economic risk value of the Credit Enhancement.
Accordingly, we accrued such amount as a liability in the third quarter of 2002.
In the third quarter of 2003, our Board of Directors received additional
indications that the value of the Credit Enhancement may approximate $450,000.
As such, we accrued an additional $290,000 in the third quarter of 2003. In
March 2004, our Board of Directors concluded that the $450,000, as accrued, was
the appropriate value of the Credit Enhancement. At December 31, 2004, we have
accrued, but not paid, an aggregate of $1,355,735, due to Bruce Bendell for
bonuses and credit enhancement, which amount is included in accrued expenses.
Included in the amount, is a credit enhancement of $900,000, of which $450,000
was accrued in 2004. The Company's Board of Directors approved this amount. In
addition, we have a receivable from Bruce Bendell of $1,395,358, based on
advances made to him prior to 2002, recorded as due from related parties on our
balance sheets.

In March 2004, we agreed in principal with Harold Bendell that, effective
January 1, 2004, he would serve as a manager of operations of Major Auto. The
agreement extends automatically for an additional one-year period at the end of
the initial term and on each anniversary thereafter, unless either Mr. Bendell
or we provide 90-day prior notice of termination. The agreement provides for an
annual base salary of $500,000. Additionally, in March 2004, we agreed in
principal to a consulting agreement with HB Automotive, Inc. ("HB Automotive"),
a company owned by Harold Bendell, that, effective January 1, 2004, HB
Automotive provide dealership management consulting services to us. The
agreement provides for a $200 fee for each used vehicle sold at our Chevrolet
dealership and to a participation in the pre-tax profits of Major Auto. In 2004,
we accrued $2,484,000 as due to HB Automotive pursuant to this agreement.

Harold Bendell has acquired the right to an off premises storage facility that
was previously leased by us, on a month-to-month basis, from an independent
third party. Accordingly, we are leasing such space from Mr. Bendell for $15,000
per month, approximately the same monthly rental we were paying to the prior
landlord.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. All of the fees billed by our principal accountant, BDO Seidman,
LLP, in 2004 and 2003 were audit fees incurred in connection with our annual
audit and reporting on Forms 10-K and for reviews in connection with our
quarterly reporting on Forms 10-Q. The aggregate fees billed for such services
were approximately $444,000 and $452,000 in 2004 and 2003, respectively.

Audit-Related Fees. There were no other audit-related services performed or fees
billed by our principal accountant, BDO Seidman, LLP, in 2004 and 2003.

Tax Fees. There were no tax services performed or fees billed by our principal
accountant, BDO Seidman, LLP, in 2004 and 2003.

All Other Fees. There were no other services performed or fees billed by our
principal accountant, BDO Seidman, LLP, in 2004 and 2003.

Pre-Approval Policies. Pursuant to the rules and regulations of the Commission,
before our independent accountant is engaged to render audit or non-audit
services, the engagement must be approved by our Audit Committee or entered into
pursuant to the Audit Committee's pre-approval policies and procedures. The
policy granting pre-approval to certain specific audit and audit-related
services and specifying the procedures for pre-approving other services is set
forth in the Amended and Restated Charter of our Audit Committee.

                                       58

ITEM. 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)      Exhibits

         EXHIBIT NUMBER     DESCRIPTION                                     PAGE

         3.1 (1)            Articles of Incorporation of Fidelity
                            Holdings, Inc., ("Company") incorporated
                            by reference to Exhibit 3.1 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         3.2 (1)            Articles of Incorporation of Computer
                            Business Sciences, Inc., incorporated by
                            reference to Exhibit 3.2 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         3.3 (1)            Articles of Incorporation of 786710
                            (Ontario) Limited, incorporated by
                            reference to Exhibit 3.3 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         3.4 (1)            Articles of Incorporation of Premo-Plast,
                            Inc., incorporated by reference to
                            Exhibit 3.4 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         3.5 (1)            Articles of Incorporation of C.B.S.
                            Computer Business Sciences Ltd.,
                            incorporated by reference to Exhibit 3.5
                            of Company's Registration Statement on
                            Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         3.6 (1)            Articles of Incorporation of Major Fleet
                            & Leasing Corp., incorporated by
                            reference to Exhibit 3.6 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         3.7 (1)            Articles of Incorporation of Reynard
                            Service Bureau, Inc., incorporated by
                            reference to Exhibit 3.7 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         3.8 (1)            Articles of Incorporation of Major
                            Acceptance Corp., incorporated by
                            reference to Exhibit 3.8 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         3.9 (1)            By-Laws of the Company incorporated by
                            reference to Exhibit 3.9 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         3.10 (14)          Certificate of Amendment to Articles of
                            Incorporation of the Company filed on
                            December 12, 2000.                             N/A

         4.1 (1)            Certificate of Designation for the
                            Company's 1996-MAJOR Series of
                            Convertible Preferred Stock, incorporated
                            by reference to Exhibit 4.1 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         4.1(i) (2)         Form of Amended and Restated Certificate
                            of Designation for the Company's
                            1996-MAJOR Series of Convertible
                            Preferred Stock.                               N/A

                                 59

         4.2 (1)            Warrant Agreement for Nissko Warrants,
                            incorporated by reference to Exhibit 4.2
                            of Company's Registration Statement on
                            Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         4.3 (1)            Warrant Agreement for Major Fleet
                            Warrants, incorporated by reference to
                            Exhibit 4.3 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         4.3(i) (2)         Amended and Restated Warrant Agreement,
                            dated October 11, 1997 between the
                            Company, Bruce Bendell and Harold
                            Bendell.                                       N/A

         4.4 (1)            Warrant Agreement for Progressive
                            Polymerics International, Inc. Warrants,
                            incorporated by reference to Exhibit 4.4
                            of Company's Registration Statement on
                            Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         4.5 (2)            Form of Certificate of Designation for
                            the Company's 1997A-Major Automotive
                            Group Series of Preferred Stock.               N/A

         4.6 (2)            Form of Certificate of Designation for
                            the Company's 1997 Major Series of
                            Convertible Preferred Stock.                   N/A

         4.7 (2)            Form of Registration Rights Agreement
                            between the Company and Bruce Bendell.         N/A

         4.8 (2)            Stock Pledge and Security Agreement,
                            dated March 26, 1996, between Doron
                            Cohen, Bruce Bendell, Avraham Nissanian,
                            Yossi Koren, Sam Livian and Robert
                            Rimberg.                                       N/A

         4.9 (2)            Form of Registration Rights Agreement
                            between the Company, Castle Trust and
                            Management Services Limited and Bruce
                            Bendell.                                       N/A

         4.10 (2)           Form of the Company's 10% Convertible
                            Subordinated Debenture due 1999.               N/A

         4.11 (4)           Certificate of Designation for the
                            Company's 1997-Major Series of
                            Convertible Preferred Stock.                   N/A

         4.11 (6)           Form of Warrant.                               N/A

         4.12 (6)           Form of CBS Warrant.                           N/A

         4.13 (6)           Form of Debenture.                             N/A

         4.14 (7)           Form of Closing Warrant.                       N/A

         4.15 (7)           Form of Adjustable Warrant.                    N/A

         4.16 (8)           Form of Closing Warrant.                       N/A

         4.17 (8)           Form of Adjustable Warrant.                    N/A

         4.18 (9)           Form of Closing Warrant.                       N/A

         4.19 (9)           Form of Adjustable Warrant.                    N/A

         10.1 (1)           Employment Agreement, dated November 7,
                            1995, between the Company and Doron
                            Cohen, incorporated by reference to
                            Exhibit 10.1 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

                                 60

         10.1(i) (2)        Amendment No. 1 to Employment Agreement,
                            dated as of November 7, 1995 between the
                            Company and Doron Cohen.                       N/A

         10.2 (1)           Consulting Agreement, dated November 7,
                            1995, between the Company and Bruce
                            Bendell, incorporated by reference to
                            Exhibit 10.2 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         10.2(i) (2)        Amendment No. 1 to Consulting Agreement,
                            dated as of November 7, 1995 between
                            Fidelity Holdings, Inc. and Bruce
                            Bendell.                                       N/A

         10.3 (1)           Agreement for Purchase of Patents, dated
                            November 14, 1995, between the Company
                            and Progressive Polymerics, Inc.,
                            incorporated by reference to Exhibit 10.3
                            of the Company's Registration Statement
                            on Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         10.3(i) (1)        First Amendment, dated September 30,
                            1996, to Agreement for Purchase of
                            Patents, dated November 14, 1995,
                            incorporated by reference to Exhibit 10.4
                            of Company's Registration Statement on
                            Form 10-SB as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         10.5 (1)           Agreement, dated March 25, 1996, between
                            Nissko Telecom, Ltd. and Computer
                            Business Sciences, Inc., incorporated by
                            reference to Exhibit 10.5 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         10.6 (1)           Asset Purchase Agreement, dated April 18,
                            1996, between the Company and Zvi and
                            Sarah Barak, incorporated by reference to
                            Exhibit 10.6 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         10.6(i) (2)        Amendment to Asset Purchase Agreement
                            dated August 7, 1997.                          N/A

         10.7 (1)           Employment Agreement dated April 18, 1996
                            between the Company and Dr. Zvi Barak,
                            incorporated by reference to Exhibit 10.7
                            of Company's Registration Statement on
                            Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         10.8 (1)           Employment Agreement dated October 18,
                            1996 between Computer Business Sciences,
                            Inc. and Paul Vesel, incorporated by
                            reference to Exhibit 10.8 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         10.9 (1)           Indemnification Agreement dated November
                            7, 1995 between the Company and Doron
                            Cohen, incorporated by reference to
                            Exhibit 10.9 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         10.10 (1)          Indemnification Agreement dated November
                            7, 1995 between the Company and Bruce
                            Bendell, incorporated by reference to
                            Exhibit 10.10 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

                                 61

         10.11 (1)          Indemnification Agreement dated December
                            6, 1995 between the Company and Richard
                            C. Fox, incorporated by reference to
                            Exhibit 10.11 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         10.12 (1)          Indemnification Agreement dated March 28,
                            1996 between the Company and Dr. Barak,
                            incorporated by reference to Exhibit
                            10.12 of Company's Registration Statement
                            on Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         10.13 (1)          Indemnification Agreement dated March 28,
                            1996 between the Company and Yossi Koren,
                            incorporated by reference to Exhibit
                            10.13 of Company's Registration Statement
                            on Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         10.14 (1)          Plan of Reorganization for acquisition of
                            Major Fleet & Leasing Corp. dated August
                            23, 1996 between the Company, Bruce
                            Bendell and Harold Bendell, incorporated
                            by reference to Exhibit 10.17 of
                            Company's Registration Statement on Form
                            10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         10.15 (1)          Patent Purchase Agreement dated December
                            30, 1996 between Premo-Plast, Inc. and
                            John Pinciaro, incorporated by reference
                            to Exhibit 10.16 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         10.16 (1)          Employment Agreement dated December 30,
                            1996 between Premo-Plast, Inc. and John
                            Pinciaro, incorporated by reference to
                            Exhibit 10.17 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         10.17 (1)          Employment Agreement dated January 27,
                            1997 between the Company and Ronald K.
                            Premo, incorporated by reference to
                            Exhibit 10.18 of Company's Registration
                            Statement on Form 10-SB, as amended,
                            filed with the Securities and Exchange
                            Commission on March 7, 1997.                   N/A

         10.18 (1)          Plan and Agreement of Merger, dated April
                            21, 1997, the Company, Major Automotive
                            Group, Inc., Major Acquisition Corp. and
                            Bruce Bendell, incorporated by reference
                            to Exhibit 10.19 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         10.18(i) (2)       Amendment to Plan and Agreement of
                            Merger, dated August 1, 1997, between
                            Fidelity Holdings, Inc., Major Automotive
                            Group, Inc., Major Acquisition Corp. and
                            Bruce Bendell.                                 N/A

         10.18(ii) (2)      Amendment to Plan and Agreement of
                            Merger, dated August 26, 1997, between
                            Fidelity Holdings, Inc., Major Automotive
                            Group, Inc., Major Acquisition Corp. and
                            Bruce Bendell.                                 N/A

         10.18(iii) (2)     Amendment to Plan and Agreement of
                            Merger, dated November 20, 1997, between
                            Fidelity Holdings, Inc., Major Automotive
                            Group, Inc., Major Acquisition Corp. and
                            Bruce Bendell.                                 N/A

         10.18(iv) (4)      Amendment to Plan and Agreement of
                            Merger, dated March 20, 1998, between
                            Fidelity Holdings, Inc., Major Automotive
                            Group, Inc., Major Acquisition Corp., and
                            Bruce Bendell.                                 N/A

                                 62

         10.19 (1)          Stock Purchase Agreement with Escrow
                            Agreement attached, incorporated by
                            reference to Exhibit 10.20 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         10.20 (1)          Management Agreement, incorporated by
                            reference to Exhibit 10.21 of Company's
                            Registration Statement on Form 10-SB, as
                            amended, filed with the Securities and
                            Exchange Commission on March 7, 1997.          N/A

         10.21 (1)          Employment Agreement with Moise Benedid,
                            incorporated by reference to Exhibit
                            10.22 of Company's Registration Statement
                            on Form 10-SB, as amended, filed with the
                            Securities and Exchange Commission on
                            March 7, 1997.                                 N/A

         10.22 (2)          Partnership Agreement between Nissko
                            Telecom Associates and the Company.            N/A

         10.23 (2)          Memorandum of Understanding, dated
                            September 9, 1997, by and among Computer
                            Business Sciences, Inc., Nissko Telecom
                            Ltd., the Company and Robert L. Rimberg.       N/A

         10.24 (2)          Letter of Intent, dated June 6, 1997,
                            between the Company and SouthWall Capital
                            Corp. (formerly known as Sun Coast
                            Capital Corp.)                                 N/A

         10.25 (2)          Letter of Intent, dated September 1997,
                            between the Company, Lichtenberg Robbins
                            Buick, Inc. and Lichtenberg Motors Inc.        N/A

         10.26 (2)          Consulting Agreement, dated February 18,
                            1997, with Ronald Shapss Corporate
                            Services, Inc.                                 N/A

         10.27 (2)          Value Added Reseller Agreement between
                            Summa Four, Inc. and Computer Business
                            Sciences, Inc., as Reseller.                   N/A

         10.28 (2)          Lease Agreement, dated March 1996,
                            between 80-02 Leasehold Company, as
                            Owners and the Company, as Tenant.             N/A

         10.29 (2)          Master Lease Agreement, dated December
                            26, 1996, between Major Fleet & Leasing
                            Corp., as Lessor, and Nissko Telecom,
                            Ltd., as Lessee.                               N/A

         10.30 (2)          Sublease Agreement, dated March 1995,
                            between Speedy R.A.C., Inc., as
                            Sublessor, and Major Subaru Inc., as
                            Sublessee.                                     N/A

         10.31 (2)          Lease Agreement, dated November 1, 1991,
                            between Gloria Hinsch, as Landlord, and
                            Major Chrysler-Plymouth, Inc., as Tenant.      N/A

         10.32 (2)          Store Lease Agreement, dated June 10,
                            1992, between Bill K. Kartsonis, as
                            Owner, and Major Automotive Group, as
                            Tenant.                                        N/A

         10.33 (2)          Lease Agreement, dated June 3, 1994,
                            between General Motors Corporation, as
                            Lessor, and Major Chevrolet, Inc., as
                            Lessee.                                        N/A

                                 63

         10.34 (2)          Lease Agreement, dated August 1990,
                            between Bruce Bendell and Harold Bendell,
                            as Landlord and Major Chrysler-Plymouth,
                            Inc., as Tenant.                               N/A

         10.34(i) (2)       Extension of Lease Agreement, dated
                            August 14, 1997, between Bruce Bendell
                            and Harold Bendell, as Landlord and Major
                            Dodge, Inc. (formerly known as Major
                            Chrysler-Plymouth, Inc.), as Tenant.           N/A

         10.34(ii) (2)      Extension of Lease Agreement, dated
                            December 16, 1997, between Bruce Bendell
                            and Harold Bendell, as Landlord and Major
                            Dodge (formerly known as Major
                            Chrysler-Plymouth, Inc.), as Tenant.           N/A

         10.35 (2)          Lease Agreement, dated February 1995,
                            between Bendell Realty, L.L.C., as
                            Landlord, and Major Chrysler-Plymouth
                            Jeep Eagle, Inc., as Tenant.                   N/A

         10.35(i) (2)       Extension of Lease Agreement, dated
                            August 14, 1997, between Bendell Realty,
                            L.L.C., as Landlord and Major
                            Chrysler-Plymouth Jeep Eagle, Inc., as
                            Tenant.                                        N/A

         10.35(ii) (2)      Extension of Lease Agreement, dated
                            December 16, 1997, between Bendell
                            Realty, L.L.C., as Landlord and Major
                            Chrysler-Plymouth Jeep Eagle, Inc., as
                            Tenant.                                        N/A

         10.36 (2)          Lease Agreement, dated February 1996,
                            between Prajs Drimmer Associates, as
                            Landlord, and Barak Technology Inc., as
                            Tenant.                                        N/A

         10.37 (2)          Sublease Agreement, dated January 8,
                            1997, between Newsday, Inc., as
                            Sublessor, and Major Fleet & Leasing
                            Corp., as Sublessee.                           N/A

         10.37(i) (2)       Consent to Sublease Agreement, dated
                            January 16, 1997, between 80-02 Leasehold
                            Company, Newsday Inc. and Major Fleet and
                            Leasing Corp.                                  N/A

         10.38 (2)          General Security Agreement between Major
                            Fleet & Leasing Corp., as Debtor, and
                            Marine Midland Bank, as Secured Party.         N/A

         10.39 (2)          Retail and Wholesale Dealer's Agreement,
                            dated March 30, 1995, between Marine
                            Midland Bank, as Bank, and Major Fleet &
                            Leasing Corp., as Dealer.                      N/A

         10.40 (2)          Wholesale Lease Financing Line of Credit
                            between General Electric Capital
                            Corporation, as Lender, and Major Fleet &
                            Leasing Corp., as Borrower.                    N/A

         10.41 (2)          Chrysler Leasing System License Agreement
                            between Chrysler Motors Corporation, as
                            Licensor, and Major Fleet & Leasing
                            Corp., as Licensee.                            N/A

         10.42 (2)          GMAC Retail Plan Agreement between
                            General Motors Acceptance Corp. and Major
                            Fleet & Leasing Corp., as Dealer.              N/A

         10.43 (2)          Fidelity Holdings, Inc. 1996 Employees'
                            Performance Recognition Plan.                  N/A

         10.44 (2)          Secured Promissory Note, dated December
                            31, 1996, between Doron Cohen, as Maker,
                            and Fidelity Holdings, Inc., as Holder.        N/A

         10.45 (2)          Dealer Master Agent Agreement and
                            License, dated February 1996, between
                            Computer Business Sciences, Inc. and
                            Progressive Polymerics International,
                            Inc., as Master Agent.                         N/A

         10.46 (2)          Dealer Master Agent Agreement and
                            License, dated February 1996, between
                            Computer Business Sciences, Inc. and
                            Cellular Credit Corp. of America, Inc.,
                            as Master Agent.                               N/A

         10.47 (2)          Dealer Master Agent Agreement and
                            License, dated February 1996, between
                            Computer Business Sciences, Inc. and
                            America's New Beginning, Inc., as Master
                            Agent.                                         N/A

                                       64

         10.48 (2)          Dealer Master Agent Agreement and
                            License, dated February 1996, between
                            Computer Business Sciences, Inc. and
                            Korean Telecom, as Master Agent.               N/A

         10.49 (2)          Dealer Master Agent Agreement and
                            License, dated February 1996, between
                            Computer Business Sciences, Inc. and
                            Philcom Telecommunications, as Master
                            Agent.                                         N/A

         10.50 (2)          Management Agreement, dated August 23,
                            1996, between Major Fleet, Bruce Bendell
                            and Harold Bendell.                            N/A

         10.51 (2)          Wholesale Security Agreement, dated April
                            26, 1990, between General Motors
                            Acceptance Corporation ("GMAC") and Major
                            Fleet.                                         N/A

         10.51(i) (2)       Amendment, dated February 14, 1991, to
                            Wholesale Security Agreement between GMAC
                            and Major Fleet.                               N/A

         10.52 (2)          Direct Leasing Plan Dealer Agreement,
                            dated July 24, 1986, between GMAC and
                            Major Fleet.                                   N/A

         10.53 (2)          Retail Lease Service Plan Agreement,
                            dated April 3, 1987, between GMAC and
                            Major Fleet.                                   N/A

         10.54 (2)          Contribution Agreement dated as of
                            October 6, 1997 between the Company,
                            Bruce Bendell and Doron Cohen.                 N/A

         10.55 (2)          Letter of Commitment dated March 16, 1998
                            from Falcon Financial, LLC to Major Auto
                            Acquisition, Inc.                              N/A

         10.56 (4)          Security Agreement, dated May 14, 1998,
                            made by Major Acquisition Corp., Major
                            Automotive Realty Corp., and Falcon
                            Financial, LLC.                                N/A

         10.57 (4)          Guarantee, dated as of May 14, 1998, made
                            by Fidelity Holdings, Inc. in favor of
                            Falcon Financial, LLC.                         N/A

         10.58 (4)          Amended and restated secured promissory
                            note, dated May 14, 1998 and between
                            Major Acquisition Corp. and Falcon
                            Financial, LLC.                                N/A

         10.59 (3)          Consulting Agreement among Fidelity
                            Holdings, Inc., Major Automotive Group,
                            Inc. and Clemont Investors Ltd., dated
                            October 1, 1998.                               N/A

         10.60 (6)          Placement Agent Agreement, dated as of
                            January 25, 1999, between Fidelity
                            Holdings, Inc. and The Zanett Securities
                            Corporation, Claudio Guazzoni, David
                            McCarthy, and Tony Milbank.                    N/A

         10.61 (6)          Securities Purchase Agreement dated as of
                            January 25, 1999, by and among Fidelity
                            Holdings, Inc., Computer Business
                            Sciences, Inc., Zanett Lombardier, Ltd.,
                            Goldman Sachs Performance Partners, L.P.,
                            Goldman Sachs Performance Partners,
                            (Offshore) L.P., David McCarthy and Bruno
                            Guazzoni.                                      N/A

         10.62 (6)          Registration Rights Agreement dated as of
                            January 25, 1999, by and among Fidelity
                            Holdings, Inc., Zanett Lombardier, Ltd.,
                            Goldman Sachs Performance Partners, L.P.,
                            Goldman Sachs Performance Partners,
                            (Offshore) L.P., David McCarthy and Bruno
                            Guazzoni.                                      N/A

         10.63 (7)          Letter Agreement, dated as of June
                            24,1999, by and among Fidelity Holdings,
                            Inc. and Strong River Investments, Inc.,
                            Bay Harbor Investments, Inc. and Augusta
                            Street LLC.                                    N/A

                                 65

         10.64 (7)          Securities Purchase Agreement dated as of
                            June 24, 1999, by and among Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc., Bay Harbor
                            Investments, Inc. and Augusta Street LLC.      N/A

         10.65 (7)          Registration Rights Agreement dated as of
                            June 24, 1999, by and among Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc., Bay Harbor
                            Investments, Inc. and Augusta Street LLC.      N/A

         10.66 (8)          Securities Purchase Agreement dated as of
                            December 8, 1999, by and among Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc., Montrose Investments
                            Ltd. and Augusta Street LLC.                   N/A

         10.67 (9)          Registration Rights Agreement dated as of
                            December 8, 1999, by and among Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc., Montrose Investments
                            Ltd. and Augusta Street LLC.                   N/A

         10.68 (9)          Securities Purchase Agreement dated as of
                            February 8, 2000, by and among Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc., Montrose Investments
                            Ltd. and Augusta Street LLC.                   N/A

         10.69 (9)          Registration Rights Agreement dated as of
                            February 8, 2000, by and among Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc., Montrose Investments
                            Ltd. and Augusta Street LLC.                   N/A

         10.70 (10)         Merger Agreement dated January 18, 2000
                            by and among Fidelity Holdings, Inc.,
                            Cars Acquisition, Inc., CarsTV.com, Inc.,
                            and Jack H. Singer.                            N/A

         10.71 (10)         Transfer Restriction and Optional
                            Conversion Agreement dated January 18,
                            2000 by and among Fidelity Holdings,
                            Inc., Jack H. Singer and certain other
                            individual investors.                          N/A

         10.72 (10)         Escrow Agreement dated January 18, 2000
                            by and among Fidelity Holdings, Inc.,
                            Cars Acquisition, Inc., CarsTV.com, Inc.,
                            and Jack H. Singer, certain other
                            individual investors and Littman Krooks
                            Roth & Ball P.C., as escrow agent.             N/A

         10.73 (10)         Securities Purchase Agreement dated as of
                            March 14, 2000, by and between Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc.                              N/A

         10.74 (10)         Registration Rights Agreement dated as of
                            March 14, 2000, by and between Fidelity
                            Holdings, Inc. and Strong River
                            Investments, Inc.                              N/A

         10.75 (10)         Lease Agreement dated as of January 28,
                            2000, by 80-02 Leasehold Company, L.P.
                            and Mid-Atlantic Telecommunications, Inc.      N/A

         10.76 (10)         Repurchase of Nissko Master Rights
                            Agreement among Computer Business
                            Sciences Inc, Nissko L.P. and
                            shareholders of Nissko Telecom Ltd dated
                            November 30, 1999.                             N/A

         10.77 (11)         Separation and Release Agreement dated as
                            of August 8, 2000, entered into by and
                            among Fidelity Holdings, Inc. and Doron
                            Cohen.                                         N/A

         10.78 (12)         Redemption Agreement dated as of
                            September 8, 2000, entered into by and
                            among Fidelity Holdings, Inc., Strong
                            River Investments, Inc. and Montrose
                            Investments Ltd.                               N/A

                                 66

         10.79 (12)         Redemption Agreement dated as of
                            September 8, 2000, entered into between
                            Fidelity Holdings, Inc. and Augusta
                            Street LLC.                                    N/A

         10.80 (13)         Senior Secured Promissory Note due
                            December 11, 2002 dated December 11,
                            2000.                                          N/A

         10.81 (13)         Security and Pledge Agreement dated
                            December 11, 2000 between Fidelity
                            Holdings, Inc. and M&K Equities, Ltd.          N/A

         10.82 (14)         Asset Purchase Agreement Asset dated as
                            of February 12, 2001 between Internet
                            Creations, Inc. (d/b/a Internet
                            Connections) and Access Technology, Inc.       N/A

         10.83 (14)         Stock Purchase Agreement dated of March
                            27, 2001 by and among Global
                            Communications of NY, Inc., Fidelity
                            Holdings, Inc. and IG2, Inc.                   N/A

         10.84 (14)         Senior Secured Promissory Note due March
                            27, 2006 dated March 27, 2001.                 N/A

         10.85 (14)         Separation and Release Agreement dated
                            March 27, 2001 entered into by and
                            between Fidelity Holdings, Inc. and
                            Kimberly Peacock.                              N/A

         10.86 (14)         Letter dated November 21, 2000 regarding
                            Promissory Notes in favor of Strong River
                            Investments, Inc. and Montrose
                            Investments Ltd.                               N/A

         10.87 (15)         Stock Purchase Agreement by and among
                            Global Communications of NY, Inc., the
                            Major Automotive Companies, Inc. and ICS
                            Globe, Inc. dated July 31, 2001.               N/A

         10.88 (15)         Senior Secured Promissory Note due
                            December 31, 2003 dated July 31, 2001.

         10.89 (16)         2001 Outside Director Stock Plan               N/A

         10.90 (17)         Wholesale Security Agreement dated March
                            12, 2002 between General Motors
                            Acceptance Corporation and Major
                            Chevrolet, Inc.

         10.91 (17)         Letter from HSBC Bank, USA dated March
                            20, 2002 regarding floor plan lines.           N/A

         10.92 (18)         Separation and Release Agreement by and
                            among Bruce Bendell, Fidelity Holdings,
                            Inc., The Major Automotive Companies,
                            Inc., Major Chevrolet, Inc., Major Motors
                            of Hempstead, Inc., d/b/a Mazda of
                            Hempstead, Compass Dodge, Inc., and
                            Compass Lincoln-Mercury, Inc. and James
                            R. Wallick.                                    N/A

         10.92 (19)         Amended Senior Secured Promissory Note
                            due December 11, 2002 effective as of
                            January 3, 2003.                               N/A

         10.93 (19)         Amended Security and Pledge Agreement
                            dated December 11, 2000 between
                            Fidelity Holdings, Inc. and M&K Equities,
                            Ltd.                                           N/A

         10.94 (20)         Employment Agreement dated July 24, 2003
                            by and between The Major Automotive
                            Companies, Inc. and Bruce Bendell.              -

         10.95 (21)         Extension to Management Agreement by and
                            between Major Fleet & Leasing Corp. and
                            Bruce Bendell and Harold Bendell dated
                            March 25, 2004.                                 -

         10.96 (21)         Extension to Management Agreement by and
                            between The Major Automotive Companies,
                            Inc. and Bruce Bendell and Harold Bendell
                            dated March 25, 2004.                           -

                                 67

         10.97 (21)         Second Amended Senior Secured Promissory
                            Note due December 11, 2002 effective as
                            of January 3, 2004.                             -

         10.98 (21)         Second Amended Security and Pledge
                            Agreement dated December 11, 2000 between
                            The Major Automotive Companies, Inc. and
                            M&K Equities, Ltd.                              -

         14.1(21)           Code of Ethics and Conduct                      -

         16.1 (5)           Letter from Peter C. Cosmas Co., CPAs,
                            dated February 9, 1999.                        N/A

         21.1               List of Subsidiaries of the Company.            -

         31.1               Certification of Chief Executive Officer
                            and Acting Chief Financial Officer
                            pursuant to Section 302 of the
                            Sarbanes-Oxley Act of 2002.                    -

         32.1               Certification of Chief Executive Officer
                            and Acting Chief Financial Officer
                            pursuant to Section 906 of the
                            Sarbanes-Oxley Act of 2002.                    -

         (1)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's
                            registration statement on Form 10-SB
                            (File No. 0-29182).

         (2)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's annual
                            report on Form 10-KSB for the year ended
                            December 31, 1997 (File No. 0-29182)

         (3)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's quarterly
                            report on Form 10-QSB for the quarter
                            ended September 30, 1998 (File No.
                            0-29182).

         (4)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated May 14, 1998.
                            (File No. 0-29182).

         (5)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated February 5,
                            1999. (File No. 0-29182).

         (6)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated January 26,
                            1999. (File No. 0-29182).

         (7)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated July 3, 1999.
                            (File No. 0-29182).

         (8)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated December 10,
                            1999. (File No. 0-29182).

         (9)                Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated February 16,
                            2000 (File No. 0-29182).

                                 68

         (10)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's annual
                            report on Form 10-KSB for the year ended
                            December 31, 1999 (File No. 0-29182).

         (11)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's quarterly
                            report on Form 10-Q, dated August 21,
                            2000 (File No. 0-29182).

         (12)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated September 22,
                            2000 (File No. 0-29182).

         (13)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K, dated December 21,
                            2000 (File No. 0-29182).

         (14)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's annual
                            report on Form 10-K, dated April 17, 2001
                            (File No. 0-29182).

         (15)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's quarterly
                            report on Form 10-Q, dated August 20,
                            2001 (File No. 0-29182).

         (16)               Previously filed with the Commission as
                            an Exhibit to, and incorporated herein by
                            reference from, the Company's definitive
                            proxy statement on Schedule 14A, dated
                            October 24, 2001 (File No. 0-29182).

         (17)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's annual
                            report on Form 10-K, dated April 16, 2002
                            (File No. 0-29182).

         (18)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K dated October 21, 2002
                            (File No. 0-29182).

         (19)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's annual
                            report on Form 10-K, dated April 15, 2003
                            (File No. 0-29182).

         (20)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's current
                            report on Form 8-K dated July 28, 2003
                            (File No. 0-29182).

         (21)               Previously filed with the Commission as
                            Exhibits to, and incorporated herein by
                            reference from, the Company's annual
                            report on Form 10-K dated April 14, 2004
                            (File No. 0-29182).

(b) Financial Statements and Financial Statement Schedules.

Our consolidated financial statements that we are filing as part of this Form
10-K are filed on pages F-1 to F-69 of this Form 10-K. The financial statement
schedule required by Regulation S-X is filed on pages S-1 and S-2.

                                 69

                              SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                            The Major Automotive Companies, Inc.

Dated: July 25, 2005                        /s/ Bruce Bendell
                                            ------------------------------------
                                            Bruce Bendell,
                                            President, Chief Executive Officer
                                            and Acting Chief Financial Officer

In accordance with the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated:

    SIGNATURE                        TITLE                              DATE
    ---------                        -----                              ----

/s/ Bruce Bendell           President, Chief Executive             July 25, 2005
-----------------           Officer, Acting Chief Financial
Bruce Bendell               Officer and Director

/s/ David Edelstein         Director                               July 25, 2005
-------------------
David Edelstein

/s/ Steven Hornstock        Director                               July 25, 2005
--------------------
Steven Hornstock

/s/Alan Pearson             Director                               July 25, 2005
---------------
Alan Pearson

/s/ Jeffrey Weiner          Director                               July 25, 2005
------------------
Jeffrey Weiner

                                       70

                              THE MAJOR AUTOMOTIVE
                                 COMPANIES, INC.

                                               CONSOLIDATED FINANCIAL STATEMENTS
                                    YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

                              THE MAJOR AUTOMOTIVE
                                 COMPANIES, INC.

                                               CONSOLIDATED FINANCIAL STATEMENTS
                                    YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

                                      F-1

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                                                        CONTENTS
--------------------------------------------------------------------------------

     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               F-3

     CONSOLIDATED FINANCIAL STATEMENTS:
        Balance sheets as of December 31, 2004 and 2003                    F-4
        Statements of operations for the years ended
          December 31, 2004, 2003 and 2002                                 F-5
        Statements of stockholders' equity for the years
          ended December 31, 2004, 2003 and 2002                     F-6 - F-8
        Statements of cash flows for the years ended
          December 31, 2004, 2003 and 2002                          F-9 - F-10
        Notes to consolidated financial statements                 F-11 - F-60

                                      F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
The Major Automotive Companies, Inc.
Long Island City, New York

We have audited the consolidated balance sheets of The Major Automotive
Companies, Inc. and subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2004. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
controls over financial reporting. Our audits included examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also included assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Major Automotive
Companies, Inc. and subsidiaries at December 31, 2004 and 2003, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.

                                                  /s/ BDO Seidman, LLP

New York, New York
May 17, 2005

                                      F-3

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                                     CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------

<TABLE>

December 31,                                                                            2004                   2003
---------------------------------------------------------------------------------------------------------------------

ASSETS
CURRENT:
   Cash and cash equivalents                                                   $   3,723,500          $   1,003,137
   Short-term investment                                                             433,145                430,325
   Net investment in direct financing leases, current                                181,079                213,311
   Accounts receivable, net of allowance for doubtful accounts of
      $492,000 in 2004 and 2003                                                   11,849,314             10,066,439
   Inventories, net of reserves                                                   53,719,844             50,257,955
   Due from related parties                                                        1,216,925              1,974,008
   Other current assets                                                              224,416                277,942
---------------------------------------------------------------------------------------------------------------------
      TOTAL CURRENT ASSETS                                                        71,348,223             64,223,117
NET INVESTMENT IN DIRECT FINANCING LEASES, NET OF CURRENT PORTION                    285,495                 62,773
PROPERTY AND EQUIPMENT, NET                                                        5,028,024              4,899,059
DEFERRED INCOME TAXES                                                              1,459,535              1,576,000
GOODWILL                                                                           5,260,000             13,589,000
DUE FROM RELATED PARTIES                                                             493,745                541,741
DUE FROM OFFICER                                                                   1,395,358              1,395,358
NOTES RECEIVABLE AND OTHER ASSETS                                                    744,087              1,325,891
---------------------------------------------------------------------------------------------------------------------
                                                                                 $86,014,467            $87,612,939
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Notes payable - floor plan                                                    $51,380,310            $49,599,366
   Accounts payable                                                                8,565,886              7,761,992
   Accrued expenses                                                                4,010,148              3,640,745
   Accrued expenses - related parties                                              4,008,172              1,314,470
   Current maturities of long-term debt                                              895,409                701,741
   Customer deposits and other current liabilities                                   548,749                567,846
---------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT LIABILITIES                                                 69,408,674             63,586,160
LONG-TERM DEBT, LESS CURRENT MATURITIES                                            6,910,269              7,156,125
---------------------------------------------------------------------------------------------------------------------
        TOTAL LIABILITIES                                                         76,318,943             70,742,285
---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value - 2,000,000 shares authorized; 0
      shares issued and outstanding in 2004 and 2003                                       -                      -
   Common stock, $.01 par value - 50,000,000 shares authorized;
      9,720,047 and 9,702,047 shares issued and 9,204,228and
      9,474,856 shares outstanding in 2004 and 2003, respectively                     97,200                 97,020
   Additional paid-in capital                                                     40,189,749             40,175,709
   Deficit                                                                       (28,276,273)           (21,438,311)
   Treasury stock, at cost; 515,819 and 227,191 shares in 2004
      and 2003,  respectively                                                     (2,315,152)            (1,963,764)
---------------------------------------------------------------------------------------------------------------------
        TOTAL STOCKHOLDERS' EQUITY                                                 9,695,524             16,870,654
---------------------------------------------------------------------------------------------------------------------
                                                                                 $86,014,467            $87,612,939
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-4

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

<TABLE>

Years ended December 31,                                                 2004               2003                2002
---------------------------------------------------------------------------------------------------------------------

REVENUES:
   Sales                                                         $396,981,562       $380,298,852        $397,947,494
   Cost of sales                                                  332,455,524        319,655,160         333,809,386
---------------------------------------------------------------------------------------------------------------------
        GROSS PROFIT                                               64,526,038         60,643,692          64,138,108
OPERATING EXPENSES                                                (62,280,951)       (60,912,306)        (63,071,054)
GOODWILL IMPAIRMENT                                                (8,116,000)                 -           -
INTEREST EXPENSE, NET OF INTEREST INCOME                             (737,774)          (779,732)           (961,826)
---------------------------------------------------------------------------------------------------------------------
        INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
           AND LOSS FROM DISCONTINUED OPERATIONS                   (6,608,687)        (1,048,346)            105,228
INCOME TAX EXPENSE                                                    229,275             81,918             190,000
---------------------------------------------------------------------------------------------------------------------
              LOSS FROM CONTINUING OPERATIONS                      (6,837,962)        (1,130,264)            (84,772)
LOSS FROM DISCONTINUED OPERATIONS (NET OF INCOME TAX
   BENEFIT)                                                                 -                  -            (206,000)
---------------------------------------------------------------------------------------------------------------------
NET LOSS                                                         $ (6,837,962)      $ (1,130,264)     $     (290,772)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Loss per common share - continuing operations:
      Basic and diluted                                                $(0.72)            $(0.12)             $(0.01)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Loss per common share - discontinued operations:
      Basic and diluted                                                $    -              $   -              $(0.02)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Net loss per common share:
      Basic and diluted                                                $(0.72)            $(0.12)             $(0.03)
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Average number of shares used in computation:
      Basic and diluted                                             9,486,905          9,436,969           8,947,332
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-5

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

<TABLE>

                                                     Preferred stock              Common stock                Treasury stock
                                                 -----------------------     -----------------------      -----------------------
                                                   Shares         Amount       Shares        Amount          Shares      Amount
------------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 1, 2002                            100,000    $   1,000      7,994,338    $   79,943        227,191   $(1,963,764)
Net loss                                               --           --             --            --             --            --
Issuance of common stock for:
    Settlement of litigation                           --           --          225,000         2,250           --            --
    Stock compensation, net of deferred amounts        --           --           16,200           162           --            --
Cancellation of shares                                 --           --           (4,500)          (45)          --            --
Conversion of preferred stock                      (100,000)      (1,000)     1,333,333        13,333           --            --
Amortization of deferred income                        --           --             --            --             --            --
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 (CARRIED FORWARD)           --           --        9,564,371        95,643        227,191    (1,963,764)
------------------------------------------------------------------------------------------------------------------------------------

                                                                             Retained          Unearned            Total
                                                         Additional          earnings         stock-based      stockholders'
                                                       paid-in capital      (deficit)        compensation          equity
-----------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 1, 2002                                  $39,964,363       $(20,017,275)        $(115,946)      $17,948,321
Net loss                                                            -           (290,772)                -          (290,772)
Issuance of common stock for:
    Settlement of litigation                                  159,750                  -                 -           162,000
    Stock compensation, net of deferred amounts                11,940                  -                 -            12,102
Cancellation of shares                                             45                  -                 -                 -
Conversion of preferred stock                                 (12,333)                 -                 -                 -
Amortization of deferred income                                     -                  -           115,946           115,946
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 (CARRIED FORWARD)               40,123,765        (20,308,047)                -        17,947,597
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-6

                         THE MAJOR AUTOMOTIVE COMPANIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

<TABLE>

                                                      Preferred stock           Common stock                Treasury stock
                                                   ----------------------  ----------------------      -------------------------
                                                     Shares      Amount     Shares        Amount        Shares        Amount
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 1, 2003 (BROUGHT FORWARD)              --     $   --       9,564,371   $    95,643     227,191   $ (1,963,764)
Net loss
Issuance of common stock for:
    Settlements of litigation                           --         --         119,676         1,197        --             --
    Stock compensation, net of deferred amounts         --         --          18,000           180        --             --
--------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003 (CARRIED FORWARD)            --         --       9,702,047   $    97,020     227,191   $ (1,963,764)
--------------------------------------------------------------------------------------------------------------------------------

                                                                             Retained          Unearned             Total
                                                         Additional          earnings        stock-based        stockholders'
                                                       paid-in capital      (deficit)        compensation          equity
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 1, 2003 (BROUGHT FORWARD)               $40,123,765       $(20,308,047)        $       -       $17,947,597
Net loss                                                                     (1,130,264)                         (1,130,264)
Issuance of common stock for:
    Settlements of litigation                                 38,803                  -                 -            40,000
    Stock compensation, net of deferred amounts               13,141                  -                 -            13,321
--------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003 (CARRIED FORWARD)             $40,175,709       $(21,438,311)           $    -       $16,870,654
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-7

                         THE MAJOR AUTOMOTIVE COMPANIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

<TABLE>

                                                        Preferred stock         Common stock               Treasury stock
                                                      -------------------    -------------------        ---------------------
                                                       Shares     Amount      Shares      Amount         Shares       Amount
------------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 1, 2004 (BROUGHT FORWARD)                --     $    --     9,702,047   $   97,020      227,191   $    (1,963,764)
Net loss                                                  --          --          --           --           --                --
Issuance of common stock for:
    Stock compensation, net of deferred amounts           --          --        18,000          180         --                --
Treasury stock acquired in litigation settlements         --          --          --           --        288,628          (351,388)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2004                                --          --     9,720,047   $   97,200      515,819   $    (2,315,152)
------------------------------------------------------------------------------------------------------------------------------------

                                                                            Retained          Unearned             Total
                                                        Additional          earnings        stock-based        stockholders'
                                                       paid-in capital      (deficit)        compensation          equity
------------------------------------------------------------------------------------------------------------------------------

BALANCE, JANUARY 1, 2004 (BROUGHT FORWARD)               $40,175,709       $(21,438,311)        $       -       $16,870,654
Net loss                                                           -         (6,837,962)                -        (6,837,962)
Issuance of common stock for:
    Stock compensation, net of deferred amounts               14,040                  -                 -            14,220
Treasury stock acquired in litigation settlements                  -                  -                 -          (351,388)
------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2004                               $40,189,749       $(28,276,273)           $    -        $9,695,524
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-8

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE>

Years ended December 31,                                                     2004              2003             2002
---------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                        $   (6,837,962)  $    (1,130,264)   $    (290,772)
   Adjustments to reconcile net loss to net cash provided by
      (used in) operating activities:
        Amortization of intangible assets                                       -                 -          395,000
        Depreciation and amortization                                     424,773           362,405          397,947
        Increase of deferred income taxes                                 116,465                 -                -
        Stock-based compensation                                                -                 -          115,946
        Discontinued operations, net of tax                                     -                 -          206,000
        Stock issuance for services and other                              14,220            53,321          162,000
        Additions to (reductions of) allowance for doubtful
        accounts                                                                -           250,000          235,000
        Goodwill written off on franchise termination                     213,000                 -                -
        Impairment of goodwill                                          8,116,000                 -                -
        (Increase) decrease in assets:
           Net investment in direct financing leases                     (190,490)          122,408          (72,317)
           Accounts receivable, net                                    (1,696,621)        3,536,865          329,902
           Inventories                                                 (3,461,889)       (3,736,982)     (13,847,072)
           Due from related parties                                       805,079                 -                -
           Other assets                                                   522,919          (372,748)       1,120,535
        Increase (decrease) in liabilities:
           Accounts payable                                               803,894         1,034,414       (2,590,832)
           Accrued expenses                                                37,514        (2,264,844)         787,427
           Accrued expenses - related parties                           2,693,702           228,732          253,137
           Notes payable - floorplan                                    1,780,944         3,374,659       12,260,804
           Customer deposits and other liabilities                        (19,097)         (411,135)         208,310
---------------------------------------------------------------------------------------------------------------------
              NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES       3,321,951         1,046,831         (378,985)
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment                                   (600,356)         (398,358)         (49,760)
   Proceeds from certificate of deposit                                    (2,820)            4,395                -
   Proceeds from sale of leased equipment                                  53,776            73,481                -
---------------------------------------------------------------------------------------------------------------------
                NET CASH USED IN INVESTING ACTIVITIES                    (549,400)         (320,482)         (49,760)
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments of long-term debt                                            (302,188)         (519,286)      (2,888,656)
   Additions to long-term debt                                            250,000
   Payments from officers                                                       -                 -          200,191
   Capital lease reduction                                                      -                 -         (111,643)
---------------------------------------------------------------------------------------------------------------------
              NET CASH USED IN FINANCING ACTIVITIES                       (52,188)         (519,286)      (2,800,108)
---------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    2,720,363           207,063       (3,228,853)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                            1,003,137           796,074        4,024,927
---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                              $   3,723,500     $   1,003,137      $   796,074
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-9

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE>

Years ended December 31,                                              2004               2003                2002
---------------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for:
      Interest                                               $   2,447,233      $   2,643,773       $   2,011,288
      Income taxes                                                  77,000            123,967              52,000
   Noncash financing activities:
      Common stock issued as stock compensation                     14,220             13,321              12,002
      Acquisition of treasury stock in settlement of
        litigation                                                 351,388                  -                   -
      Common stock issued for settlement of litigation                   -             40,000             162,000
      Capital lease obligations                                          -                  -          (3,000,000)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-10

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.  NATURE OF BUSINESS       (a)   Nature of Business
    AND SUMMARY OF
    SIGNIFICANT                    The Major Automotive Companies, Inc. (the
    ACCOUNTING POLICIES            "Company") was incorporated under the
                                   laws of the State of Nevada on November 7,
                                   1995. The Company's business is the operation
                                   and consolidation of retail automotive
                                   dealerships. The Company sells new and used
                                   vehicles through six retail automobile
                                   franchises in five showrooms in three
                                   locations. The Company's leasing operations
                                   consist of providing leases and other
                                   financing.

                             (b)   Principles of Consolidation

                                   The accompanying consolidated financial
                                   statements include the accounts of The Major
                                   Automotive Companies, Inc. and its
                                   wholly-owned subsidiaries, each of which is
                                   engaged in the sales and leasing of new and
                                   used vehicles. All significant intercompany
                                   accounts, transactions and profits have been
                                   eliminated.

                             (c)   Earnings (Loss) per Share

                                   The Company has presented basic and diluted
                                   earnings (loss) per share, where applicable.
                                   Basic earnings (loss) per share excludes
                                   potential dilution and is calculated by
                                   dividing income (loss) available to common
                                   stockholders by the weighted average number
                                   of outstanding common shares. Diluted
                                   earnings per share incorporates, in periods
                                   in which they have a dilutive effect, the
                                   potential dilutions from all potential
                                   dilutive securities that would have reduced
                                   earnings per share.

                                      F-11

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                   There is no effect given to dilution for the
                                   years ended December 31, 2004, 2003 and 2002,
                                   because potential common shares of 9,517,
                                   411,413 and 385,163, respectively, related to
                                   the Company's outstanding stock options and
                                   warrants were excluded from the computation
                                   of diluted net loss per shares because their
                                   effect on net loss per share is
                                   anti-dilutive.

                             (d)   Cash Equivalents and Short-term Investment

                                   Cash equivalents consist of highly liquid
                                   investments, principally money market
                                   accounts with a maturity of three months or
                                   less at the time of purchase. Cash
                                   equivalents are stated at cost, which
                                   approximates market value. At December 31,
                                   2004 and 2003, the Company had an investment
                                   in a certificate of deposit with a financial
                                   institution. The amount shown at the balance
                                   sheet date is at the fair value of the
                                   investment, which approximates its cost.

                                      F-12

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             (e)   Accounts Receivable

                                   Accounts receivable consist primarily of
                                   amounts due from fleet sales manufacturers
                                   for repair services performed on vehicles
                                   with a remaining factory warranty, third
                                   parties from the sale of parts and contracts
                                   in transit. Contracts in transit represent
                                   customer finance contracts evidencing loan
                                   agreements or lease agreements between the
                                   Company, as creditor, and the customer, as
                                   borrower, to acquire or lease a vehicle in
                                   situations where a third-party finance source
                                   has given the Company initial, non-binding
                                   approval to assume the Company's position as
                                   creditor. Funding and final approval from the
                                   finance source is provided upon the finance
                                   source's review of the loan or lease
                                   agreement and related documentation executed
                                   by the customer at the dealership. These
                                   finance contracts are typically funded within
                                   ten days of the initial approval of the
                                   finance transaction given by the third-party
                                   finance source. The finance source is not
                                   contractually obligated to make the loan or
                                   lease to the customer until it gives its
                                   final approval and funds the transaction, and
                                   until such final approval is given, the
                                   contracts in transit represent amounts due
                                   from the customer to the Company. Contracts
                                   in transit are included in accounts
                                   receivable on the accompanying consolidated
                                   balance sheets and totaled $5.9 million and
                                   $6.7 million at December 31, 2004 and
                                   December 31, 2003 respectively. Management
                                   believes that there is minimal risk of
                                   uncollectibility on warranty receivables. The
                                   Company evaluates fleet sales, parts and
                                   other receivables for collectibility based on
                                   the age of the receivable, the credit history
                                   of the customer and past collection
                                   experience.

                                      F-13

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             (f)   Inventories

                                   New and used vehicle inventories are valued
                                   at the lower of cost or market, with cost
                                   determined on a specific identification
                                   basis. Parts and accessories inventories are
                                   also valued at the lower of cost or market,
                                   with cost determined on the first-in,
                                   first-out method.

                                   The Company assesses the valuation of all of
                                   its vehicle and parts inventories and
                                   maintains a reserve where the cost basis
                                   exceeds the fair market value. In making this
                                   assessment for new vehicles, the Company
                                   primarily considers the age of the vehicles
                                   along with the timing of annual and model
                                   changeovers. For used vehicles, the Company
                                   considers recent market data and trends such
                                   as loss histories along with the current age
                                   of the inventory. Parts inventories are
                                   primarily assessed considering excess
                                   quantity and continued usefulness of the
                                   part. The risk with parts inventories is
                                   minimized by the fact that excess or obsolete
                                   parts can generally be returned to the
                                   manufacturer.

                             (g)   Property and Equipment

                                   Property and equipment are recorded at cost.
                                   Depreciation and amortization of property and
                                   equipment are computed using the
                                   straight-line method over the estimated
                                   useful lives of the assets, ranging from
                                   three to twenty years. Maintenance and
                                   repairs are charged to operations as
                                   incurred. When property and equipment are
                                   sold or otherwise disposed of, the asset cost
                                   and accumulated depreciation are removed from
                                   the accounts, and the resulting gain or loss,
                                   if any, is included in the results of
                                   operations.

                             (h)   Revenue Recognition

                                   The Company records revenue when vehicles are
                                   delivered to customers, when vehicle service
                                   work is performed and when parts are
                                   delivered.

                                      F-14

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                   The Company arranges financing for customers
                                   through various financial institutions and
                                   receives a commission from the lender equal
                                   to the difference between the interest rates
                                   charged to customers over the predetermined
                                   interest rates set by the financing
                                   institution. The Company may be assessed a
                                   chargeback fee in the event of early
                                   cancellation of a loan by the customer.
                                   Finance commission revenue is recorded net of
                                   estimated chargebacks at the time the related
                                   contract is placed with the financial
                                   institution.

                                   The Company also receives commissions from
                                   the sale of non-recourse third party extended
                                   service contracts to customers. Under these
                                   contracts the applicable manufacturer or
                                   third party warranty company is directly
                                   liable for all warranties provided within the
                                   contract. Commission revenue from the sale of
                                   these third party extended service contracts
                                   is recorded net of estimated chargebacks at
                                   the time of sale.

                             (i)   Other Comprehensive Income (Loss)

                                   The Company has noother comprehensive income
                                   or loss.

                             (j)   Use of Estimates in Preparation of Financial
                                   Statements

                                   The preparation of financial statements in
                                   conformity with accounting principles
                                   generally accepted in the United States of
                                   America requires management to make estimates
                                   and assumptions that affect the reported
                                   amounts of assets and liabilities and
                                   disclosures of contingent assets and
                                   liabilities as of the date of the financial
                                   statements and the reported amounts of income
                                   and expenses during the reporting periods.
                                   Operating results in the future could vary
                                   from the amounts derived from management's
                                   estimates and assumptions.

                                      F-15

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             (k)   Goodwill

                                   Effective July 1, 2001, the Company adopted
                                   the provisions of Statement of Financial
                                   Accounting Standards ("SFAS") No. 141,
                                   "Business Combinations." Among other
                                   provisions, SFAS No. 141 provides guidance
                                   regarding the recognition and measurement of
                                   goodwill and other acquired intangible
                                   assets. For acquisitions after July 1, 2001,
                                   the provisions of SFAS No. 141 require
                                   separate recognition of intangible assets
                                   acquired if the benefit of the asset is
                                   obtained through contractual or other legal
                                   rights, or if the asset can be sold,
                                   transferred, licensed, rented, or exchanged.
                                   Goodwill is recognized to the extent that the
                                   purchase price of the acquisition exceeds the
                                   estimated fair value of the net assets
                                   acquired, including other identifiable
                                   intangible assets.

                                   Effective January 1, 2002, the Company also
                                   adopted the provisions of SFAS No. 142,
                                   "Goodwill and Other Intangible Assets." Among
                                   other things, SFAS No. 142 no longer permits
                                   the amortization of goodwill or intangible
                                   assets with indefinite lives, but requires
                                   that the carrying amount of such assets be
                                   reviewed for impairment and reduced against
                                   operations if they are found to be impaired.
                                   Prior to the adoption of SFAS No. 142,
                                   goodwill and intangible assets acquired prior
                                   to July 1, 2001 were amortized over various
                                   periods up to 40 years. Effective January 1,
                                   2002, such amortization ceased.

                                      F-16

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                   With the assistance of an independent
                                   appraisal firm, the Company completed the
                                   impairment tests required by SFAS No. 142 for
                                   the excess of costs over net assets acquired
                                   ("goodwill"). In order to evaluate goodwill
                                   for impairment, the Company compared the
                                   carrying value to the fair value of the
                                   underlying businesses. For this purpose, the
                                   Company has one reporting unit and one
                                   reporting segment. Based on the results of
                                   the tests, which included a projection of
                                   future operating results, based on the
                                   continuing trend of changes in our new and
                                   used vehicles sales mix, an impairment of
                                   goodwill was indicated as the recorded value
                                   of the goodwill was in excess of its fair
                                   value at December 31, 2004. In recording the
                                   amount of a goodwill write-down, SFAS No. 142
                                   requires an allocation of the estimated fair
                                   value to the Company's net assets. This
                                   allocation resulted in a significant increase
                                   in the value of certain of the Company's
                                   assets, including tradename, favorable leases
                                   and customer relationships, which, under the
                                   provisions of SFAS No. 142, may not be
                                   written up from their historical carrying
                                   values. Since the allocation process uses the
                                   value of those assets in arriving at the
                                   remaining amount of goodwill to be compared
                                   with the historical carrying value of the
                                   goodwill, the amount of the goodwill
                                   impairment is increased. As a result, the
                                   Company recorded an $8,116,000 non-cash
                                   charge for the impairment of goodwill to its
                                   estimated fair value during the fourth
                                   quarter of 2004. The goodwill impairment
                                   deductibility for tax purposes is
                                   approximately $2,500,000. The tax benefit of
                                   such deduction is approximately $1,100,000.
                                   However, the Company recorded a valuation
                                   allowance equal to the amount of this
                                   potential future benefit. The Company will
                                   continue to test goodwill for impairment
                                   annually, or more frequently if events or
                                   circumstances indicate possible impairment.
                                   As of December 31, 2004 and 2003, the
                                   carrying amount of goodwill was $5,260,000
                                   and $13,589,000, respectively.

                                      F-17

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             (l)   Long-lived Assets

                                   Long-lived assets, such as ongoing client
                                   relationships and property and equipment, are
                                   evaluated for impairment when events or
                                   changes in circumstances indicate that the
                                   carrying amount of the assets may not be
                                   recoverable through the estimated
                                   undiscounted future cash flow resulting from
                                   the use of these assets. When any such
                                   impairment exists, the related assets will be
                                   written down to fair value.

                             (m)   Fair Value Disclosures

                                   The carrying amounts reported in the
                                   consolidated balance sheet for cash and cash
                                   equivalents, short-term investments, notes
                                   and accounts receivable, inventories,
                                   accounts payable, and notes payable - floor
                                   plan approximate fair value because of the
                                   immediate or short-term maturity of these
                                   financial instruments.

                                   The fair value of long-term debt is estimated
                                   based on current rates offered to the Company
                                   for similar debt.

                             (n)   Income Taxes

                                   The provision for income taxes is computed on
                                   the pretax income (loss) based on the current
                                   tax law. Deferred income taxes are recognized
                                   for the tax consequences in future years of
                                   differences between the tax bases of assets
                                   and liabilities and their financial reporting
                                   amounts at each year-end based on enacted tax
                                   laws and statutory tax rates. Valuation
                                   allowances are recorded when recoverability
                                   of the deferred tax asset is in doubt.

                                      F-18

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             (o)   Stock-Based Compensation

                                   In December 2002, the Financial Accounting
                                   Standards Board ("FASB") issued SFAS No. 148,
                                   "Accounting for Stock-Based Compensation --
                                   Transition and Disclosure". SFAS No. 148
                                   amends Statement of Financial Accounting
                                   Standards No. 123, "Accounting for
                                   Stock-Based Compensation," to provide
                                   alternate methods of transition for companies
                                   electing to voluntarily change to the fair
                                   value method of accounting for stock-based
                                   compensation and also amends the disclosure
                                   provisions of SFAS No. 123. The provisions of
                                   SFAS No. 148 are effective for fiscal years
                                   ending December 15, 2002. The Company has
                                   adopted the disclosure provisions of SFAS No.
                                   148 and No 123.

                                   The Company accounts for its stock option
                                   rewards to employees under the intrinsic
                                   value based method of accounting prescribed
                                   by the Accounting Principles Board ("APB")
                                   Opinion No. 25, "Accounting for Stock Issued
                                   to Employees", and related interpretations.
                                   In accordance with those provisions, because
                                   the exercise price of all options granted
                                   under those plans equaled the market value of
                                   the underlying stock at the grant date, no
                                   stock-based employee compensation cost is
                                   recorded. Using the Black-Scholes option
                                   pricing model for all options granted, the
                                   following table illustrates the effect on net
                                   loss and loss per share if the Company had
                                   applied the fair value recognition provisions
                                   of SFAS No 123, "Accounting for Stock-Based
                                   Compensation, to stock-based employee
                                   compensation:

                                      F-19

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

       Year ended December 31,            2004            2003           2002
       -------------------------------------------------------------------------
       Reported net loss           $ (6,837,962)    $(1,130,264)     $(290,772)
       Deduct:  Fair value
         compensation cost              (11,900)        (18,000)      (174,624)
       -------------------------------------------------------------------------
       Pro forma net loss          $ (6,849,862)    $(1,148,264)     $(465,396)
       -------------------------------------------------------------------------
       Basic and diluted net
         loss per share:
             Reported net loss          $ (.72)          $(.12)         $(.03)
             Pro forma net
               loss                       (.72)           (.12)          (.05)
       -------------------------------------------------------------------------

                                      F-20

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                   The weighted average fair value of options
                                   granted or assumed was $.70, $.68 and $1.13
                                   per share in 2004, 2003 and 2002,
                                   respectively. The fair value of each option
                                   granted during 2004, 2003 and 2002 was
                                   estimated using the Black-Scholes
                                   option-pricing model with the following
                                   weighted average assumptions:

                                                2004        2003       2002
                 ---------------------------------------------------------------
                 Dividend yield                     0%         0%         0%
                 Risk free interest rate          4.5         4.0        4.0
                 Expected lives              10 years    10 years   10 years
                 Volatility                     91.1%        104%       104%
                 ---------------------------------------------------------------

                             (p)   Effect of Recently Issued Accounting
                                   Standards

                                   In January 2003, the FASB issued FIN 46,
                                   "Consolidation of Variable Interest Entities,
                                   an Interpretation of APB No. 50." FIN 46
                                   requires the consolidation of certain
                                   variable interest entities by the primary
                                   beneficiary if the equity investors do not
                                   have a controlling financial interest or
                                   sufficient equity at risk to finance the
                                   entities' activities without additional
                                   subordinated financial support of other
                                   parties. The provisions of FIN 46 are
                                   effective for all variable interest entities
                                   created or acquired after January 31, 2003.
                                   For variable interest entities created or
                                   acquired prior to that date, the provisions
                                   of FIN 46 must be applied for the first
                                   interim or annual period beginning after June
                                   15, 2003. The adoption of FIN 46 had no
                                   impact on the Company's consolidated results
                                   of operations, financial position or cash
                                   flows.

                                      F-21

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                   In November 2003, the EITF reached a
                                   consensus on EITF Issue No. 03-10,
                                   "Application of Issue No. 02-16 to Resellers
                                   to Sales Incentives Offered to Consumers by
                                   Manufacturers." EITF Issue 03-10 provides
                                   guidance on how to account for sales
                                   incentive arrangements provided by
                                   manufacturers directly to consumers and
                                   accepted by resellers. The provisions of EITF
                                   Issue 03-10 apply to fiscal years beginning
                                   after November 25, 2003. The adoption of EITF
                                   Issue 03-10 did not have a material impact on
                                   the Company's financial statements.

                                   In December 2004, the FASB issued SFAS No.
                                   153, "Exchanges of Nonmonetary Assets" (SFAS
                                   153) which amends Accounting Principles Board
                                   Opinion No. 29, "Accounting for Nonmonetary
                                   Transactions (APB 29). SFAS 153 amends APB 29
                                   to eliminate the fair-value exception for
                                   nonmonetary exchanges of similar productive
                                   assets and replace it with a general
                                   exception for nonmonetary exchanges that do
                                   not have commercial substance. It is
                                   effective for nonmonetary asset exchanges
                                   occurring in fiscal periods beginning after
                                   June 15, 2005. This statement is not
                                   anticipated to have a material impact on the
                                   Company's financial position or results of
                                   operations.

                                      F-22

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                   In December 2004, the FASB issued SFAS No.
                                   123(R), "Share-Based Payment" (SFAS 123(R))
                                   which establishes accounting standards for
                                   all transactions in which an entity exchanges
                                   its equity instruments for goods and
                                   services. SFAS 123(R) revises SFAS No. 123,
                                   "Accounting for Stock-Based Compensation",
                                   supersedes Accounting Principles Board
                                   Opinion No. 25, "Accounting for Stock Issued
                                   to Employees" and amends Financial Accounting
                                   Standard No. 95, "Statement of Cash Flows".
                                   SFAS No. 123(R) generally requires companies
                                   to measure the cost of employee services
                                   received in exchange for an award of equity
                                   instruments based on the fair value of the
                                   award on the date of the grant. The standard
                                   requires the fair value on the grant date to
                                   be estimated using either an option-pricing
                                   model which is consistent with the terms of
                                   the award or a market observed price, if such
                                   a price exists. The resulting cost must be
                                   recognized over the period during which an
                                   employee is required to provide service in
                                   exchange for the award, which is usually the
                                   vesting period. SFAS 123(R) must be adopted
                                   no later than periods beginning after June
                                   15, 2005 and the Company expects to adopt
                                   SFAS 123(R) on the effective date. The
                                   Company expects that the adoption of SFAS
                                   123(R) will not have a material impact on its
                                   net income and earnings per share.

                                        F-23

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             (q)   Floor Plan Interest and Advertising

                                   Floor plan and advertising assistance
                                   received from manufacturers are recorded as
                                   offsets to the cost of the vehicle and
                                   recognized as income upon the sale of the
                                   vehicle or when earned under a specific
                                   manufacturer's program, whichever is later.
                                   Floor plan assistance payments have been
                                   included as offsets to cost of sales. Floor
                                   plan interest expense is presented as a
                                   component of operating expense in the
                                   accompanying consolidated statement of
                                   operations.

                                   For the years ended December 31, 2004, 2003
                                   and 2002, aggregate floor plan assistance
                                   included in cost of sales was $1,800,257,
                                   $1,195,534, and $1,294,109, respectively.

                                   Advertising assistance received from
                                   manufacturers for the years ended December
                                   31, 2004, 2003 and 2002, included in cost of
                                   sales was $944,383, $723,111 and $714,216,
                                   respectively.

                                   Advertising costs, which are charged to
                                   expense as incurred, for the years ended
                                   December 31, 2004, 2003 and 2002, included in
                                   operating expense were $11,761,463,
                                   $15,768,832 and $14,453,062, respectively.

                             (r)   Reclassifications

                                   Certain reclassifications were made to the
                                   prior years to conform with the current
                                   year's presentation.

                             (s)   Segment Information

                                   The Company sells similar products and
                                   services (new and used vehicles, parts,
                                   service and collision repair services), uses
                                   similar processes in selling products and
                                   services, and sells its products and services
                                   to similar classes of customers. As a result
                                   of this and the way the Company manages its
                                   business, the Company has aggregated its
                                   results into a single segment for purposes of
                                   reporting financial condition and results of
                                   operations.

                                      F-24

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

2.  NOTE RECEIVABLE          The Company held a note from one officer/
    OFFICER/                 stockholder in the amount of $1,395,358 at
    STOCKHOLDER              December 31, 2004 and 2003. The balance on this
                             note has remained unchanged since prior to 2002.
                             The note is non-interest bearing and is classified
                             as long term.

                                      F-25

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

3.  NET INVESTMENT IN        Components of the net investment in direct
    DIRECT FINANCING         financing leases is as follows:
    LEASES

<TABLE>

                             December 31,                                          2004                2003
                             --------------------------------------------------------------------------------

                             Total minimum lease payments to be               $ 473,252           $ 244,829
                               received
                             Estimated residual value of leased
                               property                                         103,251              71,750
                             Unearned income                                   (109,929)            (40,495)
                             --------------------------------------------------------------------------------
                                                                                466,574             276,084
                             Less:  Current portion                            (181,079)           (213,311)
                             --------------------------------------------------------------------------------
                             Net investment in direct financing
                               leases, net of current portion                 $ 285,495            $ 62,773
                             --------------------------------------------------------------------------------
</TABLE>

                             Future minimum lease payments receivable at
                             December 31, 2004 are as follows:

                             Year ending December 31,                  Amount
                             ---------------------------------------------------
                             2005                                    $195,055
                             2006                                     158,526
                             2007                                     119,671
                             ---------------------------------------------------
                             Total                                   $473,252
                             ---------------------------------------------------

4.  INVENTORIES              Inventories consist of the following:

<TABLE>

                             December 31,                             2004                2003
                             -------------------------------------------------------------------

                             New automobiles                   $16,187,727         $16,339,679
                             New trucks and vans                14,583,590          15,785,288
                             Used automobiles and trucks        21,547,355          16,618,207
                             Parts and accessories               1,348,715           1,473,761
                             Other                                  52,457              41,020
                             -------------------------------------------------------------------
                                                               $53,719,844         $50,257,955
                             -------------------------------------------------------------------
</TABLE>

                             Aggregate reserves included in the inventories were
                             $647,000 and $720,000 for the years ended December
                             31, 2004 and 2003, respectively.

                                      F-26

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

5.  PROPERTY AND             Property and equipment consists of the following:
    EQUIPMENT

<TABLE>

                                                                                                    Estimated
                             December 31,                                  2004           2003    useful lives
                             -----------------------------------------------------------------------------------

                             Land                                   $ 2,400,000    $ 2,400,000              -
                             Building                                 1,000,000      1,000,000       20 years
                             Leasehold improvements                   1,646,585      1,505,485       15 years
                             Furniture and fixtures                   1,170,243      1,130,984      3-7 years
                             Equipment                                1,775,210      1,441,160      3-7 years
                             -----------------------------------------------------------------------------------
                                                                      7,992,045      7,477,629
                             Less:  Accumulated depreciation and
                                       amortization                  (2,964,021)    (2,578,570)
                             -----------------------------------------------------------------------------------
                                                                    $ 5,028,024    $ 4,899,059
                             -----------------------------------------------------------------------------------
</TABLE>

                             Depreciation expense was $424,773, $362,405 and
                             $397,947 for the years ended December 31, 2004,
                             2003 and 2002, respectively.

6.  INCOME TAXES             The Company accounts for income taxes using the
                             asset and liability method whereby deferred assets
                             and liabilities are recorded for differences
                             between the book and tax carrying amounts of
                             balance sheet items. Deferred liabilities or assets
                             at the end of each period are determined using the
                             tax rate expected to be in effect when the taxes
                             are actually paid or recovered. The measurement of
                             deferred tax assets is reduced, if necessary, by a
                             valuation allowance for any tax benefits that are
                             not expected to be realized. The effects of changes
                             in tax rates and laws on deferred tax assets and
                             liabilities are reflected in net income in the
                             period in which such changes are enacted.

                             The provision (benefit) for taxes on income,
                             including amounts relating to the loss from
                             discontinued operations of $(138,000) in 2002, is
                             as follows:

<TABLE>

                             Year ended December 31,             2004          2003          2002
                             -----------------------------------------------------------------------

                             Federal:
                                Current                      $ 25,000       $     -       $     -
                                Deferred                      116,000             -             -
                             State:
                                Current                        88,000        82,000        52,000
                                Deferred                            -             -             -
                             -----------------------------------------------------------------------
                                     Total                   $229,000       $82,000       $52,000
                             -----------------------------------------------------------------------
</TABLE>

                                      F-27

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             The reconciliation between the amount computed by
                             applying the Federal statutory rate to loss from
                             continuing and discontinued operations before
                             income taxes and the actual income tax expense was
                             as follows:

<TABLE>

                             Year ended December 31,                   2004         2003          2002
                             ---------------------------------------------------------------------------

                             Amount using the statutory         $(2,247,000)   $(356,000)     $(81,000)
                               Federal tax rate
                             State and local income taxes,
                               net of Federal tax benefit            58,000       54,000        34,000
                             Non-deductible write-off of
                               goodwill                           1,925,000
                             Change in valuation allowance
                               on deferred tax asset                954,000      410,000        96,000
                             Tax benefit of net operating
                               loss carryforward                   (434,000)           -             -

                             Other, net                              27,000      (26,000)        3,000
                             ---------------------------------------------------------------------------
                             Provision for taxes on income        $ 229,000     $ 82,000      $ 52,000
                             ---------------------------------------------------------------------------
</TABLE>

                             The components of the net deferred tax assets were
                             as follows:

<TABLE>

                                                                                   2004                2003
                             --------------------------------------------------------------------------------

                             Deferred assets:
                                Net operating loss carryforwards           $    492,000        $    910,000
                                Reserves and accruals not deductible
                                   until paid                                 1,786,000           1,791,000
                                Capital loss carryforward                       547,000             517,000
                                Goodwill                                      1,064,000            (244,000)
                                Other                                           254,000             331,000
                             Less:  Valuation allowance                      (2,683,000)         (1,729,000)
                             --------------------------------------------------------------------------------
                             Total deferred tax assets                      $ 1,460,000         $ 1,576,000
                             --------------------------------------------------------------------------------
</TABLE>

                                      F-28

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             At December 31, 2004, the Company had available net
                             operating loss carryforwards primarily related to
                             continuing operations of approximately $0.7
                             million, which begin to expire in the year 2020.
                             The Company believes that valuation allowances to
                             offset portions of deferred tax assets are
                             necessary since the realization of such deferred
                             tax assets is not assured.

7.  SECURED LINES OF         Secured Lines of Credit
    CREDIT AND FLOOR
    PLAN NOTES PAYABLE       The Company has two lines of credit ("Lines") with
                             a bank for a total availability of $3,000,000. The
                             interest rate is a variable rate based on the
                             bank's prime rate of interest. Interest is payable
                             monthly.

                             The Lines are collateralized by a first security
                             interest in all assets of The Major Automotive
                             Companies, Inc. and the personal guarantees of
                             Bruce Bendell, the Company's President, CEO and
                             Acting Chief Financial Officer, and his brother,
                             Harold Bendell, each of whom will be limited to 50%
                             of the total obligation to the bank.

                             As of December 31, 2004 and 2003, there was no
                             outstanding balance on the Lines, which are
                             renewable annually at December 31st.

                             Floor Plan Notes Payable

                             The Company finances the majority of its inventory
                             primarily through secured revolving floor plan
                             financing arrangements with various lenders. The
                             Company makes monthly interest payments on the
                             amount financed, but is required to make loan
                             principal repayments following the sale of the
                             related new and used vehicles.

                                      F-29

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             In September 2001, Chrysler Financial Company, LLC
                             ("CFC"), one of the Company's primary floor plan
                             credit sources for approximately $30 million for
                             the financing of vehicle inventory, notified the
                             Company that CFC had re-evaluated its credit and
                             lending relationship with the Company and was
                             requiring the Company to seek a replacement lending
                             institution to refinance and replace all existing
                             CFC credit facilities. Consequently, in March 2002,
                             the Company entered into a floor plan financing
                             arrangement with General Motors Acceptance
                             Corporation ("GMAC") for GMAC to provide the floor
                             plan credit for the financing of the Company's
                             Chevrolet dealership's new and used vehicle
                             inventory. This is the flagship dealership of the
                             Company's operations and accounted for more than
                             40% of the Company's new vehicle revenues and more
                             than 80% of the Company's consolidated used vehicle
                             revenues in the year 2004. Additionally, in March
                             2002, the Company entered into a credit agreement
                             with HSBC Bank, USA ("HSBC") pursuant to which HSBC
                             is providing the floor plan credit for the
                             financing of the Company's Chrysler, Jeep, Dodge
                             and Kia dealerships' new and used vehicle
                             inventory. As a result of the GMAC and HSBC credit
                             facilities, the Company completed the replacement
                             of financing for all the dealerships that were
                             previously financed by CFC.

                             In May 2002, the Company entered into an agreement
                             with Nissan Motor Acceptance Corporation ("NMAC")
                             pursuant to which NMAC replaced the then existing
                             floor plan credit for the financing of the
                             Company's Nissan dealership's new and used vehicle
                             inventory up to an aggregate of $8.5 million.

                             In January 2003, the Company entered into an
                             agreement with Primus Financial Services, Inc.
                             ("Primus") pursuant to which Primus replaced the
                             then existing floor plan credit for the financing
                             of the Company's Compass Dodge dealership's new and
                             used vehicle inventory up to an aggregate of $1.5
                             million.

                             Management believes that the terms of each of these
                             new floor plan lines, including interest rates, are
                             more favorable than those of each of the lines they
                             replaced. Bruce Bendell has agreed, temporarily, to
                             guarantee these obligations. The Company has agreed
                             to compensate Mr. Bendell for the fair market value
                             of such credit enhancement (see Note 12).

                                      F-30

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Outstanding borrowings under floor plan financing
                             arrangements amounted to $51,380,310 and
                             $49,599,366 at December 31, 2004 and 2003,
                             respectively. The floor plan arrangements grant a
                             security interest in the vehicles financed as well
                             as the related sales proceeds. Interest rates on
                             the floor plan agreements are variable and increase
                             or decrease based on movement in LIBOR or prime
                             borrowing rates. Floor plan interest for the years
                             ended December 31, 2004, 2003 and 2002 was
                             $1,992,244, $2,187,296 and $1,695,960,
                             respectively. Interest rates in effect in the year
                             2004 ranged between 3.5% and 6.75%. At December 31,
                             2004, committed capacity of the facilities was
                             approximately $52 million.

8.  LONG-TERM DEBT           One lender has advanced funds to the Company's
                             leasing subsidiary in the form of notes payable to
                             finance leased vehicles. Interest on each note is
                             charged depending on the prime rate in effect at
                             the time the vehicle is leased and remains constant
                             over the term of the lease. Applicable rates at
                             December 31, 2004 ranged between 4.0% and 5.25%.
                             Equal monthly installments are paid over the term
                             of the lease (which range from 12 to 60 months),
                             together with a final balloon payment, if
                             applicable. These loans are collateralized by the
                             vehicles.

                             On May 14, 1998, the Company borrowed $7.5 million
                             from Falcon Financial, LLC (an unrelated party) to
                             finance the Major Auto Acquisition (see Note 9).
                             The term of the loan is for fifteen years with
                             interest at 10.18%. Payments of principal and
                             interest of $81,423 are due monthly.

                                      F-31

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             On August 8, 2000, Doron Cohen, former President,
                             CEO and a Director of the Company, signed a
                             Separation and Release Agreement (the "Agreement")
                             with the Company. The Agreement provides for
                             periodic payments to and a forgiveness of
                             indebtedness from Mr. Cohen in an aggregate amount
                             of $1,710,067. The total amount of the payments is
                             $662,000 and the potential forgiveness of Mr.
                             Cohen's indebtedness to the Company aggregates
                             $1,048,067. The Company has accrued payments, which
                             began in August 2000. Based on the report of an
                             independent appraiser, the Company recorded a
                             deferred charge of $840,000 (included in other
                             assets) as the value of the noncompete and other
                             provisions of the Agreement, which relates to
                             continuing operations of the Company. This amount
                             has been fully amortized over twenty-four months
                             starting August 2000. The balance due at
                             December 31, 2004 was $29,167.

                             On December 11, 2000 the Company issued to M&K
                             Equities, Ltd. ("M&K"), an affiliate of a director
                             of the Company, a senior subordinated promissory
                             note in the principal amount of $2,000,000 in
                             exchange for a $2,000,000 loan from M&K. The terms
                             of the note required payment of the $2,000,000
                             principal on December 11, 2002. The date of such
                             repayment has been extended to January 2, 2006. In
                             2003 and 2002 the Company made principal payments
                             of $600,000 and $130,000, respectively, towards
                             this note, leaving a balance at December 31, 2004
                             of $1,270,000. The note requires monthly interest
                             payments at a rate of 10% per annum. In order to
                             induce M&K to make the loan, the Company granted to
                             M&K a lien on, and a security interest in, all of
                             its non-technology assets, subject to prior senior
                             liens. The director also received options under the
                             1999 Employee Stock Option Plan to purchase 50,000
                             shares of the Company's common stock at an exercise
                             price of $2.35 per share. The fair value ascribed
                             to the options was approximately $95,000 based on
                             the Black-Scholes option-pricing model; such amount
                             was recorded as a deferred charge and as additional
                             paid-in capital of stockholders' equity. The amount
                             of the deferred charge has been amortized over the
                             initial term of the note.

                                      F-32

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             In March 2005, in connection with the settlement in
                             of a lawsuit entitled Fidelity Holdings, Inc., IG2,
                             Inc. and 786710 Ontario, Ltd. v. Michael Marom and
                             M.M. Telecom, Corp., the Company incurred a
                             liability aggregating $250,000, which is due with
                             an initial payment of $50,000 on April 1, 2005 and
                             twenty-four monthly payments of $8,333, beginning
                             May 1, 2005. (See Note 12.)

                             Long-term debt consists of the following:

<TABLE>

                             December 31,                                      2004             2003
                             -------------------------------------------------------------------------

                             Leasing notes payable                      $   713,306      $   570,436
                             Falcon loan payable                          5,543,205        5,934,097
                             Note payable to former president                29,167           83,333
                             M&K Equities note payable                    1,270,000        1,270,000
                             Marom litigation settlement payable            250,000                -
                             -------------------------------------------------------------------------
                                                                          7,805,678        7,857,866
                             Less:  Current portion                         895,409          701,741
                             -------------------------------------------------------------------------
                                                                         $6,910,269       $7,156,125
                             -------------------------------------------------------------------------
</TABLE>

                             Maturities are as follows:

                             December 31,
                             ---------------------------------------------------
                             2005                                     $895,409
                             2006                                    2,245,075
                             2007                                      563,158
                             2008                                      586,350
                             2009                                      648,905
                             2010                                      718,135
                             Thereafter                              2,148,646
                             ---------------------------------------------------
                                                                    $7,805,678
                             ---------------------------------------------------

                                      F-33

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

9.  BUSINESS                 On April 21, 1997, the Company, through a
    COMBINATIONS             wholly-owned subsidiary, Major Acquisition Corp.,
                             entered into a merger agreement with The Major
                             Automotive Group Inc. ("Major Auto") and its sole
                             stockholder, Bruce Bendell, the Company's
                             President, Chief Executive Officer and Chairman.
                             Pursuant to the Merger Agreement, Bruce Bendell
                             contributed to Major Auto all of his shares of
                             common stock of Major Chevrolet Inc., Major Subaru
                             Inc., Major Dodge Inc. and Major Chrysler,
                             Plymouth, Jeep Eagle Inc. Major Acquisition Corp.
                             then acquired from Bruce Bendell all of the issued
                             and outstanding shares of common stock of Major
                             Auto in exchange for shares of a new class of the
                             Company's preferred stock. Major Acquisition Corp.
                             purchased the remaining 50% of the issued and
                             outstanding shares of common stock of Major Dodge
                             Inc. and Major Chrysler, Plymouth, Jeep Eagle Inc.
                             from Harold Bendell, Bruce Bendell's brother, for
                             $4 million in cash pursuant to a stock purchase
                             agreement. In addition, Major Acquisition Corp.
                             acquired two related real estate components (the
                             "Major Real Estate", defined hereinafter) from
                             Bruce Bendell and Harold Bendell (collectively "the
                             Bendells") for $3 million.

                             The preferred stock issued to Bruce Bendell is
                             designated as the "1997-MAJOR Series of Convertible
                             Preferred Stock." It had voting rights and was
                             convertible into the Company's common stock (the
                             "Common Stock"). The minimum number of shares of
                             Common Stock into which the new class is
                             convertible is 810,000 shares. By February 28,
                             2002, Mr. Bendell has converted all of the shares
                             of this preferred stock into 3,471,111 shares of
                             Common Stock (see Note 14). The foregoing
                             acquisitions from Major Auto and Harold Bendell are
                             collectively referred to herein as the "Major Auto
                             Acquisition."

                             To finance the cash portion of the Major Auto
                             Acquisition, aggregating $7 million ($4 million for
                             Harold Bendell and $3 million to purchase the Major
                             Real Estate), Major Acquisition Corp. borrowed $7.5
                             million from Falcon Financial, LLC pursuant to a
                             loan and security agreement dated May 14, 1998, for
                             a 15-year term with interest equal to 10.18% (see
                             Note 8). Prepayment may be made, in full only,
                             along with the payment of a premium.

                                      F-34

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             The collateral securing the loan transaction
                             includes the Major Real Estate and, subject to the
                             interests of any current or prospective "floor plan
                             or cap loan lender," the assets of Major
                             Acquisition Corp. Major Acquisition Corp. is
                             required to comply with certain financial covenants
                             related to net worth and cash flow. In addition,
                             the Company provided an unconditional guarantee of
                             the loan pursuant to a guarantee agreement dated
                             May 14, 1998. This acquisition was treated as a
                             purchase by Major Acquisition Corp.

10. FRANCHISE                In February 2004, the Company sold its Subaru
    TERMINATIONS             franchise and certain Subaru parts to an unrelated
                             third party for a cash purchase price of $450,000.
                             Additionally, the purchaser received the Company's
                             inventory of new 2004 Subaru vehicles and assumed
                             the related floor liability. All proceeds from this
                             transaction were put in escrow pending receipt of
                             certain approvals from third parties. In the second
                             quarter of 2004, the Company closed the sale and
                             recorded a gain of $237,000, included in operating
                             expense, which is net of a reduction of goodwill of
                             $213,000 as a result of this transaction.

                             In March 2004, the Company received notice from
                             American Suzuki Motor Corporation, the franchisor
                             of the Company's Suzuki dealership in Hempstead,
                             New York, of a proposed termination of their
                             franchise agreement with the Company. At the time,
                             the Company had a potential buyer for the franchise
                             and requested that Suzuki delay the termination
                             pending completion of the sale. When the potential
                             sale negotiations were terminated the Company
                             requested that Suzuki reinstate the termination and
                             purchase the Company's inventory of new Suzuki
                             vehicles. The Suzuki dealership is not material to
                             the Company's operations and management does not
                             expect the termination of such dealership to have a
                             significant effect on results of operations or cash
                             flow.

                                      F-35

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

11. GOVERNMENTAL             Substantially all of the Company's facilities are
    REGULATIONS              subject to Federal, state and local regulations
                             relating to the discharge of materials into the
                             environment. Compliance with these provisions has
                             not had, nor does the Company expect such
                             compliance to have, any material effect on the
                             financial condition or results of operations of the
                             Company. Management believes that its current
                             practices and procedures for the control and
                             disposition of such wastes comply with applicable
                             Federal and state requirements.

12. COMMITMENTS AND          Operating Leases
    CONTINGENCIES
                             The Company leases real property under various
                             operating leases, most of which have terms from one
                             to six years. The Company's most significant lease,
                             for property in Long Island City, New York, expires
                             2009, but the Company has an option to extend the
                             lease for up to two additional five-year terms.

                             Future net minimum lease payments under
                             noncancelable operating lease agreements as of
                             December 31, 2004 are as follows:

                             December 31,
                             ---------------------------------------------------
                             2005                                   $1,193,500
                             2006                                    1,143,500
                             2007                                      851,500
                             2008                                      659,500
                             2009                                      298,500
                             Thereafter                                179,083
                             ---------------------------------------------------
                                                                    $4,321,583
                             ---------------------------------------------------

                             Rent expense was $2,083,500, $1,950,000 and
                             $1,999,000 for the years ended December 31, 2004,
                             2003 and 2002, respectively.

                             Capital Leases

                             In connection with an earlier acquisition, the
                             Company was assigned a lease agreement for
                             facilities used for operations of the dealership.
                             The lease agreement provided for the transfer of
                             ownership at the option of the Company at the end
                             of the lease term for $3 million. In 2002, the
                             Company transferred the purchase option to a
                             related party and entered into an operating lease
                             arrangement with such party (see Note 13).

                                      F-36

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                           LEGAL PROCEEDINGS

                             Daniel Tepper v. Fidelity Holdings, Inc; Fidelity
                             Holdings, Inc. (Third Party Plaintiff) v.
                             InvestAmerica, et al.

                             In and around July 10, 2001, Daniel Tepper
                             commenced suit in the Southern District of New York
                             against Bruce Bendell, Doron Cohen and Richard
                             Feinstein. While the initial complaint had eight
                             causes of action, three remain: (i) conversion (ii)
                             breach of fiduciary duty and (iii) negligence. The
                             claims allege that the defendants failed to remove
                             restrictive legends that appeared on certain stock
                             certificates held by Mr. Tepper. This action
                             mirrors a Nevada action brought by Mr. Tepper
                             several years ago for which he obtained a judgment
                             of $553,000, which has been satisfied. In light of
                             the satisfaction of the Nevada judgment, the Court
                             has directed that a motion be made to dismiss the
                             New York action as there is a ban to double
                             recovery. The motion was made in July 2003 and was
                             denied in lieu of a settlement conference. Such
                             conference was held and failed. A second motion to
                             dismiss was filed and in the third quarter of 2004.
                             This case was adjudicated in the Company's favor
                             and, consequently, dismissed. However, plaintiff
                             filed a notice of appeal of the court's decision on
                             November 3, 2004. Management believes that
                             plaintiff's appeal will not prevail and that, in
                             any event, Mr. Tepper's allegations have no merit
                             and intends to vigorously defend this suit.

                             Fidelity Holdings, Inc., IG2, Inc. and 786710
                             Ontario, Ltd. v. Michael Marom and M.M. Telecom,
                             Corp.

                                      F-37

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             The Company and the Company's former subsidiaries,
                             IG2, Inc. ("IG2") and 786710 Ontario, Ltd., are
                             plaintiffs in a legal action against Michael Marom
                             and M.M. Telecom, Corp. in the Supreme Court of the
                             State of New York, County of Queens, Index No.
                             25678/96. The Company filed a complaint on December
                             23, 1996 against the defendants alleging: (i)
                             breach of a letter agreement between the parties;
                             (ii) tortuous interference with business
                             opportunities; and (iii) slander. defendants filed
                             an answer with counterclaims, which included, inter
                             alia: (i) fraud; (ii) breach of contract; (iii)
                             tortuous interference with business opportunities;
                             and (iv) tortuous interference with contract. Both
                             parties have completed discovery and the collective
                             plaintiffs, including the Company, have made a
                             motion for summary judgment against Defendants
                             seeking to have Defendants' counterclaims dismissed
                             entirely and with prejudice.

                                      F-38

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             A decision was rendered by the court, which
                             dismissed the claims for tortuous interference with
                             business opportunities and contract, but denied the
                             remainder of the motion. The case had been stayed
                             as a result of IG2 filing for bankruptcy protection
                             in January 2003. The stay has been lifted. In March
                             2004, the Company reached a settlement agreement
                             with the defendants whereby the Company is required
                             to pay an aggregate of $250,000, as follows:
                             $50,000 on April 1, 2005 and the balance of
                             $200,000 over the next 24 months at the rate of
                             $8,333.33 per month. Also, the Company is required
                             to pay to defendants any amounts the Company
                             receives from IG2, until such time as an additional
                             $250,000 has been paid to defendants. To the extent
                             the amounts the Company receives from IG2 and
                             forwards on to the defendants by February 28, 2009
                             (the "IG2 Payments"), is less than $250,000, the
                             Company will be liable for the difference between
                             $250,000 and the aggregate IG2 Payments at that
                             time. The effects of this settlement have been
                             recorded in our financial statements as of December
                             31, 2004.

                             Sanford Goldfarb v. Robert LeRea, Doran Cohen,
                             Bruce Bendell, Kimberly Peacock and The Major
                             Automotive Companies, Inc. f/k/a Fidelity Holdings,
                             Inc.

                             On September 23, 2002, a lawsuit was commenced by
                             Ira Hochman and Sanford Goldfarb against the
                             Company, Robert LeRea, a former consultant to the
                             Company, Doron Cohen, Bruce Bendell and Kimberly
                             Peacock, a former employee of the Company. The suit
                             seeks damages of up to $10,000,000 for breach of
                             contract, quantum merit, unjust enrichment,
                             conversion and fraud. Plaintiffs contend that they
                             entered into agreements with the Company and the
                             other defendants to promote the stock of the
                             Company in exchange for stock. Plaintiffs further
                             contend that, in spite of the substantial time and
                             efforts plaintiffs put in promoting the stock, the
                             Company and the other defendants failed to
                             compensate plaintiffs as per the agreements.
                             Plaintiffs also allege that they provided a bridge
                             loan to defendants in the sum of $1,830,000, which
                             has not been repaid. In July 2003, the Company had
                             filed a motion to dismiss, which was denied.

                                      F-39

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             On January 28, 2005, the parties agreed to settle
                             this by the Company paying an aggregate of $400,000
                             to the plaintiffs in exchange for the aggregate of
                             120,820 of the Company's common shares owned by the
                             plaintiffs. An initial payment of $200,000 was made
                             on February 1, 2005, an additional payment of
                             $20,000 was made on March 1, 2005 and nine
                             additional monthly payments are scheduled for each
                             of the succeeding months. The shares to be returned
                             to the Company will be returned, ratably, as
                             payments are received by the plaintiff.
                             Accordingly, a liability of $400,000 was accrued in
                             the fourth quarter of 2004 and the Company recorded
                             the acquisition of treasury stock for $144,984,
                             based on the closing price of the Company's common
                             stock on the day prior to the settlement, and
                             $255,016 was charged to litigation expense,
                             representing the difference between the total
                             amount to be paid and the fair value of the shares
                             received.

                             International Securities Corp. v. Fidelity
                             Holdings, Inc.

                             On or about March 2001, an action was commenced
                             against the Company in the Supreme Court of the
                             state of New York, New York County. This action
                             alleged that International Securities Corp. ("ISC")
                             was owed commissions for money it secured for the
                             Company in connection with a private placement of
                             the Company's securities. This action was settled
                             in January 2003 for $133,125, which was included in
                             the consolidated statement of operations for the
                             year ended December 31, 2003 and which was paid, in
                             full, by February 1, 2003.

                             Dr. Roland Nassim v. Computer Business Sciences,
                             Inc. and Fidelity Holdings, Inc.

                             On April 12, 2001, Dr. Roland Nassim commenced a
                             lawsuit against CBS and the Company in the Supreme
                             Court, New York County. The basis of the lawsuit
                             was for breach of contract of an agreement entered
                             into on December 1, 1999. The agreement was part of
                             a buyout of the Company's former subsidiary,
                             Computer Business Sciences, Inc. The purchase price
                             was approximately $500,000 to be paid out in the
                             Company's stock. It was Dr. Nassim's position that
                             the stock was only worth $27,000. In January 2002,
                             the Company reached a settlement with Dr. Nassim
                             and have issued 225,000 shares of the Company's
                             stock in his name as full settlement.

                                      F-40

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Ronald K. Premo v. Fidelity Holdings, Inc.

                             In May 2001, Ronald Premo, a former officer of one
                             of the Company's former technology subsidiaries,
                             filed suit in Connecticut Supreme Court seeking
                             employment related damages in excess of $300,000.
                             In October 2001, through an arbitration proceeding,
                             the Company reached a settlement agreement with Mr.
                             Premo for $144,158 by which he would be paid an
                             aggregate of $72,079 over ten months plus 15,000
                             shares of the Company's common stock with a
                             guaranteed aggregate value, at the first
                             anniversary date of the shares' issuance, of
                             $72,079. The aggregate amount of this settlement
                             was included in the consolidated statement of
                             operations for the year ended December 31, 2002.
                             The initial 15,000 shares of common stock were
                             issued and the $72,079 was paid. Based on the
                             market value of the Company's common stock at the
                             anniversary date, an additional 69,800 shares of
                             the Company's common stock were issued to Mr. Premo
                             during the first quarter of 2003.

                             James R. Wallick v. Bruce Bendell, Individually and
                             in his Capacity as an Officer, Director and
                             Majority Shareholder of the Defendant Corporations,
                             Fidelity Holdings, Inc., et al.

                             On September 25, 2001, Mr. Wallick, a former
                             director and officer, filed a lawsuit against the
                             Company in the United States District Court of New
                             Jersey. In this action, Mr. Wallick alleged that
                             the defendants breached an oral, written and
                             implied-in-fact employment agreement with Mr.
                             Wallick, acted in bad faith in connection with the
                             employment agreement, intentionally and negligently
                             misrepresented promises relating to Mr. Wallick's
                             employment and intentionally and tortuously
                             interfered with the contractual and employment
                             relationship of Mr. Wallick. Mr. Wallick sought,
                             among other things, compensatory and punitive
                             damages for the alleged violations in the amount of
                             $540,000. On October 10, 2002, the Company entered
                             into a Separation and Release Agreement with Mr.
                             Wallick, wherein the Company settled all matters
                             with Mr. Wallick arising out of his former
                             employment with the Company and its subsidiaries.

                                      F-41

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Mr. Wallick received, among other things, an
                             aggregate amount of $452,000, an amount
                             approximately equal to the minimum to be paid
                             during the remaining term of his employment
                             agreement, in consideration to be bound by the
                             terms of the Agreement. Pursuant to the Agreement,
                             Mr. Wallick returned the 4,500 shares of the
                             Company's common stock that were issued to him in
                             February 2000 and dismissed, with prejudice, and
                             without an award of costs or attorneys' fees, the
                             complaint previously filed against the Company.

                             GELCO Corporation, et al. v. Major Chevrolet, Inc.

                             On December 19, 2001, GELCO Corporation ("GELCO")
                             filed a complaint against Major Chevrolet, Inc. in
                             the United States District Court for the Northern
                             District of Illinois, Eastern Division. The basis
                             lawsuit alleged breach by our subsidiary, Major
                             Chevrolet, Inc., of the terms and conditions of the
                             purchase of automobiles and automobile leases under
                             that certain dealer lease plan agreement and
                             alleged breach arising out of the purchaser of
                             retail sales contracts under that certain dealer
                             retail agreement by and between the parties. GELCO
                             was seeking $2,767,000 in damages. On January 24,
                             2003, the action was settled for $900,000, which
                             was charged to litigation expense in the fourth
                             quarter of 2002, consisting of an initial payment
                             of $300,000 and a 20-month promissory note for
                             $600,000 which was paid in full by September 2004.

                             Zanett Lombardier Ltd., et al. v. The Major
                             Automotive Companies, Inc.

                             On October 24, 2001, Zanett Lombardier Ltd. and
                             others ("Zanett") filed a suit against the Company
                             for breach of contract and for the Company's
                             failure to issue shares in exchange for certain
                             warrants held by Zanett. The alleged damages
                             totaled $856,011. This matter was settled in the
                             first quarter of 2003 for payment of $130,000 and
                             issuance of shares of the Company's common stock
                             with a value of $40,000, which was included in the
                             consolidated statement of operations for the year
                             ended December 31, 2003. The $130,000 was paid in
                             five equal installments during 2003 and 49,876
                             shares of the Company's common stock were issued in
                             April 2003 in full satisfaction of this settlement.

                                      F-42

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Steel City Telecom, Inc. v. The Major Automotive
                             Companies, Inc., et al.

                             In and around September, 2002, an action was
                             commenced against the Company and its former
                             subsidiary, Computer Business Sciences, Inc., in
                             Pennsylvania, Allegheny County by Steel City
                             Telecom, Inc. ("Steel City") for up to $300,000.
                             The complaint alleges that the software sold to
                             Steel City was defective and that the Company was
                             negligent in its production. The Company is in the
                             process of requesting a removal of this case to
                             Federal court, while continuing with the discovery
                             phase. Management believes that the plaintiff's
                             allegations have no merit and intends to vigorously
                             defend this suit.

                             Zvi Barak v. The Major Automotive Companies, Inc.

                             An application to the Ontario Superior Court
                             (Toronto Court File No. 02-CV-229810CM2) was filed
                             by Zvi Barak on May 23, 2002 seeking an Order of
                             that court directing the Company to proceed
                             forthwith with arbitration in Toronto, Canada
                             regarding Zvi Barak's claims that we failed to pay
                             him $546,249.99 under an alleged letter dated June
                             5, 1996 to that certain Master Agreement dated
                             April 18, 1996 between the Company and Zvi Barak

                             The Company brought a motion before the Ontario
                             Superior Court of Justice seeking a permanent stay
                             of Zvi Barak's application on grounds which
                             include, but are not limited to: a) Ontario is not
                             a convenient forum for the hearing of the
                             application; and b) the Ontario Superior Court of
                             Justice does not have jurisdiction over the subject
                             matter or the parties. The motion was heard by the
                             Court in Toronto on February 18, 2003. At that
                             time, the Company's motion was denied and the
                             Company subsequently filed a motion for leave to
                             appeal. In July 2003, the Company's motion for
                             leave to appeal was denied

                                      F-43

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             On February 2, 2005, the Company agreed to settle
                             this case by purchasing from Mr. Barak and his wife
                             Sarah Barak all of the shares of the Company's
                             common stock that they own, aggregating 167,808
                             shares, for the purchase price of $250,000 and the
                             forgiveness of a promissory note, in the principal
                             amount of $119,500, due to one of our inactive
                             subsidiaries. The promissory note was fully
                             reserved and written off in prior years.
                             Accordingly, a liability of $250,000 was accrued
                             for this settlement in the fourth quarter of 2004
                             and the transaction was recorded as the acquisition
                             of treasury stock of $206,404, the fair market
                             value of the shares based on the closing price on
                             the day prior to the agreement, and litigation
                             expense of $43,596, representing the difference
                             between the amount to be paid and the fair value of
                             the shares.

                             Tillroe Realty Co. vs. Compass Lincoln Mercury,
                             Inc. and Fidelity Holdings Co., Inc.

                             On September 4, 2003, an action was commenced
                             against the Company and its subsidiary Compass
                             Lincoln Mercury, Inc. in the Superior Court of New
                             Jersey, Essex County by a landlord of the Company's
                             former Compass Lincoln Mercury showroom in Orange
                             New Jersey. The suit alleges that current rent and
                             damages to the showroom space at 170 Central
                             Avenue, Orange New Jersey are presently due and
                             owing by the Company. The suit alleges damages in
                             the amount of $123,556 and rent of approximately
                             $7,900 per month. This case was settled during the
                             second quarter of 2004 for $115,000.

                                      F-44

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             GRIT, LLC vs. Major Automotive Companies, Inc.

                             On September 24, 2003 the Company received notice
                             of a default judgment in the Superior Court of the
                             State of California, Los Angeles, for an aggregate
                             amount of $66,718 stemming from the plaintiff's
                             purchase in 1998 of a Talkie Communication Server
                             from a former subsidiary. In the third quarter of
                             2004, this case was adjudicated in the Company's
                             favor and, consequently, dismissed. In the fourth
                             quarter of 2004, the plaintiff refiled its
                             complaint under a slightly different theory from
                             its initial suit. It is management's belief that
                             this claim is also without merit and intends to
                             vigorously defend this suit.

                             Justin Jung et al. v. Major Automotive Companies,
                             Inc.

                             In December 2004, the Company was served with a
                             Summons and Complaint, (filed in New York State
                             Supreme Court, County of the Bronx) alleging the
                             sale of defective or otherwise dangerous vehicles.
                             Named plaintiff bases his suit on a single-vehicle
                             accident. The action includes provisions for the
                             possible promulgation of a class action lawsuit
                             regarding the previous accusations. It is the
                             position of Company that the suit has no merit and
                             management intends to vigorously defend this
                             action.

                                      F-45

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Maryann Cerbo, et al. v. Ford of Englewood, Inc.,
                             et al.

                             In November 2004, the Company received notice of a
                             pending class action in the state of New Jersey for
                             the above action in the Superior Court of the State
                             of New Jersey. The lead plaintiff had alleged the
                             systematic overcharge of all New Jersey Licensed
                             Automotive Dealers for the documentation fees for
                             the registration of new/used vehicles. Under advice
                             of counsel, the Company, through its Compass Dodge,
                             Inc. franchise, agreed to accept the proposed
                             settlement offer by the plaintiff's counsel. Using
                             a complex set of guidelines, including total sales
                             and ratio of new and used vehicles sold, the
                             Company has agreed to comply with the settlement
                             provisions. The current estimated cost of
                             settlement is approximately $30,000, which has been
                             accrued in the fourth quarter of 2004. The
                             settlement proposal awaits approval by the New
                             Jersey Superior Court.

                             Various Claims Against the Company's Subsidiaries

                             Various other claims and lawsuits arising in the
                             normal course of business are also pending against
                             the Company's subsidiaries. The results of such
                             litigation are not expected to have a material or
                             adverse effect on the Company's consolidated
                             financial position or results of operations.

                                      F-46

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Officer's Compensation

                             On May 15, 2001, the Compensation Committee of the
                             Board of Directors of the Company approved an
                             increase in the annual base salary of Bruce Bendell
                             to $500,000, annually, through June 30, 2004. The
                             agreement provided for continuity of his base
                             salary and a guaranteed annual bonus of $250,000
                             per year until that date in the event that Mr.
                             Bendell's employment was terminated prior to June
                             30, 2004. The agreement extended automatically for
                             an additional one-year period at the end of the
                             initial term, June 30, 2004, and will extend for an
                             additional one-year period on each anniversary,
                             thereafter, unless 90-day prior notice of
                             termination is provided by either Mr. Bendell or
                             the Company. Additional approval was given to a
                             bonus plan under which Mr. Bendell receives a bonus
                             equal to 10% of net income, as defined, of the
                             Company's automotive operations after all expenses,
                             including any other bonuses paid or accrued. This
                             bonus plan was approved retroactively to April 1,
                             2002. Accordingly, the Company recorded additional
                             compensation expense of $257,000 for this bonus in
                             2002. In 2003, Mr. Bendell earned an aggregate of
                             $577,500 pursuant to all of his employment
                             arrangements and $450,000 in connection with a
                             credit enhancement arrangement for the benefit of
                             the Company. (See Note 13 Related Party
                             Transactions.) In 2004, Mr. Bendell earned an
                             aggregate of $886,000 pursuant to all of his
                             employment arrangements and $450,000 in connection
                             with the credit enhancement arrangement.

                                      F-47

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Sale Tax Audit

                             In February 2004, the Company was notified by the
                             New York State Department of Taxation & Finance of
                             an assessment of $4,000,000, including interest and
                             penalties, after their audit concluded that certain
                             of the Company's subsidiaries had failed to pay
                             sales and use taxes of approximately $2,000,000
                             from February 1999 through August 2001. Management
                             believed that the tax authorities based their
                             assessment on an extrapolation from a sample of
                             certain transactions that were not representative
                             and that any additional sales taxes due would be
                             minimal. Accordingly, in prior periods, the Company
                             did not accrue any liability in connection with
                             this matter. The Company appealed the findings of
                             the taxing authorities. After investigation, the
                             taxing authorities and the Company agreed on a
                             final aggregate amount due of $65,384, including
                             $19,107 of interest. This amount is reflected in
                             accrued expenses at December 31, 2004.

13. RELATED PARTY            Amounts due from related parties result from sales
    TRANSACTIONS             of vehicles to dealerships owned by Bruce Bendell,
                             the Company's President, Chief Executive Officer,
                             Acting Chief Financial Officer and Chairman, and
                             his brother, Harold Bendell (the "Bendell
                             Dealerships"), as well as previous advances made in
                             the ordinary course of business. These amounts are
                             all due on demand and are non-interest bearing. As
                             part of its arrangement with the Bendell
                             Dealerships, the Company maintains inventory of
                             consigned vehicles on its premises. For the years
                             ended December 31, 2004, 2003 and 2002 the related
                             party sales aggregated approximated $6,000,000,
                             $5,300,000 and $4,000,000, respectively.

                             Additionally, the Company purchases vehicles from
                             the Bendell Dealerships. All of the purchases and
                             sales to and from the related dealerships are made
                             at wholesale cost plus related fees and have,
                             therefore, resulted in no profit or loss to the
                             Company. For the years ended December 31, 2004,
                             2003 and 2002 the purchases from related parties
                             approximated $7,000,000, $13,700,000 and
                             $14,900,000, respectively.

                                      F-48

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             Pursuant to a management agreement with Harold
                             Bendell, the Company has accrued a management fee
                             for services performed by Harold Bendell. For the
                             year ended December 31, 2002, such accrual amounted
                             to $624,359. Mr. Harold Bendell's management
                             agreement expired at December 31, 2003. Starting in
                             2002, the Company entered into negotiations with
                             Harold Bendell regarding his fees for 2003 and
                             future periods. In 2003, the Company accrued
                             $361,361 as a management fee for Mr. Bendell
                             pursuant to the provisions of the expired
                             agreement. Additionally, the Company's Board of
                             Directors awarded him an additional $500,000, which
                             was accrued in the fourth quarter of 2003, for his
                             services. In March 2004, the Company concluded its
                             negotiations and agreed in principle as to a new
                             consulting agreement with a company owned by Harold
                             Bendell, HB Automotive, Inc. This agreement was
                             considered to be effective January 1, 2004 through
                             the year ending December 31, 2005. It provides for
                             a management fee equal to $200 per used vehicle
                             sold at retail by the Company's Chevrolet
                             dealership and 10% of the pre-tax profits from the
                             Company's dealerships in Long Island City, New
                             York. Had the per-vehicle fee provision been in
                             effect on January 1, 2003, HB Automotive would have
                             earned an additional $2 million in 2003. In 2004,
                             HB Automotive earned $2,484,000 in connection with
                             this agreement.

                             In connection with the Company's acquisition of its
                             Nissan dealership in Hempstead, New York, the
                             Company obtained an option to acquire that
                             dealership's land and building from the landlord
                             who held the lease on that property. The Company
                             exercised its option, but was unable to obtain the
                             financing necessary to effect the purchase. Since
                             the lease expiration was concurrent with the
                             required property acquisition date and the Company
                             was unsuccessful in obtaining an extension of the
                             lease term, it became imperative to the Nissan
                             dealership's operations to maintain its presence at
                             the location.

                                      F-49

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             In order to ensure continuity of the dealership's
                             operations, in a transaction approved by the
                             Company's Board of Directors, the Company's
                             Chairman and his brother agreed to personally
                             acquire the property through a company they formed
                             and lease it back to the Company. The result of
                             this transaction was to eliminate the capitalized
                             lease of approximately $3.6 million and the related
                             liability of $3.0 million that the Company had
                             recorded in connection with this property. The
                             difference of $637,000, the book value of the
                             purchase option, was recorded as a related party
                             receivable, which is included in due from related
                             parties. The Company entered into a lease with the
                             new landlord for five years, through June 2007 with
                             a five-year renewal option for approximately the
                             same rent, $32,000 per month, it was previously
                             paying.

                             An independent appraiser was retained in order to
                             determine a fair market rent, so that the current
                             rent could be adjusted and the lease revised
                             accordingly, if necessary. Similarly, the value of
                             the purchase option was required to be determined
                             so that an adjustment to the related party
                             receivable could be made and a loss could be
                             recorded, at that time, if the value of the option
                             at the date of transfer exceeded its book value of
                             $637,000. The receivable will be repaid, ratably,
                             through monthly payments over the remaining term of
                             the lease, including extensions to the initial
                             term, together with related interest at the market
                             rate. Bruce Bendell has guaranteed payment in the
                             event the lease is prematurely terminated. Based on
                             the report of the appraiser, no adjustment was
                             required for either the rental rate or the
                             receivable balance. At December 31, 2004 and 2003,
                             $541,745 and $589,741, respectively, was receivable
                             on this balance and included in due from related
                             parties. Of such amount, in 2004 $493,745 is
                             long-term.

                                      F-50

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             In unrelated transactions, in order to obtain floor
                             plan financing at favorable rates (see Note 7),
                             each of Bruce Bendell and Harold Bendell has agreed
                             to either guarantee certain floor plan debt of the
                             Company or provide certain collateral in connection
                             with the Company's floor plan or other borrowings.
                             The Board of Directors has agreed to obtain
                             independent valuations of such credit enhancement
                             and collateral usage (together, "Credit
                             Enhancements") and pay each of the Bendell's the
                             fair value of his respective contributions. The
                             Company engaged an independent valuation firm and
                             received a preliminary valuation from such firm of
                             $160,000 for the economic risk value of the Credit
                             Enhancements. Accordingly, the Company accrued such
                             amount as a liability in the third quarter of 2002.
                             In the third quarter of 2003, the Company's Board
                             of Directors received additional indications that
                             the value of the Credit Enhancement may approximate
                             $450,000. As such, the Company accrued an
                             additional $290,000 in the third quarter of 2003.
                             In March 2004, the Company's Board of Directors
                             concluded that the $450,000, that had been accrued
                             as deferred debt costs, is the appropriate value of
                             the Credit Enhancement. Additionally, the Board of
                             Directors has approved the payments to Mr. Bendell
                             for the continuation of his Credit Enhancement to
                             the Company, of which $450,000 was accrued in 2004
                             and which is expected to approximate $450,000,
                             annually,

                             Additionally, Harold Bendell has acquired the right
                             to an off- premises storage facility that was
                             previously leased by the Company, on a
                             month-to-month basis, from an independent third
                             party. Accordingly, the Company is now leasing such
                             facility from Mr. Bendell on the same basis for
                             approximately the same monthly rental, $33,000, it
                             was paying to the prior landlord.

                                      F-51

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                             The Company also purchases from and sells vehicles
                             to Nawi Leasing, Inc., a company of which Steven
                             Nawi is President. Mr. Nawi was a member of the
                             Company's Board of Directors until December 2004.
                             For each of the years ended December 31, 2004, 2003
                             and 2002, the Company's purchases from and sales to
                             Nawi Leasing, Inc. and its affiliates represented
                             less than 1% of the Company's aggregate sales and
                             purchases.

                             Marcum & Kliegman LLP, an accounting firm of which
                             a director is a member, charged the Company
                             approximately $87,500, $75,000 and $105,000 in fees
                             for accounting and tax services for the years ended
                             December 31, 2004, 2003 and 2002, respectively.

14. WARRANTS AND             (a)   Warrants
    OPTIONS
                                    (i)   In March 1996, the Company issued to
                                          Nissko Telecom, Inc. and its investors
                                          warrants to purchase 450,000 shares of
                                          the Company's common stock at a price
                                          of $2.75 per share. In 1997, warrants
                                          to purchase 156,900 shares were
                                          exercised, leaving a balance of
                                          293,100 outstanding. Of this amount,
                                          Class B warrants for 225,000 shares,
                                          which were exercisable through March
                                          19, 1998, were unexercised by that
                                          date and, therefore, lapsed and
                                          warrants to purchase 43,414 shares of
                                          the Company's common stock were
                                          exercised in December 1998, leaving a
                                          balance of 37,029 outstanding as of
                                          December 31, 2004.

                                    (ii)  In addition, the Company issued
                                          warrants in 1996 for the purchase of
                                          45,000 shares at a price of $2.75 per
                                          share, in connection with the
                                          management agreement entered into when
                                          the Company acquired Major Fleet &
                                          Leasing Corp. As of December 31, 2004,
                                          these warrants are still outstanding.

                                    (iii) In connection with the private
                                          placement of its common stock in 2001,
                                          the Company issued warrants for
                                          116,275 shares of its common stock at
                                          an exercise price of $80.00. Such
                                          warrants have an exercise period of
                                          five years from date of grant.

                                      F-52

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                              (b)   Stock Options

                                    During November 2000, the Company adopted
                                    the 1999 Stock Option Plan (the "Plan")
                                    pursuant to which 360,000 shares of common
                                    stock are reserved for issuance upon the
                                    exercise of options, designated as 1999
                                    options. At the discretion of the Company's
                                    Board of Directors or members of any
                                    committee the Board of Directors has
                                    designated, options may be granted to
                                    consultants, non-employee members of the
                                    Board of Directors, employees, officers or
                                    anyone who performs services for the
                                    Company. The Plan will terminate upon the
                                    date on which all shares of the Plan have
                                    been exercised. In December 2001, the
                                    Company amended the Plan to increase the
                                    shares reserved for issuance by 750,000
                                    shares to 1,110,000.

                                    Options granted under the Plan expire not
                                    more than 10 years from the date of grant.
                                    Generally, options vest in 3 years beginning
                                    on the date of grant.

                                    In consideration for certain consulting
                                    services related to the acquisition of the
                                    Major Auto Group, the Company issued options
                                    to purchase 22,500 shares of the Company's
                                    common stock for $10.00 per share (market
                                    price), exercisable until May 2002.

                                      F-53

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                              In December 2000, the Company adopted the 2001
                              Outside Director Stock Plan (the "2001 Plan")
                              pursuant to which 250,000 shares are reserved for
                              issuance to non-employee members of the Board of
                              Directors ("Outside Directors"). The Plan
                              provides, that, commencing on the date of the
                              annual stockholders' meeting in 2001 and on each
                              anniversary thereafter, each Outside Director who
                              served as a member of the Board of Directors shall
                              automatically be granted an option to purchase
                              4,500 shares. The term of the option shall be ten
                              years. The option shall be immediately
                              exercisable, but only while the optionee serves as
                              a member of the Board of Directors and for the
                              three months following the termination of service
                              or 12 months, if such termination is for reason of
                              death or disability. The exercise price shall be
                              equal to the price for the Company's common stock
                              on the date of the grant. In December 2002, the
                              Company granted 22,500 shares to Outside Directors
                              at an exercise price of $0.75. Additionally, the
                              2001 Plan calls for grants of 4,500 shares of the
                              Company's common stock to each Outside Director on
                              April 30 and each anniversary thereafter.

                              Each of the Company's stock options has been
                              issued at the fair value of the Company's common
                              stock at the date of grant and no issued options
                              have ever been exercised.

                              During 2001, pursuant to a separation agreement,
                              the Company granted options to an employee of IG2
                              for 30,000 shares of common stock. The Company
                              recorded a charge of $260,616 against the reserve
                              established for discontinued operations and a
                              corresponding increase in additional paid-in
                              capital.

                              In 2001, the Company issued options for an
                              aggregate of 25,200 shares of common stock to
                              Outside Directors at an average exercise price of
                              $.85 per share, the market price at the date of
                              grant.

                                      F-54

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                              In 2002, the Company issued options for an
                              aggregate of 18,000 shares of common stock to
                              Outside Directors at an average exercise price of
                              $.68 per share, the market price at the date of
                              grant. In addition, the Company cancelled options
                              for 134,800 shares of common stock, with an
                              average exercise price of $13.71.

                              In 2003, the Company issued options for an
                              aggregate of 18,000 shares of common stock to
                              Outside Directors at an average exercise price of
                              $.62 per share, the market price at the date of
                              grant.

                              In 2004, the Company issued options for an
                              aggregate of 18,000 shares of common stock to
                              Outside Directors at an average exercise price of
                              $.70 per share, the market price at the date of
                              grant.

                              The Company applies APB Opinion 25 and related
                              Interpretations in accounting for its stock option
                              plan by recording as compensation expense the
                              excess of the fair market value over the exercise
                              price per share as of the date of grant.

                                      F-55

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                              A summary of the status of the Company's stock
                              option plan as of December 31, 2004 and changes
                              during the period January 1, 2001 through December
                              31, 2004 is presented below:

<TABLE>

                                                                                           Weighted
                                                           Number of      Expiration       average
                                                            shares           date       exercise price
                              -------------------------------------------------------------------------

                              Options outstanding at          361,688      2002-2011           7.64
                                December 31, 2001
                              Options granted                  18,000           2012            .68
                              Options cancelled and
                                expired                      (134,800)     2002-2011          13.71
                              -------------------------------------------------------------------------
                              Options outstanding at          244,888      2009-2012           3.78
                                December 31, 2002
                              -------------------------------------------------------------------------
                              Options granted                  18,000           2013            .62
                              -------------------------------------------------------------------------
                              Options outstanding at
                                December 31, 2003             262,888      2009-2013           3.57
                              -------------------------------------------------------------------------
                              Options granted                  18,000           2014            .70
                              -------------------------------------------------------------------------
                              Options outstanding at          280,888      2009-2014           3.38
                                December 31, 2004
                              -------------------------------------------------------------------------
</TABLE>

                                      F-56

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about stock options outstanding at
December 31, 2004.

<TABLE>

                                                 Options Outstanding                             Options Exercisable
                                  ---------------------------------------------------     ----------------------------------
                                      Number           Weighted         Weighted              Number
                                  Outstanding at       Average                            Exercisable at       Weighted
                                   December 31,       Remaining          Average           December 31,        Average
Exercise Price Range                   2004        Contractual Life  Exercise Price            2004         Exercise Price
----------------------------------------------------------------------------------------------------------------------------

  $24.44-$38.75                          4,388            4.6             $33.25                 4,388          $33.25
  $13.40                                 1,200            0.4              13.40                 1,200           13.40
  $4.38                                126,000            0.8               4.38               126,000            4.38
  $2.34-$2.35                           80,000            2.9               2.35                76,000            2.35
  $1.65                                  1,800            0.3               1.65                 1,800            1.65
  $0.62-$0.75                           67,500            8.6               0.68                67,500            0.68
----------------------------------------------------------------------------------------------------------------------------
                                       280,888            3.3              $3.38               276,288           $3.40
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-57

15. PREFERRED STOCK           On May 14, 1998, the Company designated 900,000
                              shares as the 1997 - Major Series of Convertible
                              Preferred Stock (the "1997 Preferred Stock"). The
                              shares of the 1997 Preferred Stock had voting
                              rights and voted with the common stock and not as
                              a separate class. Each share entitled the holder
                              to 0.9 votes per share reflecting the underlying
                              conversion rate. The shares of 1997 Preferred
                              Stock were convertible, with each share converting
                              into four and a half shares of common stock if the
                              market value was equal to or greater than
                              $6,000,000 for the 810,000 shares of common stock.
                              If the 810,000 shares of common stock had a market
                              value of less than $6,000,000, then additional
                              shares of common stock would be issued to equal a
                              market value of $6,000,000. In the event that a
                              dividend is declared on the common stock, a
                              dividend of twice the per share dividend of common
                              stock would be paid on the 1997 Preferred Stock.
                              The 1997 Preferred Stock has a liquidation value
                              of $6,000,000. On the fifth anniversary, the 1997
                              Preferred Stock would automatically convert into
                              shares of common stock. During October 2000 and
                              May 2001, 400,000 shares and 400,000 shares were
                              converted into 360,000 shares and 1,777,778
                              shares, respectively, of common stock (after the
                              three-for-two and one-for-five stock splits). In
                              February 2002, Mr. Bendell converted the remaining
                              100,000 shares of 1997 Preferred Stock into
                              1,333,333 shares of common stock.

16. DISCONTINUED              On November 3, 2000, the Board of Directors
    OPERATIONS                determined to divest the Company's non-automotive
                              operations within the next twelve months.
                              Continuing operations are represented by the
                              Company's automotive dealership activities,
                              including its automotive leasing subsidiary, Major
                              Fleet and Leasing, Inc. Non-automotive operations
                              are reported as discontinued operations.

                              The loss from discontinued operations is comprised
                              of the following:

                              Year ended December 31,                   2002
                              --------------------------------------------------
                              Loss from discontinued               $(344,000)
                                operations
                              Income tax benefit                     138,000
                              --------------------------------------------------
                                                                   $(206,000)
                              --------------------------------------------------

                              The Company completed the sale of its
                              non-automotive assets during 2001 resulting in the
                              complete divestiture of all non-automotive
                              operations. In February 2001, The Company
                              completed an asset sale of its Richmond,
                              Virginia-based Internet Creations, Inc. (d/b/a
                              Internet Connections) to Access Technology, Inc.
                              The sale price for the assets was $320,000,
                              $47,000 of which was paid at the closing, and
                              $273,000 of which was evidenced by a senior
                              secured promissory note. No payments have been
                              received on the notes.

                                      F-58

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              Effective March 27, 2001, the Company sold its
                              interest in its telecommunications subsidiary,
                              IG2, to Global Communications of NY, Inc. The sale
                              price was $3,000,000, less the assumption of
                              certain of the Company's liabilities, resulting in
                              a net amount due to the Company of $1,778,803.
                              Such indebtedness is evidenced by a note payable
                              to the Company in the principal amount of
                              $1,778,803, bearing interest at 8.5% and payable
                              in quarterly installments over 48 months,
                              beginning in March 2002. Such payments have been
                              deferred to begin in June 2002. No payments have
                              been received on the note.

                              Effective June 27, 2001, in related transactions,
                              the Company sold its interest in its Israeli
                              technology subsidiary, C.B.S (Israel), Ltd. and
                              the assets of its Canadian subsidiary, 786710
                              Ontario, Ltd., doing business as Info Systems, to
                              GYT International, Ltd., a Nevis corporation. The
                              combined sales price in connection with these
                              transactions was $350,000 for both operations,
                              less the assumption of certain of the Company's
                              liabilities, resulting in a net amount due to the
                              Company of $119,500. Such indebtedness is
                              evidenced by a note payable to the Company in the
                              principal amount of $119,500, bearing interest at
                              5% and payable in quarterly installments over 60
                              months, beginning in June 2002. No payments have
                              been received on the note.

                              Effective July 31, 2001, the Company sold its
                              interest in its telephone calling card subsidiary,
                              ICS Globe, Inc., to Global Communications of NY,
                              Inc. The sale price was $250,000, with a down
                              payment of $10,000. The balance is evidenced by a
                              note payable to the Company in the principal
                              amount of $240,000, bearing interest at 12% and
                              payable in monthly installments for sixteen
                              months, beginning in August 2002. No payments have
                              been received.

                              The aggregate sales price of the assets of these
                              discontinued operations was $3.6 million. The book
                              value of these assets was $1 million.

                              The gains on the sales of these discontinued
                              operations were deferred due to a lack of credit
                              history. Such gains were to be reflected when
                              collectibility was reasonably assured.
                              Accordingly, the Company had reclassified the
                              balance of $1,000,000 from assets held for sale at
                              December 31, 2000 to notes receivable at December
                              31, 2001 and recorded a valuation allowance of
                              $300,000 at that date to reflect the estimated
                              realizable value of the amounts expected to be
                              received from the sale of its discontinued
                              operations. The balance of the related receivables
                              of approximately $182,000 was written off in 2002
                              because of the uncertainty of collectibility.

                                      F-59

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. QUARTERLY FINANCIAL
    DATA (UNAUDITED)

                                First       Second         Third       Fourth
2004                           quarter      quarter       quarter      quarter
--------------------------------------------------------------------------------
                                  (In thousands except for per share data)
   Sales                        $84,872     $103,923      $104,118     $104,069
 Gross profit                    14,114       16,990        15,993       17,429
 Operating income (loss) from
   continuing operations           (188)       1,243           592       (8,464)
 Net income (loss)                 (188)       1,243           592       (8,464)
 Income (loss) from continuing
   operations per share -
   diluted                        $(.02)        $.13          $.06        $(.87)
 Net income (loss) per share -
   (diluted)                       (.02)        .13            .06         (.87)
--------------------------------------------------------------------------------

                                First        Second        Third       Fourth
   2003                        quarter      quarter       quarter      quarter
--------------------------------------------------------------------------------
                                  (In thousands except for per share data)
   Sales                        $91,146      $98,873      $103,957      $86,323
 Gross profit                    14,530       16,075        17,361       12,677
 Operating income (loss)
   from continuing
   operations                      (477)         600           812       (2,076)
 Net income (loss)                 (477)         600           812       (2,076)
 Income (loss) from
   continuing operations
   per share - diluted            $(.05)        $.06          $.09        $(.22)
 Net income (loss) per
   share - (diluted)               (.05)         .06           .09         (.22)
--------------------------------------------------------------------------------

                              Income (loss) per share data are computed
                              independently for each of the periods presented;
                              therefore the sum of the income (loss) per share
                              amounts for the quarters may not equal the total
                              for the year.

                              In the fourth quarter of 2004 the Company incurred
                              a charge of approximately $8.1 million in
                              connection with the valuation of its goodwill
                              and a charge of approximately $549,000 in
                              connection with litigation settlement
                              expenses. There were no comparable charges in
                              the fourth quarter of 2003.

                                      F-60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULE

To the Shareholders and Directors of The Major Automotive Companies, Inc.

The audits referred to in our report dated May 17, 2005 relating to the
consolidated financial statements of The Major Automotive Companies, Inc., which
is contained in Item 8 of this Form 10-K included the audits of the financial
statement schedule listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based upon our
audits.

In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.

New York, New York                              /s/ BDO Seidman, LLP
May 17, 2005                                    --------------------
                                                BDO Seidman, LLP

                                      S-1

SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS

              For the Years Ended December 31, 2004, 2003 and 2002

<TABLE>

                                                                     Additions
                                                 Balance at         Charged to         Deductions,          Balance at
                                                Beginning of         Costs and            Net of              End of
Account Description                                 Year             Expenses           Write-offs             Year
                                              -----------------  ------------------  -----------------   -----------------

Allowance for doubtful accounts
 Year ended December 31, 2004                  $     492,000      $     760,000       $    (760,000)      $     492,000
                                              =================  ==================  =================   =================

 Year ended December 31, 2003                  $     507,000      $     250,000       $    (265,000)      $     492,000
                                              =================  ==================  =================   =================

 Year ended December 31, 2002                  $     700,000      $     235,000       $    (428,000)      $     507,000
                                              =================  ==================  =================   =================

                                                 Balance at         Reserves on          Sales of           Balance at
                                                 Beginning         Current Year         Prior Year             End
                                                  of Year            Purchases          Inventory            of Year
                                              -----------------  ------------------  -----------------   -----------------

Inventory reserves
 Year ended December 31, 2004                  $   720,000        $     647,000       $  (720,000)        $     647,000
                                              =================  ==================  =================   =================

 Year ended December 31, 2003                  $   1,016,000      $     720,000       $  (1,016,000)      $     720,000
                                              =================  ==================  =================   =================

 Year ended December 31, 2002                  $     756,000      $   1,016,000       $    (756,000)      $   1,016,000
                                              =================  ==================  =================   =================
</TABLE>

                                      S-2
```