<PAGE>

                                  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, 2002
                         COMMISSION FILE NUMBER: 0-29182

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

<TABLE>
<CAPTION>
                    NEVADA                         11-3292094
<S>                                            <C>
         (STATE OR OTHER JURISDICTION OF        (I.R.S. EMPLOYER
          INCORPORATION OR ORGANIZATION)       IDENTIFICATION NO.)
</TABLE>

      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 June
28, 2002 was approximately $5,850,892.

As of April 11, 2003, there were 9,564,471 shares of the registrant's common
stock outstanding.



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<PAGE>
                                     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 may 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.

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 operates through nine (9) retail automobile franchises.
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.

Year 2002 Summary

The year 2002 reflected a number of important changes in our company.
First, we changed our primary floor plan financing arrangements by identifying
and engaging new lenders. In addition, we began implementing our plan to
increase our dealership's operational profitability by, among other things,
closing or divesting ourselves of non-performing or under-performing
dealerships. Our initiatives resulted in operations that generated revenues in
excess of $397 million and a historical high gross profit of approximately $67.2
million.

Our net loss for the year ended December 31, 2002 was $(290,772).



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AUTOMOTIVE OPERATIONS

Major Auto Acquisition

On April 21, 1997, we and our wholly-owned subsidiary, Major Acquisition
Corp., entered into a merger agreement (the "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 42.6% 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 Messers. Bruce
Bendell and Harold Bendell for $3 million.

The preferred stock issued to Bruce Bendell was designated as the "1997-Major
Series of Convertible Preferred Stock." Mr. Bendell has converted all of the
1997-Major Series of Convertible Preferred Stock into an aggregate of 3,471,111
shares of our common stock. The foregoing acquisitions from Major Auto and Mr.
Harold Bendell 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") pursuant to a loan and security agreement dated May
14, 1998, for a 15 year term at an interest rate of 10.18%. Prepayment is not
permitted for the first five (5) years, after which time, prepayment may be
made, in full only, along with the payment of a premium.

The collateral securing the Falcon loan 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. Major Auto owns and operates the following six (6) franchised
automobile dealerships in the New York metropolitan area: (i) Chevrolet; (ii)
Chrysler; (iii) Dodge; (iv) Jeep; (v) Subaru; and (vi) Kia. In addition, the
Major Dealer Group owns three (3) other franchised dealerships in the New York
metropolitan area: (i) Dodge; (ii) Nissan; and (iii) Suzuki. Major Auto also
distributes General Motors' vehicles in the former Soviet Union. 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.

Our President, Chief Executive Officer, Acting Chief Financial Officer and
Chairman, Bruce Bendell, has more than 31 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 nine (9)
franchise dealership group having more than $397 million in revenues and more
than 400 employees in 2002.



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Industry Background

According to industry data from the National Automobile Dealers Association
("NADA Data"), on average in 2002, new vehicle sales constituted 59.6% of a
franchised dealership's total sales. Unit sales of new vehicles decreased 1.8%
in 2002 to a total of 16.8 million units sold. At an average retail-selling
price of $26,163 per vehicle, new vehicle sales totaled approximately $439.5
billion in 2002. From 1998 to 2002, sales revenue from the sale of new vehicles
increased approximately 14.8%. The average dealership's gross profit as a
percentage of selling price for new vehicles was 5.6% in 2002.

According to NADA Data, on average in 2002, used vehicle sales constituted 28.6%
of a franchised dealership's total sales. In 2002, franchised new vehicle
dealers sold approximately 11.6 million retail used vehicles. At an average
selling price of $13,841 per vehicle, used vehicle sales totaled approximately
$160.6 billion in 2002. From 1998 to 2002, sales revenue from the retail sale of
used vehicles increased approximately 5.0%. The average dealership's gross
profit as a percentage of selling price for used vehicles was 11.0% in 2002. No
assurance can be given that results of Major Auto's operations will conform to
or meet NADA's industry results.

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>
<CAPTION>
                                             1998            1999            2000            2001            2002
                                                           (Units in millions; dollars in billions)
<S>                                        <C>             <C>             <C>             <C>             <C>
New vehicle unit sales                       16.2            16.9            17.4            17.1            16.8
New vehicle sales revenue (1)              $383.0          $413.1          $433.7          $441.1          $439.5
Used vehicle unit sales                      12.2            11.1            12.6            12.9            11.6
Used vehicle sales
revenue (1)                                $153.0          $146.9          $172.0          $179.9          $160.7
</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: National Automobile Dealers Association (NADA) Data, 2002.

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 2002 for franchised dealerships. Revenue
from parts and services constitutes, on average, approximately 11.8% 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 2002, total franchised dealership gross
profits were, on average, $4.2 million, with an average net profit before taxes
of $599,000.

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 0%
financing and rebates.



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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
have led to further consolidation. According to NADA Data, the number of
franchised dealerships has declined from 36,336 in 1960 to 21,725 at the end of
2002.

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, we believe that the increased percentages of leased
versus owned vehicles in recent years may provide some protection against the
historical trends of decreased motor vehicle purchasers during periods of
economic downturns.

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 2002, approximately
11.6 million used cars were sold retail by dealers, which is 10.5% less than the
number of such sales in 2001. 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 was 11.0%, compared with new vehicle average gross
profits of 5.9%. In 2002, our dealerships' average gross profit on used vehicles
was approximately 19.3% and on new vehicles was approximately 10.0%. 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 the more than 31 years of experience in the used vehicle business of
our President, Chief Executive Officer and Acting Chief Financial Officer, 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.



                                       5
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Major World Branding. We have established 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. At our various
locations, we offer, collectively, eight (8) makes of new vehicles- Chevrolet,
Chrysler, Dodge, Jeep, Subaru, Kia, Nissan and Suzuki. In addition, we sell 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. Our dealerships were one of
the first to provide customers with an 800 telephone number and price quotations
via facsimile. During the past several years, the Major Dealer Group has also
increased revenue to a present level of more than $1 million each month from its
Internet website, www.majorworld.com, and other electronic media such as
Bloomberg. 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 nine
different 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

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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

In the past, 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, our 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 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 presently seeking dealerships to acquire, if a particularly attractive
opportunity should present itself, we would evaluate an acquisition.

We continue to expand our volume and 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 profitable 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 increase 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. During 2002, we changed our significant floor plan financing
sources to others with lower interest rates and we have realized and expect to
continue to realize significant saving from that change. Additionally, we will
continue to use our substantial buying power to lower costs for equipment,
supplies and outside vendor services.

Dealership Operations

We own and operate six (6) automobile franchises at four (4) locations in Long
Island City, New York, two (2) franchises in two (2) locations in Hempstead, New
York and one (1) franchise in one (1) location in Orange, New Jersey. We offer
the following eight (8) makes of new vehicles: Chevrolet, Chrysler, Dodge, Jeep,
Subaru, Kia, Nissan and Suzuki. Each location 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 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 Bendell
brothers' 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 has 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 commenced on January 7, 1998) which carries voting
rights allowing them to elect a majority of the board of

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directors of Major Auto and (ii) a related management agreement. See "Certain
Relationships and Related Transactions" below. Should either of the Bendell
brothers cease managing the dealerships, their respective management rights
under the management agreement will be automatically transferred to the other,
and should both brothers 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). The management agreement expired by
its term as of December 31, 2002. The management agreement provided, however,
that if the ownership of the dealerships remains with us, the management
agreement will continue upon the unilateral decision of either of the Bendell
brothers. Upon the mutual agreement of the parties, the management agreement may
be extended or modified. Accordingly, the parties have orally elected to
continue the management agreement until such time as they reach agreement on
terms of an extension to the management agreement.

New Vehicle Sales. We sell a complete product line of cars, sport utility
vehicles, minivans and light trucks manufactured by Chevrolet, Chrysler, Dodge,
Jeep, Subaru, Kia, Nissan and Suzuki. For the year ended December 31, 2002, our
dealerships sold new vehicles generating revenue of approximately $140.7
million, which constituted approximately 35.5% of our total dealerships'
revenues. Our gross profit margin on new vehicle sales for the year ended
December 31, 2002 was approximately 10.0%, which is significantly higher than
the industry average of 5.9%. Included in our gross profit is approximately $2.0
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, 2002 was as follows:

<TABLE>
<CAPTION>
                                       Percentage of
      Manufacturer                   New Vehicle Sales
      ------------                   -----------------
<S>                                  <C>
      Chevrolet                            31.0%
      Dodge                                12.6%
      Chrysler and Jeep                     9.6%
      Subaru and Kia                        7.6%
      Nissan                               34.4%
      Suzuki                                1.6%
      Discontinued dealerships              3.2%
</TABLE>

The following table sets forth information with respect to our new vehicle sales
for the year ended December 31, 2002:

<TABLE>
<CAPTION>
      NEW VEHICLE SALES
      (dollars in millions)
      ---------------------
<S>                           <C>
      Unit Sales               5,557
      Sales Revenue           $140.7
      Gross Profit             $14.7
      Gross Profit Margin      10.5%
</TABLE>

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 countries of the former Soviet Union. We generally receive a
deposit on the purchase price of the vehicle from the local dealer and release
the vehicle to the dealer upon

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full payment of the balance of the wholesale purchase price plus a percentage of
the dealer's profit on the sale. We intend to expand our distributorship
operation to former countries of the Soviet Union in the future to include the
sale of used vehicles. Amounts of such sales have not been material in relation
to our aggregate revenues.

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, 2002,
we sold 16,050 used vehicles generating revenues of approximately $236.8
million, which constituted approximately 59.7% of our total revenues. Our gross
profit margin on used vehicle sales for the year ended December 31, 2002 was
approximately 19.3%, as compared with the industry average of 11.0%. 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, however, 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 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 escalating
purchase price of new vehicles and the increase in the quality and selection of
used vehicles primarily due to an increase in the number of popular cars coming
off short-term leases.

The following table sets forth information with respect to our used vehicle
sales for the year ended December 31, 2002:

<TABLE>
<CAPTION>
      USED VEHICLE SALES
      (dollars in millions)
      ---------------------
<S>                           <C>
      Unit Sales              16,050
      Sales Revenue           $236.8
      Gross Profit             $45.8
      Gross Profit Margin      19.3%
</TABLE>

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, 2002, our parts and service operations generated revenues of approximately
$19.3 million, which constituted approximately 4.9% of our total revenues at a
gross profit margin of approximately 32.1%.

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.



                                       9
<PAGE>
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, 2002:

<TABLE>
<CAPTION>
      SALES OF PARTS AND SERVICES
      (dollars in millions)
      ----------------------------
<S>                                     <C>
      Sales Revenue                     $19.3
      Gross Profit                       $6.2
      Gross Profit Margin                32.1%
</TABLE>

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, 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, 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. According to NADA data,
nationwide, the average cost of marketing and advertising per new vehicle sold
in 2002 was approximately $507. Although advertising costs in the New York
metropolitan area are generally higher than the national average, our cost of
marketing and advertising per new vehicle sold of $493 is almost 3% 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.



                                       10
<PAGE>
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 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 Dealer Group 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



                                       11
<PAGE>
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 are 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, warranties and customer preference for
particular makes of vehicles. 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 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 which maintain similar commercial Web sites include
Autoweb.com, Autobytel.com, Carsdirect.com, Cendant Membership Service, Inc.'s
AutoVantage 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 Web sites 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 Web
sites which compete with ours.

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 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.

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.



                                       12
<PAGE>
Leasing Operations

Our subsidiary, Major Fleet & Leasing Corp. ("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.

DISCONTINUED OPERATIONS

In November 2000, we announced our intention to divest our non-automotive
operations by way of sale, merger, consolidation or otherwise by the most
economically viable means, in order to maximize shareholders' value from these
operations and to maintain our focus on the operation and consolidation of our
retail automotive dealerships.

During the year ended December 31, 2002, the Company incurred and recognized
$344,000 loss from discontinued operations, before $138,000 tax benefit. This
loss is comprised of litigation settlements of $225,000 (see Note 15 of Notes to
Consolidated Financial Statements included elsewhere in this Form 10-K) and
reduced realization of notes receivable relating to sales of discontinued
operations.

RECENT DEVELOPMENTS

Floor Plan Financing

In September 2001, Chrysler Financial Company, LLC ("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

                                       13
<PAGE>
replace all existing CFC credit facilities. Consequently, in March 2002, we
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 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 2002. Additionally, in March 2002, we entered into a credit
agreement with HSBC Bank, USA ("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, we 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 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 Financial Services,
Inc. ("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 has 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 have
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 have accrued such amount
as a liability in the third quarter of 2002. When the final valuation has been
completed, and our Board of Directors has reviewed the results and evaluated
the circumstances of the credit enhancement relative to the enterprise value of
our company as a whole, adjustment, if necessary and warranted, will be made
for any difference from the preliminary valuation.

Acquisitions of Certain Dealerships

In May 2001, we acquired a Suzuki franchise and certain Suzuki vehicles and
parts from Hempstead F.S. Motors, Ltd. and a debtor-in-possession. The purchase
price of $309,877 out of a total deposit of $500,000 for this and other
potential, but subsequently abandoned, acquisitions, was paid on May 4, 2001.
The balance of the deposit is being held in escrow pending resolution of certain
issues relating to the closing.

Termination of Franchise Agreements

In the third quarter of 2002, we voluntarily surrendered our Hempstead Mazda
dealership's franchise agreement with Mazda and received the franchise-mandated
payments for Mazda proprietary equipment, which was approximately equal to the
book value of those assets. Separately, during that same quarter, we voluntarily
surrendered our Compass Lincoln Mercury franchise to the Ford Motor Company and
received, in addition to the franchise-mandated payments for Lincoln Mercury
proprietary equipment, which was approximately equal to the book value of those
assets, financial assistance of $600,000. Accordingly, a gain for $600,000 was
recognized in the third quarter of 2002. Additionally, in the second quarter of
2002, we closed our Daewoo dealership because Daewoo USA ceased business in the
United States. Overall, we determined that the fair value of our aggregate
liability in connection with these franchise termination transactions was
approximately $600,000, which was provided for in the third quarter of 2002 and
offset against the $600,000 gain.



                                       14
<PAGE>
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.

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 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:

      -     financial condition;

      -     marketing strategy;

      -     vehicle demand;

      -     production capabilities;

      -     management;

      -     events such as labor strikes; and

      -     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.



                                       15
<PAGE>
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 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 us and the manufacturers 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, any
such termination or failure to renew could have a material adverse effect on us
and our business, financial condition and results of operations.

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:

      -     general and local economic conditions;

      -     taxes;

      -     consumer confidence;

      -     interest rates;

      -     credit availability; and

      -     the level 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,

                                       16
<PAGE>
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 current
economic outlook in the aftermath of the September 11, 2001 attacks is
uncertain. 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 or change of this type could
have a material adverse effect on our business, revenues and profitability.

      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. During 2001, we were
notified by CFC that it was terminating its financing. Although we 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:

      -     incurring significantly higher capital expenditures and operating
            expenses;

      -     failing to assimilate the operations and personnel of the acquired
            dealerships;

      -     disrupting our ongoing business;

      -     dissipating our limited management resources;

      -     failing to maintain uniform standards, controls and policies;

      -     impairing relationships with employees and customers as a result of
            changes in management; and

      -     diluting ownership percentages of current and future shareholders.



                                       17
<PAGE>
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 are likely to result in substantial amortization
charges to us that would reduce stated earnings, if any.

THERE EXIST RISKS RELATING TO THE FAILURE TO MEET MANUFACTURER CSI SCORES.

Many manufacturers attempt to measure customers' satisfaction with automobile
dealerships through a CSI, 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 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. The loss of the services of these employees, or certain other key
employees, are likely have a material adverse effect on our business. Bruce
Bendell and Harold Bendell are currently employed at will, subject, in the case
of Bruce Bendell, to certain post-employment compensation arrangements in the
event of termination prior to June 30, 2004. 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 our Bruce Bendell and/or his brother, Harold Bendell. Such
transactions include the following:

      -     In 1996, we acquired Major Fleet from the Bendell brothers. In
            exchange, the Bendell brothers received (a) shares of our 1996-Major
            Series of Convertible Preferred Stock, (b) warrants that carry
            registration rights, which have been exercised, and (c) the right to
            manage the operations of the Major Dealer Group's vehicle leasing
            activities pursuant to a management agreement.

      -     We acquired Major Auto from Bruce Bendell and Harold Bendell in May
            1998. Bruce Bendell and Harold Bendell received shares of our
            1997A-Major Automotive Group Series of Preferred Stock in that
            transaction and Bruce Bendell has 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 commenced on January
            7, 1998. These shares allow the Bendell brothers to elect a majority
            of the directors of Major Auto. The Bendell brothers are also
            parties to a management agreement with Major Auto that gives them

                                       18
<PAGE>
            control over its day-to-day operations. Should we and the Board of
            Directors of Major Auto 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. 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.

      -     The management agreement provides that, should either of the Bendell
            brothers 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 brothers
            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). The management agreement has expired by its term as
            of December 31, 2002. The management agreement provided, however,
            that if the ownership of the dealerships remains with us, the
            management agreement will continue upon the unilateral decision of
            either of the Bendell brothers. Upon the mutual agreement of the
            parties, the management agreement may be extended or modified.
            Accordingly, the parties have orally elected to continue the
            management agreement until such time as they reach agreement on
            terms of an extension to the management agreement. The parties have
            entered discussions with our Board of Directors' Compensation
            Committee with respect to an extension to the management agreement.
            There can be no assurance that such agreement will achieved and, if
            not achieved, whether a successor manager can be retained on terms
            acceptable to us and, if so, whether such manager will be
            acceptable to the applicable manufacturers.

      -     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, Bruce Bendell and Harold Bendell 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. An independent appraiser has been
            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 will be
            determined and an adjustment to the related party receivable will be
            made and a gain or loss will 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, together with related
            interest at a market rate. Based on the final report of the
            appraiser, no adjustment is required for either the rental rate or
            the receivable balance.

      -     In unrelated transactions, in order to obtain floor plan financing
            at favorable rates, each of Bruce Bendell and Harold Bendell 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 agreed to

                                       19
<PAGE>
            obtain independent valuations of such credit enhancement and
            collateral usage (together, "Credit Enhancements") and pay each of
            the Bendells' the fair value of his respective contributions. We
            have engaged an independent valuation firm and have received a
            preliminary valuation from such firm of $160,000 for the economic
            risk value of the Credit Enhancement. Accordingly, we have accrued
            such amount as a liability in the third quarter of 2002. When the
            final such valuations have been completed, and our Board of
            Directors has reviewed the results and evaluated the circumstances
            of the Credit Enhancement relative to our enterprise value,
            adjustment, if necessary and warranted, will be made for any
            difference from the preliminary estimate.

      -     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.

      -     Each of Bruce Bendell and Harold Bendell 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 2002, we had sales aggregating $1.5 million to dealerships
            owned by the Bendell brothers and had purchases aggregating $14.2
            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
            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 exists 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 would be extremely dilutive to our
shareholders. 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. 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:

      -     automobile dealers;

      -     private sellers of used vehicles;

      -     used vehicle dealers;

      -     other franchised dealers;

      -     service center chains; and

      -     independent service and repair shops.



                                       20
<PAGE>

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:

         -        motor oil;
         -        waste motor oil and filters;
         -        transmission fluid;
         -        antifreeze;
         -        freon;
         -        waste paint and lacquer thinner;
         -        batteries;
         -        solvents;
         -        lubricants;
         -        degreasing agents; and
         -        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 intend to expand our new and used vehicle purchasing service to foreign
markets by establishing relationships with vehicle dealers and strategic
partners located in certain foreign markets.

By expanding 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,

                                       21
<PAGE>
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:

         -        changes in political conditions;
         -        regulatory requirements;
         -        potentially weaker intellectual property protections;
         -        tariffs and other trade barriers;
         -        fluctuations in currency exchange rates;
         -        potentially adverse tax consequences;
         -        difficulties in managing or overseeing foreign operations;
         -        seasonal reductions in business activities during summer
                  months in Europe and other areas; and
         -        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.

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

We are subject to a number of lawsuits, many of which have been settled. 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."

WE FACE RISKS ASSOCIATED WITH THE SALE OF AUTOMOBILES OVER THE INTERNET.

Competition

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 Web sites is expected to increase significantly in the future. The
Internet is characterized by minimal barriers to entry, and new competitors can
launch new Web sites 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 Web sites,
including:

         -        Autoweb.com;
         -        Autobytel.com;
         -        Carsdirect.com;
         -        Cendant Membership Service, Inc.'s AutoVantage; and
         -        Microsoft Corporation's Carpoint and Stoneage Corporation.

Some of these recent market entrants may have greater financial, marketing and
personnel resources and/or lower overhead or sales costs than the Company. 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 Web sites 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 Web sites, 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,

                                       22
<PAGE>
competitive pressures may result in increased marketing costs, decreased Web
site 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.

The Internet industry is characterized by rapid technological change.

Rapid technological developments, evolving industry standards and consumer
demands, and frequent new product introductions and enhancements characterize
the market for Internet products and services. These market characteristics are
exacerbated by the emerging nature of the market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Our future success will depend in part on our ability to
continually improve the vehicle purchasing experience, the addition of new and
useful services and content to our Web site, and the performance, features and
reliability of our Web site. In addition, the widespread adoption of developing
multimedia-enabling technologies could require fundamental and costly changes in
our technology and could fundamentally affect the nature, viability and
measurability of Internet-based advertising, which may adversely affect our
business, results of operations and financial condition.

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 Web site, or content and materials that may be
posted by consumers through our www.majorworld.com site. Such claims might
assert, among other things, that, by directly or indirectly providing links to
Web sites operated by third parties, we should be liable for copyright or
trademark infringement or other wrongful actions by such third parties through
such Web sites. It is also possible that, if any third-party content information
provided on our Web site 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
Web site 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.

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.

We face risks associated with security breaches involving confidential
information transmitted via the Internet.

We rely on technology licensed from third parties that is designed to facilitate
the secure transmission of confidential information. Nevertheless, our computer
infrastructure is potentially vulnerable to physical or electronic computer
break-ins, viruses and similar disruptive problems. A party who is able to
circumvent our security measures could misappropriate proprietary information,
jeopardize the confidential nature of information transmitted over the Internet
or cause interruptions in our operations. Concerns over the security of Internet
transactions and the privacy of users could also inhibit the growth of the
Internet in general, particularly, as a means of conducting commercial

                                       23
<PAGE>
transactions. To the extent that our activities or those of third party
contractors involve the storage and transmission of proprietary information
(such as personal financial information), security breaches could expose us to a
risk of financial loss, litigation and other liabilities. Our insurance does not
currently protect against such losses. Any such security breach could have a
material adverse effect on our business, results of operations and financial
condition.

We face risks associated with government regulation and legal uncertainties
associated with the Internet.

There are numerous state laws regarding the sale of vehicles. In addition,
government authorities may take the position that state or federal insurance
licensing laws, motor vehicle dealer laws or related consumer protection or
product liability laws apply to aspects of our business. As we introduce new
services and expand our operations to other countries, we will need to comply
with additional licensing and regulatory requirements.

A number of legislative and regulatory proposals under consideration by federal,
state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including, but not
limited to:

         -        online content;
         -        user privacy;
         -        taxation;
         -        access charges;
         -        liability for third-party activities; and
         -        jurisdiction.

Additionally, it is uncertain as to how existing laws will be applied to the
Internet. The adoption of new laws or the application of existing laws may
decrease the growth in the use of the Internet, which could, in turn, decrease
the demand for our services, increase our cost of doing business or otherwise
have a material adverse effect on our business, results of operations and
financial condition.

The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and by
certain foreign governments that could impose taxes on the sale of goods and
services and certain other Internet activities. Recently, the Internet Tax
Information Act was signed into law placing a moratorium on new state and local
taxes on Internet commerce. However, we cannot assure you that future laws
imposing taxes or other regulations on commerce over the Internet would not
substantially impair the growth of e-commerce and as a result 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 OF THE
COMPANY.

Mr. Bruce Bendell is the beneficial owner of approximately 42.6% of our common
stock. In addition, we believe that our former President and Chief Executive
Officer, Mr. Doron Cohen, is the beneficial owner of approximately 5.4% of our
common stock. Pursuant to a Separation and Release Agreement with us dated
August 8, 2000, Mr. Cohen is required to take all necessary steps to cause all
of these shares to be voted in accordance with the recommendation of the
majority of our Board of Directors, provided that such majority includes a
majority of our non-employee directors. 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.

                                       24
<PAGE>
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 the Company. 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, at our 2000 annual meeting, our Board of Directors and majority of our
shareholders approved amendments to our Articles of Incorporation to provide for
the classification of our Board of Directors into three classes of directors
with staggered terms of office. One class of directors holds office for a term
expiring at the 2004 annual meeting; a second class of directors holds office
for a term expiring at the 2005 annual meeting; and a third class of directors
holds office for a term expiring at the 2003 annual meeting. At each annual
meeting following this classification and election, the successors to the class
of directors whose terms expire at that meeting are elected for a term of office
to expire at the third succeeding annual meeting after their election and until
their successors have been duly elected and qualified. This classified board
amendment will significantly extend the time required to effect a change in
control of our Board of Directors and may discourage hostile takeover bids for
us. It will take at least two annual meetings for even a majority of
shareholders to effect a change in control of our Board of Directors, because
only a minority of the directors will be elected at each meeting. The classified
board proposal is designed to assure continuity and stability in our Board of
Directors' leadership and policies. Because of the additional time required to
change control of our Board of Directors, the classified board amendment 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. Because the
classified board amendment increases the amount of time required for a takeover
bidder to obtain control of us without the cooperation of our Board of
Directors, even if the takeover bidder were to acquire a majority of our
outstanding stock, it tends to discourage certain tender offers, perhaps
including some tender offers that shareholders may feel would be in their best
interests. The classified board proposal 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.

Additionally, at our annual meeting in December 2000, our Board of Directors and
the majority of our shareholders approved amendments to our Articles of
Incorporation to increase the number of authorized shares of common stock from
50,000,000 to 100,000,000. The amendment authorized sufficient additional shares
of our common stock to provide us with the flexibility to make such issuances
from time to time for any proper purpose approved by our Board of Directors,
including issuances to effect acquisitions or raise capital and issuances in
connection with future stock splits or dividends, without the necessity of
delaying such activities for further stockholder approval except as may be
required in a particular case by our charter documents, applicable law or the
rules of any stock exchange or other system on which our securities may then be
listed. The amendment, however, could have an anti-takeover effect, although
that was not its intention. For example, if we were the subject of a hostile
takeover attempt, we could impede the takeover by issuing shares of our common
stock, thereby diluting the voting power of the other outstanding shares and
increasing the potential cost of the takeover. The availability of this
defensive strategy to us could discourage unsolicited takeover attempts, thereby
limiting the opportunity for our stockholders to realize a higher price for
their shares than is generally available in the public markets.

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

                                       25
<PAGE>
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 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 (the
"1996 Demand Shares"). Further, if we register any shares of common stock, we
will have to offer to include the 1996 Demand Shares and 3,471,111 shares of
common stock into which the 1997-Major Series of Convertible Preferred Stock
(the "1997 Major Preferred"), issued to Bruce Bendell in the Major Auto
Acquisition, was converted. In October 1999, Mr. Bendell converted 400,000 of
such shares of 1997 Major Preferred into 360,000 shares of common stock. In May
2001, he converted an additional 400,000 of such shares of 1997 Major Preferred
into 1,777,778 shares of common stock. In February 2002, Mr. Bendell converted
the balance of his 100,000 shares of 1997 Major Preferred stock into 1,333,333
shares of common stock.

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

                                       26
<PAGE>
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 MAY BE DELISTED FROM THE NASDAQ STOCK MARKET.

In August 2002, we received a Notification of Deficiency from the Nasdaq Stock
Market, Inc. ("Nasdaq") indicating that we were not in compliance with Nasdaq
Marketplace Rule 4450(a)(5) relating to minimum bid price per share ($1.00) that
is required for continued listing on the Nasdaq National Market. We were given
until November 20, 2002 to demonstrate compliance with this rules or face
delisting. We were, however, given the option to apply to transfer our
securities to the Nasdaq SmallCap Market, which, if such application were
accepted, would grant us an extended grace period, until February 18, 2003 to
demonstrate compliance with the $1.00 minimum bid requirement.

Accordingly, inasmuch as we did not achieve compliance with the $1.00 minimum
bid requirement by the November 20, 2002 deadline, we applied for listing on the
Nasdaq SmallCap Market. In December 2002, we received notice from Nasdaq
indicating that our common stock had been approved for listing on the Nasdaq
SmallCap Market. Consequently, the Company's shares were transferred to the
Nasdaq SmallCap Market at the opening of business on January 2, 2003.

Nasdaq noted that we met all of the continued inclusion criteria for the Nasdaq
SmallCap Market, except for the minimum $1.00 bid price per share requirement
set forth in Nasdaq Marketplace Rule 4310(c)(4) (the "Rule"). We then had until
February 18, 2003 to demonstrate compliance with the Rule by maintaining a
closing bid price for our common stock of $1.00 per share or more for a minimum
of ten consecutive trading days. We failed to demonstrate compliance with the
Rule by February 18, 2003. However, since we have met the initial listing
criteria for listing on the Nasdaq SmallCap Market, we have been granted an
additional 180 calendar day grace period to demonstrate compliance with the
Rule.

Consequently, our common stock may be eligible to transfer back to the Nasdaq
National Market if, by August 18, 2003, our bid price per share has been at
least $1.00 for 30 consecutive trading days and, at all times, we maintain
compliance with the Nasdaq National Market continued listing requirements while
on the Nasdaq SmallCap Market, excluding bid price.

If we are unable to demonstrate a minimum bid price of our common stock at $1.00
per share or more for a minimum of ten consecutive days at any time before
August 18, 2003, or fail to maintain compliance with the other listing
requirements, our common stock will be de-listed. If a delisting were to occur,
our common stock would trade on the OTC Bulletin Board or in the "pink sheets"
maintained by the National Quotation Bureau, Inc. Such alternatives are
generally considered to be less efficient markets, and our stock price, as well
as the liquidity of our common stock, may be adversely impacted as a result.

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 locations leased from unaffiliated third parties.

One of our subsidiaries, Major Subaru, Inc., subleases from an unrelated third
party approximately 2,500 square feet of office and automobile showroom space in
Woodside, New York. This lease expires on December 31, 2004. The current annual
rent under such lease is $128,000.

We have an interest in the following leases, under which Major Dealer Group
presently pays aggregate annual rental payments of $777,700:

                                       27
<PAGE>
         -        Major Chrysler, Plymouth, Jeep Eagle leases from an unrelated
                  third party approximately 17,400 square feet of office and
                  automobile showroom and storage space in Long Island City, New
                  York for an annual rental of $95,500. This lease expires on
                  October 31, 2011.

         -        Major Auto leases from an unrelated third party approximately
                  2,000 square feet of lot space in Astoria, New York adjacent
                  to the main Major Dodge showroom. This lease expired on June
                  30, 1997 at which time the annual rent was $33,000. Major Auto
                  is currently renegotiating such lease and remains in
                  possession of the premises under an oral month-to-month lease.

         -        Compass Lincoln Mercury ("Compass") leases from Ford Motor Car
                  Company approximately 30,000 square feet used for showroom,
                  office, service department and storage facilities in Orange,
                  New Jersey. This lease is currently on a month to month basis
                  at an annual cost of $90,000. Additionally, Compass leases
                  7,000 square feet of showroom, office and storage space in
                  Orange, New Jersey, from an unaffiliated third party at an
                  annual rental of $90,000. This lease is scheduled to expire on
                  March 31, 2009. Compass also leases space for a service
                  department and storage facilities in Orange, New Jersey, at an
                  annual rental 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.

         -        Major Chevrolet leases from an unrelated third party, for
                  $300,000 annually, two adjacent automobile dealership
                  facilities in Long Island City, New York, comprising
                  approximately 250,000 square feet. This lease expires on
                  February 1, 2004, but Major Chevrolet has the option to extend
                  the lease for up to three additional five-year terms.

One of our subsidiaries, Hempstead Mazda, Inc., whose franchise was voluntarily
surrendered, leases from its former owner, on behalf of our subsidiary, Major
Nissan of Garden City ("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.

Major Nissan of Garden City, Inc. leases from a related party, 316 N. Franklin
LLC, a company owned by Bruce Bendell and Harold Bendell, 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. The Company originally had an option on the purchase of the
property, but was unable to obtain financing to consummate the purchase. The
Bendell brothers 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
$360,000, 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).

ITEM 3.  LEGAL PROCEEDINGS

In re: Fidelity Holdings Securities Litigation.

This class action, in the United States District Court for the Eastern District
of New York, was purportedly brought on behalf of all persons who acquired
shares of our common stock between June 24, 1999 and April 17, 2000. Named as
defendants along with us were Doron Cohen, Richard L. Feinstein and Bruce
Bendell.

                                       28
<PAGE>
In August 2001, the lead plaintiffs in this class action served a Consolidated
and Amended Class Action Complaint. This Complaint alleged, among other things,
that plaintiffs and other members of the putative class were damaged when they
acquired shares of our common stock because defendants allegedly issued
materially false and misleading statements and failed to disclose material
information which purportedly cause such stock to trade at artificially inflated
prices during the class period. The complaint alleged violations of Sections
10(b) and 20(a) of the 1934 Exchange Act, as amended (the "Exchange Act") and
Rule 10b-5 promulgated thereunder. The allegedly misstated and omitted
information concerned primarily the prospects for our technology business. The
complaint sought, among other things, damages in an unspecified amount. In
September 2001, we moved to dismiss the complaint for failure to state a claim
upon which relief can be granted and for failure to plead with the
legally-required factual particularity. In October 2001, we reached an agreement
with lead plaintiffs to settle this action for $4.45 million, subject to the
consent thereto of our insurance company and court approval. Subsequently, in
March 2003, our insurance company and the United States District Court Eastern
District of New York consented to and approved, respectively, the settlement.

Stephen B. Wechsler, et al. v. Fidelity Holdings, Inc. et al.

On December 26, 2000, an action was commenced against us in the United States
District Court for the Eastern District of New York. This action was brought on
behalf of certain persons who acquired an unstated number of shares of our
common stock between December 1999 and May 2000. We were named as a defendant in
this case along with Doron Cohen, Richard L. Feinstein and Bruce Bendell. On
December 26, 2000, plaintiffs filed a Second Amended Complaint, which alleged,
among other things, that the plaintiffs sustained damages when they acquired
shares of our common stock because we allegedly issued materially false and
misleading statements and failed to disclose material information which
purportedly caused such stock to trade at artificially inflated prices. The
Second Amended Complaint alleged violations of Sections 10(b) and 20(a) of the
Exchange Act and Rule 10b-5 promulgated thereunder. The allegedly misstated and
omitted information concerned our reported income for the first three quarters
of 1999 and the prospects for our technology business. The Second Amended
Complaint sought, among other things, damages "in an amount, not less than" one
million dollars. On February 16, 2001, we and Messrs. Bendell and Feinstein
filed a motion to dismiss the Second Amended Complaint for failure to plead with
the legally-required factual particularity. In the fourth quarter of 2002, the
action was settled for $120,000, which has been funded by our insurance carrier.

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, as a result of
successful motion practice there are three (3) remaining causes of action (i)
conversion, (ii) breach of fiduciary duty; and (iii) negligence. The claims
underlying this action are that we failed to remove restrictive legends that
appeared on Mr. Tepper's stock certificates. 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 to ban a double recovery. As the motion is only returnable in
July of 2003, we are unable to predict the outcome of this matter.

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

We and our former subsidiaries IG2, Inc. 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 Defendants

                                       29
<PAGE>
seeking to have 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 is currently stayed as a result of IG2, Inc. filing for
bankruptcy protection in January 2003. If the stay is lifted, we believe that
the matter will quickly proceed to trial.

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 Robert LaRea, Doron Cohen, Bruce Bendell, The Major Automotive
Companies, Inc. and Kimberly Peacock. The suit seeks damages of up to
$10,000,000 for breach of contract, quantum merit, unjust enrichment,
conversion and fraud. It is plaintiffs' contention that they entered into
agreements with us and the other defendants to promote our company in exchange
for stock. It is plaintiffs' further contention that, in spite of their time
and efforts, we and the other defendants failed to compensate plaintiffs as
agreed. Plaintiffs also allege that they provided a bridge loan to defendants
in the sum of $1,830,000, which has not been repaid. Currently, there is a
motion to dismiss pending. If the motion fails, the action will proceed into
the discovery stage. We believe that these allegations have no merit and intend
to vigorously defend this suit.

International Securities Corp. v. Fidelity Holdings, Inc.

On or about March 2001, an action was commenced against us 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 us in connection with a private placement of our securities. This action was
settled in January 2003 for $133,125, all of which was paid 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 our former
subsidiary, Computer Business Sciences, Inc., and us 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 Computer
Business Sciences, Inc. of Dr. Nassim's telephony business to various countries.
The purchase price was approximately $500,000 in our stock. It was Dr. Nassim's
position that the stock was only worth $27,000. In January 2002, we reached a
settlement with Dr. Nassim and have issued 225,000 shares of our stock in his
name as full settlement.

Ronald K. Premo v. Fidelity Holdings, Inc.

In May 2001, Ronald Premo, a former officer of one of our technology
subsidiaries filed suit in Connecticut Supreme Court seeking employment related
damages in excess of $300,000. In October 2001, through an arbitration
proceeding, we reached a settlement agreement with Mr. Premo by which he would
be paid an aggregate of $72,079 over ten months plus 15,000 shares of our common
stock with a guaranteed aggregate value, at the first anniversary date of the
shares' issuance, of $72,079. The initial 15,000 shares of common stock were
issued and the $72,079 was paid. Based on the market value of our common stock
at the anniversary date, an additional 69,800 shares of our 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.

                                       30
<PAGE>
On September 25, 2001, Mr. Wallick, a former director and officer, filed a
lawsuit against us 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 tortiously 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, we entered into a Separation and Release Agreement with Mr. Wallick,
wherein we settled all matters with Mr. Wallick arising out of his former
employment with us and our subsidiaries. Mr. Wallick received, among other
things, an aggregate amount of $452,500, 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 our 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 us.

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 for the lawsuit was 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.

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

On October 24, 2001, Zannett Lombardier Ltd. and others filed a suit against us
for breach of contract and for our failure to issue shares in exchange for
warrants. The damages alleged totaled $856,011.50. This matter was settled in
the first quarter of 2003 for payment of $130,000.00 and issuance of shares of
our common stock with a value of $40,000. The $130,000 is to be paid in five (5)
equal installments during 2003.

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

In and around September 2002, an action was commenced in Pennsylvania, Allegheny
County by Steel City Telecom, Inc. for $25,000 against The Major Automotive
Companies, Inc. The complaint and the allegations contained therein, are
directed against Computer Business Sciences, Inc., a former subsidiary that is
no longer part of our company. It is alleged that the software sold was
defective and that we were negligent in its production. The case is currently
in discovery.  We believe that these allegations have no merit and 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 claimed entitlements under an alleged letter dated June 5, 1996 to
that certain Master Agreement dated April 18, 1996 between us and Dr. Barak. Dr.
Barak claims payment of the amount of $546,249.99, failing which he will
commence appropriate proceedings for recovery of this amount. 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

                                       31
<PAGE>
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, which is
scheduled to be heard on April 25, 2003. We believe that Dr. Barak's claims have
no merit and intent to vigorously defend this lawsuit.

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.

                                       32
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On December 11, 2002, we held our Annual Meeting of Shareholders. Proxies were
solicited by us pursuant to Regulation 14A under the Exchange Act. On November
1, 2002, the record date for the Annual Meeting, there were approximately
9,564,471 shares of common stock outstanding and entitled to vote, of which
7,614,076 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 one Class II Director, Steven Hornstock, for term ending in
         2005.

<TABLE>
<CAPTION>
                                             FOR              ABSTAIN           AGAINST          NOT VOTED
                                             ---              -------           -------          ---------
<S>                                        <C>               <C>                  <C>               <C>
         Steven Hornstock                  7,601,534          12,542               0                 0
</TABLE>

Mr. Hornstock was nominated as a Class II Director to fill the vacancy created
by the resignation of James Wallick, our former Class II Director, in April
2002. The terms of Bruce Bendell and Steven Nawi, Class I Directors, and Jeffrey
Weiner and David Edelstein, Class II Directors, continued after the Annual
Meeting.

2.       To ratify the appointment of BDO Seidman LLP as our independent
         auditors for the year 2002.

<TABLE>
<S>                                               <C>
         For.......................               7,605,741
         Against..................                    5,547
         Abstain..................                    2,788
         Not Voted...............                         0
</TABLE>

                                       33
<PAGE>
                                     PART II

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

Market Information

Our common stock trades on the Nasdaq SmallCap Market under the symbol "MAJR,"
after being transferred from the Nasdaq National Market at the opening of
business on January 2, 2003. The quarter-end high and low bid price of our
common stock were (as reported by the Nasdaq Stock Market), which quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not reflect actual transactions and which have been adjusted, as
necessary, to reflect a reverse 1-for-5 stock split effected in May, 2001:

<TABLE>
<CAPTION>
         Quarter Ended              High Bid         Low Bid
         -------------              --------         -------
<S>                                 <C>              <C>
         March 31, 2003             $0.910           $0.730
         December 31, 2002          $1.260           $0.750
         September 30, 2002         $1.130           $0.610
         June 30, 2002              $2.000           $0.610
         March 31, 2002             $0.90            $0.450
         December 31, 2001          $2.090           $0.610
         September 30, 2001         $3.333           $1.720
         June 30, 2001              $3.020           $1.720
         March 31, 2001             $5.156           $1.563
</TABLE>

Shareholders

As of April 11, 2003 there were approximately 481 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 2002 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.       In January 2002, we issued 225,000 shares of our common stock to Dr.
         Roland Nassim, at a per share price of $0.72, in connection with
         settlement of a litigation.

2.       In February 2002, upon conversion of 100,000 shares of 1997 Major
         Preferred Stock, we issued 1,333,333

                                       34
<PAGE>
         shares of common stock to Bruce Bendell.

3.       In April 2002, we issued 4,500 shares of common stock to David
         Edelstein, at a per share price of $0.69, as compensation for services
         as an outside member of our Board of Directors.

4.       In April 2002, we issued 4,500 shares of common stock to Jeffrey
         Weiner, at a per share price of $0.69, as compensation for services as
         an outside member of our Board of Directors.

5.       In April 2002, we issued 4,500 shares of common stock to Steven Nawi,
         at a per share price of $0.69, as compensation for services as an
         outside member of our Board of Directors.

                                       35
<PAGE>
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, 2002, 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>
<CAPTION>
                                                                      As at and for the year ended December 31,
                                                    2002             2001             2000              1999             1998
                                              -------------     -------------    -------------     -------------     -------------
<S>                                           <C>               <C>              <C>               <C>               <C>
STATEMENT OF OPERATIONS DATA
Revenues                                      $ 397,947,494     $ 375,114,505    $ 322,142,231     $ 209,531,993     $  98,578,970
Income (loss) from continuing operations            (84,772)        2,089,524        1,302,247           815,955         1,052,897
Income (loss) from discontinued operations         (206,000)          590,000      (22,427,322)       (4,006,103)         (473,161)
Net income (loss)                                  (290,772)        2,679,524      (21,125,075)       (3,190,148)          579,736
Income (loss) per common share
   Income from continuing operations
      Basic                                   $       (0.01)    $        0.32    $        0.26     $        0.19     $        0.32
      Diluted                                         (0.01)             0.24             0.19              0.19              0.26

   Income (loss) from discontinued
    operations
      Basic                                           (0.02)             0.09            (4.40)            (0.95)            (0.14)
      Diluted                                         (0.02)             0.07            (4.40)            (0.95)            (0.14)

   Net income (loss)
      Basic                                           (0.03)             0.41            (4.14)            (0.76)             0.18
      Diluted                                         (0.03)             0.31            (4.14)            (0.76)             0.14

Average number of shares used in
 computation
      Basic                                       8,947,332         6,558,356        5,101,829         4,210,837         3,301,557
      Diluted                                     8,947,332         8,662,979        6,791,104         4,210,837         4,041,407

BALANCE SHEET DATA

Total assets                                  $  87,247,341     $  82,329,517    $  86,781,397     $  68,319,331     $  49,426,735
Long-term liabilities, less current portion       7,701,700         9,853,587       10,411,463         7,416,784         7,953,278
Total stockholders' equity                       17,947,597        17,948,321       15,599,970        28,917,595        16,453,516
</TABLE>

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 the Registrant's Common Equity and Related Stockholder Matters"
for a discussion of our dividend policy.




                                       36


<PAGE>
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 have
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 2002 saw a continuation of our revenue growth. The effect of our
concentration on enhancing the profitability of our existing dealerships was
apparent in the growth of our dealership revenues and profits. We had record
revenues, gross profits and increased operating profit.

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
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 on-going
client relationships, goodwill and property and equipment, which constitute a
significant component of our consolidated balance sheets, require that

                                       37
<PAGE>
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. The cost
in excess of the fair value of net assets of businesses acquired is amortized on
a straight-line basis from five to forty years. 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 and other intangible assets beginning in the first quarter of 2002.
During 2002, we performed the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002 and December 31, 2002.
We have concluded, based, in part, on the analysis performed and conclusions
reached by an independent valuation appraiser we retained, that there is no
impairment of goodwill and indefinite lived intangible assets as of either
January 1, 2002 or December 31, 2002. We remain, however, subject to financial
statement risk to the extent that intangible assets become impaired due to
decreases in the fair market value of the related underlying business.

Reclassifications. 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 now
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, which were previously
accounted for as a reduction of floor plan interest expense, have been included
as offsets to cost of sales and the impact on cost of sales. Floor plan interest
expense, which was previously classified as interest expense below operating
income, is now presented as a component of operating expense in the accompanying
consolidated statement of operations to provide more meaningful information
regarding the Company's margin performance.

For the years ended December 31, 2002, 2001 and 2000, aggregate floor plan
interest included in operating expense was $1,695,960, $2,349,451 and
$1,749,307, respectively. The decrease in 2002 of interest expense relative to
increased sales volume is primarily attributable to the lower interest rates
associated with the Company's new floor plan arrangements.

For the years ended December 31, 2002, 2001 and 2000, aggregate floor plan
assistance now included as a reduction of cost of sales was $1,294,109,
$986,635 and $889,473, respectively.

Advertising assistance received from manufacturers for the years ended December
31, 2002, 2001 and 2000, now included as a reduction of cost of sales was
$714,216, $357,042 and $482,626, respectively.

COMMITMENTS AND CONTINGENCIES

As further discussed in Note 11, 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 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.

                                       38
<PAGE>
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.

RESULTS OF CONTINUING OPERATIONS - YEAR ENDED DECEMBER 31, 2002 AND YEAR ENDED
DECEMBER 31, 2001

Revenues. Revenues for the year ended December 31, 2002 increased to
approximately $397.9 million, which is $22.8 million, or 6.1%, more than the
prior year's revenues of $375.1 million. Such increase was solely attributable
to the revenues of our automotive dealership operations, which were
approximately $397.3 million for the 2002 year, an increase of $22.7 million, or
6.1%, over the prior year's revenue of $374.6 million. The primary reason for
the growth in revenues was the net increase in unit sales. While new car unit
sales decreased by 263 units, or 4.5% in 2002 from 2001, used car unit sales
increased significantly by 1,721 units, or 12.0%, in the 2002 year over the
prior year. Management believes that the increase in unit sales is primarily
attributable to our automotive dealership operations' successful efforts in
selling used vehicles at its expansive facility in Long Island City, New York
and the development of our used vehicle operations in Hempstead, Long Island. An
average of 1,338 used vehicles, retail and wholesale, were sold during each of
the months in the 2002 year, compared with an average of 1,194 used vehicles per
month during the prior year, an increase of 12.1%. Our automotive dealership
operations' sales efforts included extensive Internet promotions, local
advertising in all media and the branding of our used car operation as "Major
World." Management believes that market acceptance of its Major World brand was
a strong contributor to the 2002 sales volume performance. Additionally, the
average sales price per vehicle, for new vehicles, increased by approximately
$725 (3.0%), per vehicle in 2002 as compared with 2001, while the average sales
price in 2002 for used vehicles, retail and wholesale, decreased by
approximately $29 (0.2%) from the year 2001.

New vehicle sales revenue was approximately $140.7 million in 2002, a decrease
of $2.4 million or 1.7% from 2001 new vehicle sales revenue of $143.1 million.
This decrease is attributable to decreases in revenue from the dealerships we
closed during the year (see below) whose aggregate revenue decrease of
approximately $8.0 million, was partially offset by the net increased revenues
from our continuing dealerships.

Used vehicle sales revenue was $236.8 million in 2002 and $211.8 million in
2001, an increase of approximately $25.0 million or 11.8%. The most significant
contribution to this increase was made by our Chevrolet dealership in Long
Island City, New York whose used vehicle sales revenues increased by 14.1%,
which was partially offset by decreases primarily attributable to dealerships
that were closed in 2002. Our success in increasing sales volume of used
vehicles is attributable, in large measure to both our ability to obtain an
extensive variety of high quality used vehicles at all price points and our
successful efforts in obtaining non-recourse financing for prospective buyers
who may have had difficulties obtaining financing elsewhere. The results of the
terrorist attack on September 11, 2001 had only a small negative impact on
revenues for the year 2001.

In the third quarter of 2002, we voluntarily surrendered our Hempstead Mazda
dealership's franchise agreement with Mazda and received the franchise-mandated
payments for Mazda proprietary equipment, which was approximately

                                       39
<PAGE>
equal to the book value of those assets. Separately, during that same quarter,
we voluntarily surrendered our Compass Lincoln Mercury franchise to the Ford
Motor Company and received, in addition to the franchise-mandated payments for
Lincoln Mercury proprietary equipment, which was approximately equal to the book
value of those assets, financial assistance of $600,000. Accordingly, a gain for
$600,000 was recognized in the third quarter of 2002. Additionally, in the
second quarter of 2002, we closed our Daewoo dealership because Daewoo USA
ceased business in the United States. Overall, we determined that the fair value
of our aggregate liability in connection with these franchise termination
transactions was approximately $600,000, which was provided for in the third
quarter of 2002 and offset against the $600,000 gain.

Cost of sales. The cost of sales increase of $18.9 million, or 6.1%, to $330.8
million in the year 2002 from $311.9 million in the year ended December 31,
2001, is solely attributable to our automotive dealership operations. The
percentage increase is approximately the same as the revenues percentage
increase and reflects an increase of $359 or 1.6% in the average cost of new
vehicles and an increase of only $4 or .03% in the average unit cost of used
vehicles. As noted, above, the cost of sales in both years reflects the net
effect of automotive manufacturers' floor plan assistance incentives and
advertising incentives. (See Reclassifications.)

Gross profit. Our automotive dealership operations generated almost all of the
total gross profit of $67.2 million for the year ended December 31, 2002. The
gross profit for automotive dealerships in 2002 was $66.5 million compared with
the 2001 amount of $62.7 million, an increase of $3.8 million or 6.1%. The gross
profits increase was primarily attributable, in general, to the lower percentage
of increase of cost of sales as compared with the overall percentage increase in
sales revenue and, specifically, to (i) the increase in units sold and (ii) the
change in revenue percentage mix. Automotive dealership revenues went from 38.3%
of total revenues generated by new vehicle sales and 56.7% generated by used
vehicles sales in 2001 to 35.5% of total revenues generated by new vehicle sales
and 59.7% generated by used vehicle sales in 2002. For the industry as a whole,
the average percentage of new and used vehicles' revenue as a percentage of
total dealership revenue is 64.6% and 23.6% respectively. Our dealerships'
overall gross profit as a percentage of sales was 16.8%, compared with the
industry average of 13.4%. Our gross profit percentage on new vehicles of 10.5%
is above the industry average of 5.9%, while our gross profit percentage on used
vehicle sales of 19.3%, is significantly over the industry average used vehicle
gross profit of 11.0%. Management believes 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 profitability.

Operating expenses. In the year ended December 31, 2002, operating expenses
increased approximately $5.6 million to approximately $64.8 million, from $59.2
million in 2001. The most significant component of this increase is the spending
on advertising, which represents $3.0 million of the increase. This is
reflected in the significant increase in sales during 2002. The balance of the
increase, $2.6 million, is significantly attributable to the costs associated
with increased sales efforts and results, principally, personnel-related.

Interest expense. Interest expense had a net decrease of approximately $180,000
to approximately $960,000 in 2002. This is primarily related to the interest
incurred in 2001 in connection with a capitalized lease on the property on which
our Major Nissan dealership in Hempstead, Long Island is located. During the
third quarter of 2002, our option to purchase the property was sold to related
parties and the capitalized lease became an operating lease. Accordingly,
interest ceased to accrue at the time the option was sold.

Income tax expense. Local income tax expense of approximately $190,000 for the
year ended December 31, 2002 was calculated on pre-tax income from continuing
operations. In 2001, we recorded tax benefits of $291,000 from our continuing
operations. In 2002 and 2001, we recorded tax benefits of $138,000 and $590,000,
respectively, in connection with our discontinued operations.

Discontinued operations. We had a loss from discontinued operations of $206,000
(net of $138,000 of income tax benefits) in the year ended December 31, 2002,
compared with no loss from discontinued operations in the

                                       40
<PAGE>
comparable prior period. The loss represents the cost of litigation settlements
and reduced realization of notes receivable relating to the discontinued
operations in excess of amounts we had previously provided. Because any
anticipated expenses associated with the non-automotive components of our
business had been estimated and accrued in 2000, no expenses incurred in
connection with those operations had been charged to expense in 2001.

RESULTS OF CONTINUING OPERATIONS - YEAR ENDED DECEMBER 31, 2001 AND YEAR ENDED
DECEMBER 31, 2000

Revenues. Revenues for the year ended December 31, 2001 increased to
approximately $375.1 million, which is $53.0 million, or 16.5%, more than the
prior year's revenues of $322.1 million. Such increase was solely attributable
to the revenues of our automotive dealership operations, which were
approximately $374.6 million for the 2001 year, an increase of $53.1 million, or
16.5%, over the prior year's revenue of $321.5 million. Of this increase,
approximately $48.2 million relates to revenues generated by four dealerships we
acquired between September 1999 and December 2000. The other primary reason for
the significant growth in revenues was the substantial increase in unit sales.
New car unit sales increased by 451 units, or 8.4% in 2001 from 2000, while used
car unit sales increased 1,038 units, or 7.8%, in the 2001 year over the prior
year. Management believes that the increase in unit sales is primarily
attributable to our automotive dealership operations' successful efforts in
selling used vehicles at its expansive facility in Long Island City, New York
and the development of our used vehicle operations in Hempstead, Long Island. An
average of 1,194 used vehicles, retail and wholesale, were sold during each of
the months in the 2001 year, compared with an average of 1,108 used vehicles per
month during the prior year, an increase of 7.7%. Our automotive dealership
operations' sales efforts included extensive Internet promotions, local
advertising in all media and the branding of our used car operation as "Major
World." Management believes that market acceptance of its Major World brand was
a strong contributor to the 2001 sales volume performance. Additionally, the
average sales price per vehicle, for new vehicles, decreased by approximately
$78 (0.3%), per vehicle in 2001 as compared with 2000, while the average sales
price in 2001 for used vehicles, retail and wholesale, increased by
approximately $1,387 (10.4%) from the year 2000.

New vehicle sales revenue was approximately $143.1 million in 2001, an increase
of $10.6 million or 8.0% from 2000 new vehicle sales revenue of $132.5 million.
All of this increase is attributable to sales from our dealerships located in
Hempstead, Long Island, which were acquired in 2000.

Used vehicle sales revenue was $211.8 million in 2001 and $178.1 million in
2000, an increase of approximately $33.7 million or 18.9%. The most significant
contribution to this increase was made by our Chevrolet dealership in Long
Island City, New York and, to a lesser extent, our Mazda dealership in
Hempstead, Long Island. These changes in sales volume of used vehicles is
attributable, in part, to our successful efforts in obtaining non-recourse
financing for prospective buyers who may have had difficulties obtaining
financing elsewhere and also selling higher priced luxury quality used cars.

The results of the terrorist attack on September 11, 2001, had only a small
negative impact on revenues for the year ended 2001.

Cost of sales. The cost of sales increase of $41.4 million, or 15.3%, to $311.9
million in the year 2001 from $270.5 million in the year ended December 31,
2000, is solely attributable to our automotive dealership operations. The
percentage increase is 1.2% less than the revenues percentage increase and
reflects an increase of $1,615 or 7.7% in the average cost of new vehicles and
an decrease of $925 or 8.4% in the average unit cost of used vehicles. 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. (See Reclassifications.)

Gross profit. Our automotive dealership operations generated almost all of the
total gross profit of $63.2 million for the year ended December 31, 2001. The
gross profit for automotive dealerships in 2001 was $62.7 million compared

                                       41
<PAGE>
with the 2000 amount of $51.0 million, an increase of $11.7 million or 22.9%.
The four dealerships we acquired between September 1999 and December 2000
generated approximately $5.1 million or 44.0% of this total increase.

The balance of the gross profits increase was primarily attributable to (i) the
increase in units sold and (ii) the change in revenue percentage mix. Automotive
dealership revenues went from 40.8% of total revenues generated by new vehicle
sales and 54.9% generated by used vehicles sales in 2000 to 38.3% of total
revenues generated by new vehicle sales and 56.7% generated by used vehicle
sales in 2001. For the industry as a whole, the average percentage of new and
used vehicles' revenue as a percentage of total dealership revenue is 6.0% and
11.0% respectively. Our dealerships' overall gross profit as a percentage of
sales was 16.4%, compared with the industry average of 13.1%. Our gross profit
percentage on new vehicles of 9.3% is above the industry average of 6.0%, while
our gross profit percentage on used vehicle sales of 19.5% is significantly over
the industry average used vehicle gross profit of 11.0%. Management believes
that our product mix, i.e. our concentration on the more profitable used vehicle
segment, our ability to buy quality used vehicles at favorable prices and our
ability to find competitive financing sources for our customers are the
significant factors in our profitability.

Operating expenses. In the year ended December 31, 2001, operating expenses
increased approximately $12.6 million to approximately $59.2 million, from $46.6
million in 2000. The most significant component of this increase is the spending
on advertising, which represents $2.2 million of the increase. This is
reflected in the significant increase in sales during 2001. The balance of the
increase, $10.4 million, is significantly attributable to the costs associated
with increased sales efforts and results, principally, personnel-related.

Interest expense. Interest expense decreased approximately $700,000 to $1.1
million in 2001. It relates to short-term and long-term borrowings and there was
no significant change in the underlying borrowings amounts and rates.

Income tax expense. Local income tax expense of approximately $50,000 for the
year ended December 31, 2001 was calculated on pre-tax income from continuing
operations. In 2001, we recorded tax benefits of $341,000 from our continuing
operations. In 2001 and 2000, we recorded tax benefits of $590,000 and $500,000
respectively, in connection with our discontinued operations.

Discontinued operations. Because all anticipated expenses associated with the
non-automotive components of our business had been estimated and accrued in
2000, no expenses incurred in connection with those operations has been charged
to expense in 2001. The aggregate amount of such loss from discontinued
operations, net of taxes, was $22.4 million in 2000. Such loss in 2000 includes,
net of taxes, the actual operating costs of those operations of approximately
$6.8 million, plus a one-time, non-cash, charge of approximately $13.6 million
to write-down the assets associated with those operations to their estimated net
realizable value and a charge of $2.0 million to accrue an estimate of operating
and other costs to be incurred until the divestiture has been completed.

ASSETS, LIQUIDITY AND CAPITAL RESOURCES - DECEMBER 31, 2002

At December 31, 2002, our total assets were approximately $87.2 million, an
increase of approximately $4.9 million from December 31, 2001. This net increase
is primarily related to the significant increase in inventories of $13.8 million
as offset by decreases in cash and cash equivalents of $3.2 million, property
and equipment, net, of $3.9 million, accounts receivable, net, of $600,000,
notes receivable and other assets of $900,000, related party receivables of
$300,000 and amounts due from officer of $200,000.  The increase in inventory
is primarily attributable to the increase of floor plan financing available to
purchase inventory.  The decreases in property and equipment was attributable
to the elimination of capitalized leases for the Nissan of Garden City
dealership and the voluntary surrender of the franchises for certain
dealerships.

Our primary use of cash in the year ended December 31, 2002 was approximately
$2.8 million for our financing activities.  This was, primarily, the result of
cash used in payments of long-term debt of $2.9 million.

Our operating activities used approximately $379,000 of cash as a result of
the net cash generated from income of $710,000 (our $291,000 net loss with

                                       42
<PAGE>
non-cash charges of $1.0 million added back) plus the total change in current
liabilities of $10.9 million (primarily, an increase in floor plan notes
payable of $12.2 million, partially offset by a net reduction in accounts
payable and accrued expenses of $1.5 million), as more than offset by the total
increase in non-cash current assets of $12.0 million (primarily due to the
increase in inventories of $13.8 million, as partially offset by decreases in
other assets of $1.3 million and accounts receivable of $600,000).

Our investing activities used approximately $50,000 of cash as additions to
property and equipment.

The foregoing activities, i.e. financing, operating and investing, resulted in a
net cash decrease of $3.2 million for the year ended December 31, 2002.

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 the 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 2002. 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 has 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 have
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 have accrued such amount
as a liability in the third quarter of 2002. When the final valuation has been
completed, and our Board of Directors has reviewed the results and evaluated
the circumstances of the credit enhancement relative to the enterprise value of
our company as a whole, adjustment, if necessary and warranted, will be made
for any difference from the preliminary valuation.

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

                                       43
<PAGE>
acquisitions, we will require additional financing. There can be no assurance
that, for such growth, funding will be available. We are exploring financing
alternatives with respect to our projected cash requirements.

<TABLE>
<CAPTION>
                                                 LESS                                       MORE
                                                 THAN                                       THAN
                              TOTAL             1 YEAR       1-3 YEARS       4-5 YEARS     5 YEARS
                              -----------    -----------    -----------    -----------    -----------
<S>                           <C>            <C>            <C>            <C>            <C>
CONTRACTUAL OBLIGATIONS:
Long Term Debt                $ 8,377,151    $   675,452    $ 3,069,839    $   529,824    $ 4,102,036
Operating Lease Obligation    $ 5,844,600    $ 1,381,500    $ 2,963,500    $   611,500    $   888,100
                              -----------    -----------    -----------    -----------    -----------
                              $14,221,751    $ 2,056,952    $ 6,033,339    $ 1,141,324    $ 4,990,136
                              -----------    -----------    -----------    -----------    -----------
</TABLE>

FORWARD-LOOKING STATEMENTS

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.

                                       44
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

Although we sell some vehicles in the former Soviet republics, 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 14 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.
                                      45
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

As of April 11, 2003, our directors and executive officers were as follows:

<TABLE>
<CAPTION>
NAME                         AGE     POSITION
----                         ---     --------
<S>                          <C>     <C>
Bruce Bendell ...........    48      Chairman of the Board, President, Chief Executive Officer
                                     and Acting Chief Financial Officer

David Edelstein .........    49      Director

Steven Hornstock ........    53      Director

Steven Nawi .............    55      Director

Jeffrey Weiner ..........    45      Director
</TABLE>

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

Bruce Bendell. Mr. Bendell has served as our Chairman of the Board since our
formation in November 1995, our President and Chief Operating Officer since
September 2001 and as Acting Chief Financial Officer since October 2002. 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
he 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 Directors 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.

Steven Nawi. Mr. Nawi has served as our Director since December 2001. Mr. Nawi
has served as the President of Nawi Leasing, Inc., a leasing company, since
1978. Mr. Nawi also serves as the President of Fort Lee Road Company, Inc., a
real estate holding company, since 1986, as President of Major Automotive, Inc.,
a unrelated daily car-rental operations company, since January 2000, and as
President of N.A.W.I. Enterprises, a financial lending company, since January
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.

                                       46
<PAGE>
The following person, although not an executive officer or director, is
regarded by management as a key employee:

Harold Bendell. Mr. Bendell, age 53, 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.

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
Securities and Exchange Commission (the "SEC"). 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 during
2002, Dennis Roth and James R. Wallick are the only reporting person to have
made late filings under Section 16(a). Messer's Roth and Wallick filed Form 5's
to report their respective annual statement of changes in beneficial ownership
on February 19, 2002. These disclosures were required to be reported on a Form 5
on or before the forty-fifth (45) day after the end of our fiscal year (i.e., by
February 14, 2002).

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information for each of our fiscal years ended
December 31, 2002, 2001 and 2000 concerning compensation of (i) all individuals
serving as our Chief Executive Officer during the fiscal year ended December 31,
2002 and (ii) each other of our executive officers whose total annual salary and
bonus equaled or exceeded $100,000 in the fiscal year ended December 31, 2002
(collectively, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                    LONG-TERM
                                                                                                   COMPENSATION
                                                                                                   ------------
                                                                     ANNUAL COMPENSATION
                                                                     -------------------

                                                                                                    SECURITIES
                                                                                                    UNDERLYING
NAME AND PRINCIPAL POSITION                        YEAR       SALARY        BONUS        OTHER       OPTIONS (#)
---------------------------                        ----       ------        -----        -----       -----------
<S>                                                <C>       <C>           <C>        <C>           <C>
Bruce Bendell (1).............................     2002      $494,837      $461,379        0            0
Chairman of the Board, President, Chief            2001      $369,837      $756,665        0            0
Executive Officer and Acting Chief Financial       2000      $236,426             0        0         400,000
Officer

Richard L. Feinstein (2).......................    2002      $171,890             0    $34,563          0
Former Senior Vice President, Finance and          2001      $171,890       $25,000     $6,324          0
Chief Financial Officer                            2000      $165,654             0     $6,324        15,000
</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 the years 2002 and 2001 reflect those
         terms.

(2)      Effective October 22, 2002, Richard L. Feinstein resigned as our Senior
         Vice President - Finance and Chief Financial Officer. The amount
         reported under Bonus reflects a cash bonus in 2001. The amounts
         reported under Other in 2002, includes $28,239 of fees for consulting
         services performed by Mr. Feinstein subsequent to his resignation, and
         $6,324 in automobile and other expenses. In

                                       47
<PAGE>
         2001 and 2000 amounts reported under Other are reflective of automobile
         and other expenses.

OPTION GRANTS IN LAST FISCAL YEAR

No stock options were granted to the Named Executive Officers during 2002. We
have never granted any stock appreciation rights.

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

No options were exercised by any of the Named Executive Officers during the
fiscal year ended December 31, 2002. There were no unexercised "in-the-money"
options held by any Named Executive Officers as of December 31, 2002.

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 2002 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

As of November 7, 1995, our date of incorporation, we entered into a Consulting
Agreement with Bruce Bendell, our Chairman, pursuant to which he serves as a
business, management and financial consultant to us. Mr. Bendell received an
annual consulting fee as determined by our Board of Directors from time to time,
but not less than $150,000. From the expiration of the agreement until June 30,
2001, Mr. Bendell has been serving at will. 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 for the period July 1, 2001 to
June 30, 2004. Additional approval was given to a bonus plan under which Mr.
Bendell receives a quarterly bonus equal to 10% of the net income 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, 2001.
Accordingly, the Company has recorded additional compensation expense of
$756,665 for this bonus. 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.

On March 3, 1997, in connection with the acquisition of Major Auto from Bruce
Bendell and Harold Bendell, we entered into a management agreement with Messers.
Bendell which gave them control over the day-to-day operations of Major Auto.
The management agreement has expired by its term as of December 31, 2002. The
management agreement provided, however, that if the ownership of the dealerships
remains with us, the management agreement will continue upon the unilateral
decision of either of the Bendell brothers. Upon the mutual agreement of the
parties, the management agreement may be extended or modified. Accordingly, the
parties have orally elected to continue the management agreement until such time
as they reach agreement on terms of an extension to the management agreement.
The parties have entered discussions with our Board of Directors' Compensation
Committee with respect to an extension to the management agreement. There can
be no assurance that such agreement will achieved and, if not achieved, whether
a successor manager can be retained on terms acceptable to us and, if so,
whether such manager will be acceptable to the applicable manufacturers.

On October 22, 2002, Richard L. Feinstein resigned as our Senior Vice President
- Finance and Chief Financial Officer. Pursuant to an oral agreement with Mr.
Feinstein, we agreed to continue to pay Mr. Feinstein's base salary through
January 31, 2003. We have engaged Mr. Feinstein to perform certain consulting
and advisory services for us from time to time.

On October 19, 1999, we entered into a memorandum of understanding with James
Wallick, our former President and Chief Operating Officer, pursuant to which he
was to serve as our Executive Vice-President for a term of three

                                       48
<PAGE>
years, at an annual base salary of $200,000. The annual salary was subject to a
$100,000 incentive pursuant to commissions to be mutually agreed upon. Mr.
Wallick was also granted a signing bonus consisting of 4,500 shares of our
common stock. In addition, Mr. Wallick was entitled to various fringe benefits
and was entitled to participate in any incentive, stock option, deferred
compensation or pension plans established by our Board of Directors. Effective
June 30, 2001, Mr. Wallick was terminated from his executive positions but
remained on Board of Directors. Moreover, on March 25, 2002, Mr. Wallick
resigned from our Board of Directors. On September 25, 2001, Mr. Wallick filed
suit against us in the United States District Court of New Jersey entitled 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., The Major Automotive Companies, Inc. Major Chevrolet, Major
Motors of Hempstead, Inc., d/b/a/ Mazda of Hempstead, Compass Dodge, Compass
Lincoln-Mercury, ABC Companies I-V, fictitious name, actual names unknown, and
John Does, I-X, fictitious names, actual names unknown, individually and in
their official capacity (collectively, the Defendants"). 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 tortiously interfered with the contractual and employment relationship of
Mr. Wallick. Mr. Wallick was seeking, among other things, compensatory and
punitive damages for the alleged violations. Consequently, on October 10, 2002,
we entered into a Separation and Release Agreement (the "Agreement") with Mr.
Wallick, wherein we settled all matters with Mr. Wallick arising out of his
former employment with us and our subsidiaries. Mr. Wallick received, among
other things, an aggregate amount of $452,500, 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 has returned the 4,500 shares of our common stock issued
to him in February 2000 and has dismissed, with prejudice, and without an award
of costs or attorneys' fees, the complaint previously filed in United States
District Court, District of New Jersey, against us.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of our Board of Directors consists of Messrs.
Edelstein and Weiner, neither of whom has been an officer or employee at any
time since our inception. None of our executive officers 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 independent, outside
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.

                                       49
<PAGE>
Base Salary. Salaries for executive officers for 2002 were generally determined
by the Board of Directors on an individual basis, taking into account individual
experience and performance and our specific needs. For 2003, the Compensation
Committee will review the base salaries of the 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 executive officers to perform to
the greatest extent of their abilities to generate the highest attainable
profits for us. In 2002, a bonus of $461,379 was paid to 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. Mr. Bendell, Chairman of the Board of
Directors and our President, Chief Executive Officer and Acting Chief Financial
Officer, was paid a base salary of $500,000 for the year ended December 31,
2002. 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
the Company's 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 2002 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 2003, 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.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS.

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. Consequently, our common
stock was transferred back to the Nasdaq SmallCap Market on January 2, 2003.

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, 1997 and ending December 31, 2002. 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.

                                       50
<PAGE>
The information contained in the performance graph shall not be deemed
"soliciting material" or to be "filed" with the Securities and Exchange
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.

           [COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN LINE CHART]


*$100 invested on December 31, 1997 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.

                                       51
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under the Nevada Revised Statute, as amended, a director, officer, employee or
agent of a Nevada corporation may be entitled to indemnification by the
corporation under certain circumstances against expenses, judgments, fines and
amounts paid in settlement of claims brought against them by a third person or
by or in right of the corporation.

We are obligated under our Articles of Incorporation to indemnify any of our
present or former directors who served at our request as a director, officer or
member of another organization against expenses, judgments, fines and amounts
paid in settlement of claims brought against them by a third person or by or in
right of the corporation if such director acted in good faith or in a manner
such director reasonably believed to be in, or not opposed to, our best
interests and, with respect to any criminal action or proceeding, if such
director had no reason to believe his or her conduct was unlawful. However with
respect to any action by or in the right of the Company, the Articles of
Incorporation prohibit indemnification in respect of any claim, issue or matter
as to which such director is adjudged liable for negligence or misconduct in the
performance is his or her duties to us, unless otherwise ordered by the relevant
court. Our Articles of Incorporation also permit us to indemnify other persons
except against gross negligence or willful misconduct.

We are obligated under our bylaws to indemnify our directors, officers and other
persons who have acted as our representatives at our request to the fullest
extent permitted by applicable law as in effect from time to time, except for
costs, expenses or payments in relation to any matter as to which such officer,
director or representative is finally adjudged derelict in the performance of
his or her duties, unless we have received an opinion from independent counsel
that such person was not so derelict.

Our indemnification obligations are broad enough to permit indemnification with
respect to liabilities arising under the Securities Act. Insofar as we may
otherwise be permitted to indemnify our directors, officers and controlling
persons against liabilities arising under the Securities Act or otherwise, we
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

The Nevada Revised Statute, as amended, also permits a corporation to limit the
personal liability of its officers and directors for monetary damages resulting
from a breach of their fiduciary duty to the corporation and its stockholders.
Our Articles of Incorporation limit director liability to the maximum extent
permitted by the Nevada Revised Statute, which presently permits limitation of
director liability except (i) for a director's acts or omissions that involve
intentional misconduct, fraud or a knowing violation of law and (ii) for a
director's willful or grossly negligent violation of a Nevada statutory
provision that imposes personal liability on directors for improper
distributions to stockholders. As a result of the inclusion in our Articles of
Incorporation of this provision, our stockholders may be unable to recover
monetary damages against directors as a result of their breach of their
fiduciary duty to us and our stockholders. This provision does not, however,
affect the availability of equitable remedies, such as injunctions or rescission
based upon a breach of fiduciary duty by a director.

We maintain a $5 million liability insurance policy for the benefit of our
officers and directors.

                                       52
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

Securities Authorized for Issuance Under Equity Compensation Plans.

The following table sets forth information as of December 31, 2002 with respect
to compensation plans under which equity securities of the Company are
authorized for issuance.

<TABLE>
<CAPTION>
                                                                                                 Number of securities remaining
                                                                                                 available for future issuance
Plan Category                   Number of securities to be        Weighted-average exercise     under equity compensation plans
                                 issued upon exercise of        price of outstanding options,   (excluding securities reflected
                              outstanding options, warrants          warrants and rights                 in column (a))
                                        and rights
-----------------------       ----------------------------       --------------------------     -------------------------------
                                           (a)                               (b)                              (c)
-----------------------       ----------------------------       --------------------------     -------------------------------
<S>                           <C>                               <C>                             <C>
Equity compensation
plans approved by
security holders                       220,888 (1)                          $3.94                        1,499,112 (2)
-----------------------       ----------------------------       --------------------------     -------------------------------
Equity compensation
plans not approved by
security holders
-----------------------       ----------------------------       --------------------------     -------------------------------
Total                                  220,888                              $3.94                        1,499,112
-----------------------       ----------------------------       --------------------------     -------------------------------
</TABLE>

(1) Includes 189,388 options issued and outstanding under the 1999 Employee
Stock Option Plan with an average exercise price of $4.48 per share, and 31,500
options issued and outstanding under the 2001 Outside Director Plan with an
average exercise price of $0.71 per share.

(2) Includes 170,612 shares available for issuance under the 1999 Employee Stock
Option Plan and 218,500 shares available for issuance under the 2001 Outside
Director Option Plan.

As of April 11, 2003, 360,000 options were authorized under the 1999 Employee
Stock Option Plan and options to purchase 189,388 shares were outstanding and
170,612 options were available for future grants. As of April 11, 2003, 250,000
options were authorized under the 2001 Outside Director Plan, 31,500 options to
purchase shares had been granted and 218,500 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 April 11, 2003, 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>
<CAPTION>
      NAME AND ADDRESS OF BENEFICIAL OWNER                             NUMBER OF SHARES          PERCENT OF
                                                                                                 CLASS (1)
      ------------------------------------                             ----------------          ----------
<S>                                                                    <C>                       <C>
      Executive Officers and Directors:
      Bruce Bendell...........................................           4,121,727 (2)             42.6%
</TABLE>
                                       53

<PAGE>
<TABLE>
<CAPTION>
      NAME AND ADDRESS OF BENEFICIAL OWNER                             NUMBER OF SHARES          PERCENT OF
                                                                                                 CLASS (1)
      ------------------------------------                             ----------------          ----------
<S>                                                                    <C>                       <C>
      David Edelstein.........................................              42,080 (3)(4)           *
      Steven Hornstock .......................................               4,590 (5)              *
      Steven Nawi.............................................              14,300 (6)              *
      Jeffrey Weiner..........................................             105,590 (7)              1.1%
      All directors and executive officers as a group.........           4,288,287 (8)(9)          43.8%
      Other 5% Stockholders:
      Doron Cohen.............................................             511,892 (10)             5.4%
      47 Parker Boulevard
      Monsey, New York 10952
</TABLE>

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

(1)      Based on 9,564,471 shares of common stock outstanding on April 11,
         2003.

(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 34,700 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 4,500 shares of common stock which are immediately
         exercisable.

(6)      Includes 800 shares of common stock owned by N.A.W.I. Enterprises, a
         family corporation, and options for 9,000 shares of common stock which
         are immediately exercisable.

(7)      Includes options for 84,700 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 right to acquire within 60 days and (iii) options for
         208,400 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.

(10)     Based solely on a Schedule 13G/A filed on February 1, 2001. Pursuant to
         a Separation and Release Agreement dated August 8, 2000, the shares
         will be voted in accordance with the recommendation of the majority of
         the non-employee directors of the Company.

                                       54
<PAGE>
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 us and our subsidiary Major Fleet. In 2002, we
were billed by Marcum & Kliegman LLP approximately $105,000 for its services.
Mr. Weiner, one of our directors, is Managing Partner of Marcum & Kliegman LLP.

Bruce Bendell and Harold Bendell, have interests in several non-affiliated auto
dealerships, including Five Towns Nissan, Bronx Automotive Group, HB Automotive
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; however, at December 31, 2002, these affiliated dealerships were
indebted to us in an aggregate amount of approximately $2.9 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. By its terms, the
note was due on December 11, 2002 (the "Maturity Date") at a rate per annum of
ten percent (10%). The Maturity Date of the note was initially extended until
January 2, 2003 and subsequently, it has been further extended until January 2,
2004. A payment of $600,000 was made in September 2002. A subsequent payment of
$130,000 was made in April 2003. 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 Employee Stock Option Plan to purchase 50,000 shares of
our common stock at an exercise price of $2.35 (as adjusted for the subsequent
one-for-five reverse stock split). 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 is being amortized
ratably over the term of the note.

We purchase from and sell vehicles to Nawi Leasing, Inc., a company of which
Steven Nawi is President. Mr. Nawi is a member of our Board of Directors.
During the year 2002, purchases from and sales to Nawi Leasing, Inc. and its
affiliates represented less than 1% of our aggregate sales and purchases.

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, Bruce Bendell and Harold
Bendell 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. An independent appraiser has been 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 will be determined and an adjustment to the related party receivable will
be made and a gain or loss will 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, together with related interest at a market rate. Based on the
final report of the appraiser, no adjustment is required for either the rental
rate or the receivable balance.

                                       55
<PAGE>
In unrelated transactions, in order to obtain floor plan financing at favorable
rates, each of Bruce Bendell and Harold Bendell 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 agreed to obtain
independent valuations the Credit Enhancements and pay each of the Bendell's the
fair value of his respective contributions. We have engaged an independent
valuation firm and have received a preliminary valuation from such firm of
$160,000 for the economic risk value of the Credit Enhancement. Accordingly, we
have accrued such amount as a liability in the third quarter of 2002. When the
final such valuations have been completed, and our Board of Directors has
reviewed the results and evaluated the circumstances of the Credit Enhancement
relative to our enterprise value, adjustment, if necessary and warranted, will
be made for any difference from the preliminary estimate.

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. CONTROLS AND PROCEDURES.

Our Chief Executive Officer, who is also our Acting Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)
and 15d-14(c) as of a date within 90 days of the filing date of this annual
report on Form 10-K (the "Evaluation Date")), has concluded that as of the
Evaluation Date, our disclosure controls and procedures were adequate and
effective to ensure that material information relating to the Company and its
consolidated subsidiaries would be made known to him by others within those
entities, particularly during the period in which this yearly report on Form
10-K was being prepared.

There were no significant changes in our internal controls or in other factors
that could significantly affect our disclosure controls and procedures
subsequent to the Evaluation Date, nor any significant deficiencies or material
weaknesses in such disclosure controls and procedures requiring corrective
actions. As a result, no corrective actions were taken.

ITEM. 15.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)      Exhibits

<TABLE>
<CAPTION>
         EXHIBIT NUMBER                 DESCRIPTION                                                        PAGE
         --------------                 -----------                                                        ----
<S>                                     <C>                                                                <C>
         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
</TABLE>

                                       56
<PAGE>
<TABLE>
<S>                                     <C>                                                                <C>
         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.                                  -

         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

         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
</TABLE>

                                       57
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<S>                                     <C>                                                                <C>
         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

         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.,
</TABLE>

                                       58
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<S>                                     <C>                                                                <C>
                                        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

         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
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                                       59
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<S>                                     <C>                                                                <C>
         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

         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
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                                       60
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<S>                                     <C>                                                                <C>
         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

         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
</TABLE>

                                       61
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<S>                                     <C>                                                                <C>
         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
</TABLE>

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<S>                                     <C>                                                                <C>
         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
</TABLE>

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<S>                                     <C>                                                                <C>
         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

         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, Nisko L.P. and shareholders of Nissko
                                        Telecom Ltd dated November 30, 1999.                                 N/A
</TABLE>

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<S>                                     <C>                                                                <C>
         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

         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      N/A
                                        plan lines.

         10.92                          Amended Senior Secured Promissory Note due December 11, 2002           -
                                        effective as of January 3, 2003.

         10.93                          Amended Security and Pledge Agreement dated December 11, 2000          -
                                        between Fidelity Holdings, Inc. and M&K Equities, Ltd.

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

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<S>                                     <C>                                                                <C>
         21.1                           List of Subsidiaries of the Company.                                  -

         23.1                           Consent of BDO Seidman, LLP, Independent Accountants.                 -

         99.1                           Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                                        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).

         (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 current
                                        report on form 10-Q, dated August 21, 2000 (File No. 0-29182).
</TABLE>

                                       66
<PAGE>
<TABLE>
<S>                                     <C>                                                                <C>
         (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 current
                                        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 current
                                        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 current
                                        report on Form 10-K, dated April 16, 2002 (File No. 0-29182).

</TABLE>


(b)      Reports on Form 8-K

On October 23, 2002, we filed a Report on Form 8-K reporting, that, effective
October 22, 2002, Richard L. Feinstein resigned as our Senior Vice President -
Finance and Chief Financial Officer.

On October 21, 2002, we filed a Report on Form 8-K reporting that we entered
into a Separation and Release Agreement with James R. Wallick, our former
President and former member of our Board of Directors, wherein we have settled
all matters with Mr. Wallick arising out of his former employment with us and
our subsidiaries.

On April 5, 2002, we filed a Report on Form 8-K reporting that James R. Wallick
resigned as a director.


                                       67
<PAGE>
                                   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: April 15, 2003                     /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:

<TABLE>
<CAPTION>
                     SIGNATURE                                        TITLE                                    DATE
                     ---------                                        -----                                    ----
<S>                                         <C>                                                        <C>
          /s/ Bruce Bendell                 President, Chief Executive Officer, Acting Chief           April 15, 2003
          ---------------------------       Financial Officer and Director
          Bruce Bendell

          /s/ David Edelstein               Director                                                   April 15, 2003
          ---------------------------
          David Edelstein

          /s/ Steven Hornstock              Director                                                   April 15, 2003
          ---------------------------
          Steven Hornstock

          /s/Steven Nawi                    Director                                                   April 15, 2003
          ---------------------------
          Steven Nawi

          /s/ Jeffrey Weiner                Director                                                   April 15, 2003
          ---------------------------
          Jeffrey Weiner
</TABLE>

                                       68





<PAGE>
                                  CERTIFICATION

I, Bruce Bendell, certify that:

1. I have reviewed this annual report on Form 10-K of the Major Automotive
Companies, Inc.

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:

         (a)      designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to me
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

         (b)      evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

         (c)      presented in this annual report my conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on my evaluation as of the Evaluation Date;

5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function):

         (a)      all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         (b)      any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6. I have indicated in this annual report whether or not there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

April 15, 2003                     /s/ Bruce Bendell
                                   -------------------------------
                                   Bruce Bendell
                                   President, Chief Executive Officer and
                                   Acting Chief Financial Officer


                                       69
<PAGE>
                                                            THE MAJOR AUTOMOTIVE
                                                                 COMPANIES, INC.

                                               CONSOLIDATED FINANCIAL STATEMENTS
                                    YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
<PAGE>
                                                            THE MAJOR AUTOMOTIVE
                                                                 COMPANIES, INC.

                                               CONSOLIDATED FINANCIAL STATEMENTS
                                    YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000


                                       F-1
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

<TABLE>
<CAPTION>
                                                                                                   CONTENTS
                                                                                                   --------

<S>                                                                                            <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                                                      F-3

CONSOLIDATED FINANCIAL STATEMENTS:
    Balance sheets as of December 31, 2002 and 2001                                                     F-4
    Statements of operations for the years ended December 31, 2002, 2001 and 2000                       F-5
    Statements of stockholders' equity for the years ended December 31, 2002, 2001 and 2000       F-6 - F-8
    Statements of cash flows for the years ended December 31, 2002, 2001 and 2000                F-9 - F-10
    Notes to consolidated financial statements                                                  F-11 - F-54
</TABLE>


                                       F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
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, 2002 and 2001, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the three years in the period ended December 31, 2002. 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 generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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, 2002 and 2001, and the results
of their operations and their cash flows for the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America.

As discussed in Note 1(l) to the consolidated financial statements, effective
January 1, 2002, the Company adopted the provisions of Statements of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets".

                                                    /S/ BDO Seidman, LLP
                                                   ---------------------
April 11, 2003                                          BDO Seidman, LLP
New York, New York


                                      F-3
<PAGE>
                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
 December 31,                                                                        2002                           2001
 ------------                                                                        ----                           ----
<S>                                                                              <C>                           <C>
 ASSETS
 CURRENT:

     Cash and cash equivalents                                                   $   796,074                   $  4,024,927
     Short term investment                                                           425,930                        269,899
     Net investment in direct financing leases, current                              164,555                        135,122
     Accounts receivable, net of allowance for doubtful accounts of
         $ 506,500 and $700,000                                                   15,179,194                     15,744,096
     Inventories                                                                  46,520,973                     32,673,901
     Due from related parties                                                      1,130,966                      1,442,097
     Other current assets                                                            506,435                        520,574
                                                                                 -----------                    -----------
         TOTAL CURRENT ASSETS                                                     64,724,127                     54,810,616
 NET INVESTMENT IN DIRECT FINANCING LEASES, NET OF CURRENT PORTION                   233,937                        191,053
 PROPERTY AND EQUIPMENT, NET                                                       4,938,545                      8,901,218
 DEFERRED INCOME TAXES                                                             1,576,000                      1,576,000
 GOODWILL                                                                         13,589,000                     13,589,000
 DUE FROM OFFICER AND STOCKHOLDER                                                  1,395,358                      1,595,549
 NOTES RECEIVABLE AND OTHER ASSETS                                                   790,374                      1,666,081
                                                                                 -----------                    -----------
                                                                                 $87,247,341                    $82,329,517
                                                                                 ===========                    ===========

 LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES:

     Notes payable - floor plan                                                  $46,224,707                    $33,963,903
     Line of credit                                                                       --                        500,000
     Accounts payable                                                              6,727,578                      9,318,409
     Accrued expenses                                                              6,991,326                      5,950,762
     Current maturities of long-term debt                                            675,452                        912,221
     Customer deposits and other current liabilities                                 978,981                        770,671
                                                                                 -----------                     ----------
     TOTAL CURRENT LIABILITIES                                                    61,598,044                     51,415,966
 LONG-TERM DEBT, LESS CURRENT MATURITIES                                           7,701,700                      9,853,587
 OBLIGATIONS UNDER CAPITAL LEASES                                                         --                      3,111,643
                                                                                 -----------                    -----------
            TOTAL LIABILITIES                                                     69,299,744                     64,381,196
                                                                                 -----------                    -----------
 COMMITMENTS AND CONTINGENCIES
 STOCKHOLDERS' EQUITY:
     Preferred stock, $.01 par value - 2,000,000 shares authorized;
         -0- and 100,000 shares issued and outstanding                                    --                          1,000
     Common stock, $.01 par value - 50,000,000 shares
         authorized; 9,564,371 and 7,994,338 shares
         issued and outstanding in 2002 and 2001, respectively                        95,643                         79,943
     Unearned stock-based compensation                                                    --                       (115,946)
     Additional paid-in capital                                                   40,123,765                     39,964,363
     Treasury stock, at cost                                                      (1,963,764)                    (1,963,764)
     Deficit                                                                     (20,308,047)                   (20,017,275)
                                                                                 -----------                    -----------
            TOTAL STOCKHOLDERS' EQUITY                                            17,947,597                     17,948,321
                                                                                 -----------                    -----------
                                                                                 $87,247,341                    $82,329,517
                                                                                 ===========                    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>
                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
 Year ended December 31,                                                         2002             2001            2000
 -----------------------                                                         ----             ----            ----
<S>                                                                           <C>             <C>             <C>

     Sales                                                                    $397,947,494    $375,114,505    $322,142,231

     Cost of sales                                                             330,772,319     311,865,557     270,874,536
                                                                              ------------    ------------    ------------
            GROSS PROFIT                                                        67,175,175      63,248,948      51,267,695

 OPERATING EXPENSES                                                             64,760,121      59,222,739      46,580,842

 LITIGATION COSTS                                                                1,348,000       1,085,893         199,802

 INTEREST EXPENSE, NET OF INTEREST INCOME                                          961,826       1,141,792       1,800,804
                                                                              ------------    ------------    ------------
            INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND INCOME (LOSS)
                FROM DISCONTINUED OPERATIONS                                       105,228       1,798,524       2,686,247

 INCOME TAX EXPENSE (BENEFIT)                                                      190,000        (291,000)      1,384,000
                                                                              ------------    ------------    ------------
                   INCOME (LOSS) FROM CONTINUING OPERATIONS                        (84,772)      2,089,524       1,302,247

 INCOME (LOSS) FROM DISCONTINUED OPERATIONS (NET OF INCOME TAX BENEFIT)           (206,000)        590,000     (22,427,322)
                                                                              ------------    ------------    ------------
 NET INCOME (LOSS)                                                            $   (290,772)   $  2,679,524    $(21,125,075)
                                                                              ============    ============    ============
 Income (loss) per common share - continuing operations:
         Basic                                                                $     (0.01)    $       0.32    $       0.26

         Diluted                                                              $     (0.01)    $       0.24    $       0.19
                                                                              ============    ============    ============
 Income (loss) per common share - discontinued operations:
         Basic                                                                $     (0.02)    $       0.09    $      (4.40)

         Diluted                                                              $     (0.02)    $       0.07    $      (4.40)
                                                                              ============    ============    ============
 Net income (loss) per common share:
         Basic                                                                $     (0.03)    $       0.41    $      (4.14)

         Diluted                                                              $     (0.03)    $       0.31    $      (4.14)
                                                                              ============    ============    ============
 Average number of shares used in computation:
         Basic                                                                   8,947,332       6,558,356       5,101,829

         Diluted                                                                 8,947,332       8,662,976       6,791,104
                                                                              ============    ============    ============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


 Years ended December 31, 2002, 2001 and 2000





<TABLE>
<CAPTION>
                                                                        Preferred stock                  Common stock
                                                                    ------------------------      ---------------------------
                                                                      Shares       Amount          Shares           Amount
                                                                    --------    ------------      ----------    -------------

<S>                                                                 <C>         <C>               <C>           <C>
BALANCE, DECEMBER 31, 1999                                           500,000    $      5,000      16,019,796    $    160,198
Net loss                                                                  --              --              --              --
Currency translation adjustment                                           --              --              --              --
Issuance of common stock for:
    Services                                                              --              --          21,770             218
    Business combinations                                                 --              --         678,102           6,781
    Exercise of warrants                                                  --              --         574,648           5,747
    Stock compensation, net of deferred amounts                           --              --          71,230             712
Issuance of common stock in connection with private
    placements                                                            --              --         316,667           3,167
Redemption of warrants in connection with private placements              --              --         393,587           3,936
Purchase of treasury stock                                                --              --              --              --
Original issue discount                                                   --              --              --              --
Three-for-two stock split effected in the form of a 150%
    dividend                                                              --              --       8,009,898          80,100
                                                                     -------    ------------      ----------    ------------
BALANCE, DECEMBER 31, 2000 (CARRIED FORWARD)                         500,000    $      5,000      26,085,698    $    260,859
                                                                     =======    ============      ==========    ============
</TABLE>


<TABLE>
<CAPTION>
                                                                         Treasury stock           Additional
                                                                      -----------------------      paid-in
                                                                      Shares        Amount         capital
                                                                      ------    -------------    ------------

<S>                                                                  <C>        <C>              <C>
BALANCE, DECEMBER 31, 1999                                            20,980    $   (263,580)    $ 30,593,905

Net loss                                                                  --              --               --
Currency translation adjustment                                           --              --               --
Issuance of common stock for:
    Services                                                              --              --          209,276
    Business combinations                                                 --              --        8,106,466
    Exercise of warrants                                                  --              --          739,342
    Stock compensation, net of deferred amounts                           --              --          854,566
Issuance of common stock in connection with private
    placements                                                            --              --        4,691,832
Redemption of warrants in connection with private placements              --              --       (6,000,016)
Purchase of treasury stock                                           130,947        (631,390)              --
Original issue discount                                                   --              --           95,000
Three-for-two stock split effected in the form of a 150%
    dividend                                                          10,490              --          (80,100)
                                                                     -------    ------------     ------------
BALANCE, DECEMBER 31, 2000 (CARRIED FORWARD)                         162,417    $   (894,970)    $ 39,210,271
                                                                     =======    ============     ============
</TABLE>


<TABLE>
<CAPTION>
                                                                                   Cumulative
                                                                  Retained          currency        Unearned          Total
                                                                  earnings        translation     stock-based      stockholders'
                                                                  (deficit)        adjustment     compensation        equity
                                                                ------------     ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>              <C>
BALANCE, DECEMBER 31, 1999                                      $ (1,571,724)    $     (6,204)    $         --     $ 28,917,595

Net loss                                                         (21,125,075)              --               --      (21,125,075)
Currency translation adjustment                                           --            6,204               --            6,204
Issuance of common stock for:
    Services                                                              --               --               --          209,494
    Business combinations                                                 --               --               --        8,113,247
    Exercise of warrants                                                  --               --               --          745,089
    Stock compensation, net of deferred amounts                           --               --         (284,391)         570,887
Issuance of common stock in connection with private
    placements                                                            --               --               --        4,694,999
Redemption of warrants in connection with private placements              --               --               --       (5,996,080)
Purchase of treasury stock                                                --               --               --         (631,390)
Original issue discount                                                   --               --               --           95,000
Three-for-two stock split effected in the form of a 150%
    dividend                                                              --               --               --               --
                                                                ------------     ------------       ----------     ------------
BALANCE, DECEMBER 31, 2000 (CARRIED FORWARD)                    $(22,696,799)    $         --       $ (284,391)    $ 15,599,970
                                                                ============     ============       ==========     ============
</TABLE>



See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>
                                                  THE MAJOR AUTOMOTIVE COMPANIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 Years ended December 31, 2002, 2001 and 2000





<TABLE>
<CAPTION>
                                                                   Preferred stock              Common stock
                                                                 -------------------     -------------------------
                                                                 Shares       Amount        Shares         Amount
                                                                --------     -------     -----------     ---------
<S>                                                             <C>          <C>         <C>             <C>
BALANCE, DECEMBER 31, 2000 (BROUGHT FORWARD)                     500,000     $ 5,000      26,085,698     $ 260,859

Net income                                                            --          --              --            --
One-for-five reverse split                                            --          --     (20,868,558)     (208,686)
Issuance of common stock for:
    Services                                                          --          --          98,800           989
    Business combinations                                             --          --         427,120         4,271
    Litigation                                                        --          --         472,600         4,723
    Stock compensation, net of deferred amounts                       --          --             900             9
Redemption of warrants in connection with private placements          --          --              --            --
Purchase of treasury stock                                            --          --              --            --
Conversion from preferred                                       (400,000)     (4,000)      1,777,778        17,778
Stock options granted                                                 --          --              --            --
Amortization of deferred compensation                                 --          --              --            --
                                                                --------     -------     -----------     ---------
BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)                     100,000     $ 1,000       7,994,338     $  79,943
                                                                ========     =======     ===========     =========
</TABLE>



<TABLE>
<CAPTION>
                                                                    Treasury stock           Additional         Retained
                                                                ------------------------       paid-in          earnings
                                                                 Shares         Amount         capital          (deficit)
                                                                --------     -----------     ------------     ------------

<S>                                                             <C>          <C>             <C>              <C>
BALANCE, DECEMBER 31, 2000 (BROUGHT FORWARD)                     162,417     $  (894,970)    $ 39,210,271     $(22,696,799)

Net income                                                            --              --               --        2,679,524
One-for-five reverse split                                      (129,934)             --          208,686               --
Issuance of common stock for:
    Services                                                          --              --          200,516               --
    Business combinations                                             --              --           (4,271)              --
    Litigation                                                        --              --          250,932               --
    Stock compensation, net of deferred amounts                       --              --            2,007               --
Redemption of warrants in connection with private placements          --              --         (150,000)              --
Purchase of treasury stock                                       194,708      (1,068,794)              --               --
Conversion from preferred                                             --              --          (13,778)              --
Stock options granted                                                 --              --          260,000               --
Amortization of deferred compensation                                 --              --               --               --
                                                                --------     -----------     ------------     ------------
BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)                     227,191     $(1,963,764)    $ 39,964,363     $(20,017,275)
                                                                ========     ===========     ============     ============
</TABLE>

<TABLE>
<CAPTION>
                                                                Cumulative
                                                                 currency       Unearned              Total
                                                                translation    stock-based        stockholders'
                                                                adjustment     compensation          equity
                                                                -----------    ------------      ---------------
<S>                                                             <C>            <C>               <C>
BALANCE, DECEMBER 31, 2000 (BROUGHT FORWARD)                        $--        $(284,391)        $ 15,599,970

Net income                                                           --               --            2,679,524
One-for-five reverse split                                           --               --                   --
Issuance of common stock for:
    Services                                                         --               --              201,505
    Business combinations                                            --               --                   --
    Litigation                                                       --               --              255,655
    Stock compensation, net of deferred amounts                      --               --                2,016
Redemption of warrants in connection with private placements         --               --             (150,000)
Purchase of treasury stock                                           --               --           (1,068,794)
Conversion from preferred                                            --               --                   --
Stock options granted                                                --               --              260,000
Amortization of deferred compensation                                --          168,445              168,445
                                                                    ---        ---------         ------------
BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)                        $--        $(115,946)        $ 17,948,321
                                                                    ===        =========         ============
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>
                                                  THE MAJOR AUTOMOTIVE COMPANIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 Years ended December 31, 2002, 2001 and 2000





<TABLE>
<CAPTION>
                                                      Preferred stock             Common stock               Treasury stock
                                                   --------------------      ----------------------     -----------------------
                                                    Shares       Amount        Shares       Amount      Shares         Amount
                                                   --------     -------      ---------     --------     -------     -----------

<S>                                                <C>         <C>           <C>           <C>          <C>         <C>
BALANCE, DECEMBER 31, 2001 (BROUGHT FORWARD)        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 compensation     --          --         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 compensation                    --          --             --           --          --              --
                                                   --------     -------     ----------     --------     -------     -----------
BALANCE, DECEMBER 31, 2002                               --     $    --      9,564,371     $ 95,643     227,191     $(1,963,764)
                                                   ========     =======     ==========     ========     =======     ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                                         Cumulative
                                                       Additional         Retained        currency       Unearned        Total
                                                         paid-in          earnings       translation    stock-based   stockholders'
                                                         capital          (deficit)      adjustment    compensation      equity
                                                       ------------     ------------     -----------   -------------  -------------
<S>                                                    <C>              <C>              <C>           <C>            <C>
BALANCE, DECEMBER 31, 2001 (BROUGHT FORWARD)           $ 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 compensation                            --               --         --          115,946          115,946
                                                       ------------     ------------         --        ---------     ------------
BALANCE, DECEMBER 31, 2002                             $ 40,123,765     $(20,308,047)       $--        $      --     $ 17,947,597
                                                       ============     ============         ==        =========     ============
</TABLE>




See accompanying notes to consolidated financial statements.


                                      F-8
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31,                                                    2002              2001              2000
                                                                       --------------    ------------      ------------
<S>                                                                    <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                                                  $    (290,772)     $ 2,679,524      $(21,125,075)
    Adjustments to reconcile net income (loss) to net cash provided
        by (used in) operating activities:
           Amortization of intangible assets                                 119,293          679,000           655,000
           Depreciation                                                      397,947          190,313           436,787
           Stock-based compensation                                          115,946          430,461           570,887
           Discontinued operations                                           206,000               --        19,217,915
           Stock issuance for services                                       162,000          201,505           209,494
           (Increase) decrease in assets:
               Net investment in direct financing leases                     (72,317)         168,867           424,526
               Accounts receivable                                           564,902       (7,665,985)       (2,742,427)
               Inventories                                               (13,847,072)      14,791,360       (15,348,990)
               Customer deposits                                             208,310           22,708           (98,099)
               Other assets                                                1,346,242         (888,378)       (3,477,793)
           Increase (decrease) in liabilities:
               Accounts payable                                           (2,590,832)        4,783,93        (1,709,224)
               Accrued expenses                                            1,040,564        1,216,583         2,286,126
               Floor plan notes payable                                   12,260,804      (11,250,541)       16,643,439
                                                                       --------------    ------------      ------------
                  NET CASH PROVIDED BY (USED IN)
                   OPERATING ACTIVITIES                                     (378,985)          59,349        (4,057,434)
                                                                       --------------    ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:

    Additions to property and equipment                                      (49,760)        (296,548)         (305,230)
    Business combinations                                                         --          (70,000)       (1,393,411)
                                                                       --------------    ------------      ------------
                      NET CASH USED IN INVESTING ACTIVITIES                  (49,760)        (366,548)       (1,698,641)
                                                                       --------------    ------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:

    Proceeds from line of credit                                                  --               --           500,000
    Proceeds from long-term debt                                                  --        3,429,499         2,000,000
    Payments of long-term debt                                            (2,888,656)      (3,841,432)         (397,371)
    Proceeds from issuance of common stock and exercise of warrants,
        net of expenses                                                           --               --         5,440,088
    Redemption of adjustable warrants                                             --               --        (4,746,079)
    Decrease in notes payable                                                     --       (1,250,001)               --
    Payments from offices                                                    200,191               --                --
    Capital lease reduction                                                 (111,643)              --                --
    Proceeds from convertible debentures                                                           --                --
    Loans to officers                                                             --         (766,214)         (347,765)
    Purchase of treasury stock                                                    --       (1,068,794)         (631,390)
    Increase (decrease) in due from shareholders                                  --               --          (157,794)
                                                                       --------------    ------------      ------------
                  NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES     (2,800,008)      (3,496,942)        1,659,689
                                                                       --------------    ------------      ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                      (3,228,853)       1,495,859        (4,096,386)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                               4,024,927        2,529,068         6,625,454
                                                                       --------------    ------------      ------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                 $     796,074     $  4,024,927        $2,529,068
                                                                       ==============    ============      ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-9

<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31,                                                   2002             2001          2000
-----------------------                                                   ----             ----          ----
<S>                                                                    <C>               <C>           <C>
 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year
     for:
         Interest                                                       $2,011,288       $2,504,608    $2,660,638
         Income taxes                                                       52,000           50,000            --
     Noncash financing activities:
         Notes issued for redemption of warrants                                --          150,000     1,250,000
         Common stock issued as stock compensation                          12,002          430,461       854,566
         Common stock issued for settlement of litigation                  162,000               --            --
         Common stock issued for business combinations and services             --          457,160     8,322,000
         Debt issued in connection with business combinations                   --               --     1,500,000
         Capital lease obligations and (reversal)                       (3,000,000)              --     3,000,000
         Original issue discount                                                --               --        95,000
                                                                       ==============  ============  ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-10


<PAGE>

                      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                "Company"), formerly known as Fidelity Holdings,
     POLICIES                  Inc., was incorporated under the laws of the
                               State of Nevada on November 7, 1995. The Company
                               is structured as a holding company that has an
                               automotive division and had a technology
                               division that included computer telephony,
                               telecommunication operations and plastics and
                               utility operations. On November 3, 2000 the
                               Board of Directors determined to divest the
                               Company's non-automotive division (see Note 16).
                               As a result of treating the divestiture as
                               discontinued operations, the Company operates in
                               one segment.

                         (b)   Principles of Consolidation

                               The accompanying consolidated financial
                               statements include the accounts of The Major
                               Automotive Companies, Inc. and its wholly-owned
                               subsidiaries. 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
                               the potential dilutions from all potential
                               dilutive securities that would have reduced
                               earnings per share.



                                      F-11
<PAGE>
                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                               A reconciliation of shares used in calculating
                               basic and diluted earnings per share is as
                               follows:

<TABLE>
<CAPTION>
                               Year ended
                                 December 31,            2002         2001         2000
                               --------------------   ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>
                               Basic                  8,947,332    6,558,356    5,101,829

                               Effect of assumed
                                 conversions of
                                 options, preferred
                                 stock and warrants          --    2,104,620    1,689,275
                                                      ---------    ---------    ---------
                               Diluted                8,947,332    8,662,976    6,791,104
                                                      =========    =========    =========
</TABLE>


                               Options and warrants to purchase 353,663 shares
                               of common stock at prices ranging from $1.65 to
                               $80.00 during 2002, options and warrants to
                               purchase 456,925 shares of common stock at prices
                               ranging from $2.35 to $80.00 that were
                               outstanding during each of the years 2002 and
                               2001 and options and warrants to purchase 171,310
                               shares of common stock at prices ranging from
                               $57.50 to $80.00 that were outstanding during
                               2000 were not included in the computation of
                               diluted earnings per share for each of the
                               respective years because the options' exercise
                               price exceeded the fair market value of the
                               Company's common stock. Options and warrants
                               were not used in the calculation of loss per
                               share in 2002 because their effect would be
                               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, 2002 and 2001, 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.

                         (e)   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 it 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
                               receivables on the accompanying consolidated
                               balance sheets and totaled $7.8 million at
                               December 31, 2002 and $7.4 million at
                               December 31, 2001.

                         (f)   Accounts Receivable

                               Accounts receivable consist primarily of
                               amounts due from fleet sales, amounts due from
                               manufacturers for repair services performed on
                               vehicles with a remaining factory warranty and
                               amounts due from third parties from the sale of
                               parts. Management believes that there is minimal
                               risk of uncollectability on warranty
                               receivables. The Company evaluates fleet sales,
                               parts and other receivables for collectability
                               based on the age of the receivable, the credit
                               history of the customer and past collection
                               experience.


                                      F-12
<PAGE>
                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                         (g)   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.

                         (h)   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.
                               Depreciation of leased equipment is calculated on
                               the cost of the equipment, less an estimated
                               residual value, on the straight-line method over
                               the term of the lease. 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.

                         (i)   Revenue Recognition

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

                               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 also receives commissions from the sale
                               of various insurance contracts to customers. The
                               Company may be assessed a chargeback fee in the
                               event of early cancellation of a loan or
                               insurance contract by the customer. Finance and
                               insurance 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.

                         (j)   Comprehensive Income (Loss)

                               The Company has no comprehensive income or loss.


                                      F-13
<PAGE>
                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                         (k)   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.

                          (l)  Goodwill

                               Effective July 1, 2001, the Company adopted the
                               provisions of SFAS 141, "Business Combinations."
                               Among other provisions, SFAS 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 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 142, "Goodwill and
                               Other Intangible Assets." Among other things,
                               SFAS 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 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. The following table shows
                               the effect on net income (loss) and net income
                               (loss) per share for the years ending December
                               31, 2002 and 2001 as if the provisions of SFAS
                               142 eliminating goodwill amortization had been
                               applied as of January 1, 2000.

<Table>
<Caption>
                                                  For the Year Ended
                                           -------------------------------------
                                              2002        2001          2000
                                           ----------  ----------  ------------
<S>                                        <C>         <C>          <C>
Income (loss) from continuing operations,
  as reported                              $  (84,772) $2,089,524 $  1,302,247
Add back: amortization of goodwill,
  net of tax                                       --     472,000      517,000
                                           ----------  ----------  ------------

Income (loss) from continuing operations,
  As adjusted                                 (84,772)  2,561,524    1,819,247
Income (loss) from discontinued
  operations (net of income tax
  benefit of $138,000, $590,000 and
  $1,804,000)                                (206,000)    590,000  (22,427,322)
                                           ----------  ----------  ------------

  Net income (loss), as adjusted           $ (290,772) $3,151,524 $(20,608,075)
                                           ==========  ==========  ============

Basic earnings (loss) per share:
  Reported net income (loss)               $    (0.03) $     0.41 $      (4.14)
  Amortization of goodwill, net of tax             --        0.07         0.10
                                           ----------  ----------  ------------

Basic earnings (loss) per share,
  as adjusted                              $    (0.03) $     0.48 $      (4.04)
                                           ==========  ==========  ============

Diluted earnings (loss) per share:
  Reported net income (loss)               $    (0.03) $     0.31 $      (4.14)
  Amortization of goodwill, net of tax             --        0.05         0.10
                                           ----------  ----------  ------------

Diluted earnings (loss) per share,
  as adjusted                              $    (0.03) $     0.36 $      (4.04)
                                           ==========  ==========  ============

Average number of shares used in
  computation:
  Basic                                     8,947,332   6,558,356     5,101,829
  Diluted                                   8,947,332   8,662,976     6,791,104
                                           ==========  ==========  ============
</Table>

                               We have completed the impairment tests required
                               by SFAS No. 142 for goodwill and other intangible
                               assets with indefinite lives. In order to
                               evaluate goodwill for impairment, we compared the
                               carrying value to the fair value of the
                               underlying businesses. Based on the results of
                               our tests, no impairment was indicated for
                               goodwill or other intangible assets. We will
                               continue to test goodwill and other intangible
                               assets with indefinite lives for impairment
                               annually, or more frequently if events or
                               circumstances indicate possible impairment. As of
                               December 31, 2002, net carrying amount of
                               goodwill was $13,589,000.

                                      F-14
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                (m)   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. In connection with the
                                      discontinued operations, in 2000 the
                                      Company took an impairment charge of
                                      approximately $13.6 million (see Note 16).

                                (n)   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,
                                      approximates book value, estimated based
                                      on current rates offered to the Company
                                      for similar debt.

                                (o)   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-15
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                (p)   Stock-Based Compensation

                                      In December 2002, the Financial Accounting
                                      Standards Board ("FASB") issued Statement
                                      of Financial Accounting Standard no. 148,
                                      "Accounting for Stock-Based Compensation
                                      -- Transition and Disclosure". SFAS 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 123. The
                                      provisions of SFAS 148 are effective for
                                      fiscal years ending after December 15,
                                      2002. The Company has adopted the
                                      disclosure provisions of SFAS 148.

                                      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 income (loss) and
                                      earnings (loss) per share if the Company
                                      had applied the fair value recognition
                                      provisions of FASB Statement No. 123,
                                      Accounting for Stock-Based Compensation,
                                      to stock-based employee compensation:

<Table>
<Caption>
                                             For the Year ended December 31,
                                           ------------------------------------
                                              2002        2001         2000
                                           ----------  ----------  ------------
<S>                                        <C>         <C>         <C>
             Reported net income (loss)... $(290,772)  $2,679,524  $(21,125,075)
             Add: Stock based compensation
               included in reported net
               income (loss), net of tax..   162,000      631,966       780,381
             Deduct: Fair value
               compensation cost,
               net of tax ................  (174,624)    (650,738)   (1,394,381)
                                           ----------  ----------  ------------
             Pro forma net income ........ $(303,396)  $2,660,752  $(21,739,075)
                                           ----------  ----------  ------------
             Basic net income (loss)
               per share:
             Reported net income (loss) .. $    (.03)  $      .41  $      (4.14)
             Pro forma net income (loss) . $    (.03)  $      .41  $      (4.26)
                                           ----------  ----------  ------------
             Diluted net income (loss)
               per share:
             Reported net income (loss) .. $    (.03)  $      .41  $      (4.14)
             Pro forma net income (loss) . $    (.03)  $      .31  $      (4.26)
                                           ----------  ----------  ------------
</Table>

                                      The weighted average fair value of options
                                      granted or assumed was $.68, $1.13, and
                                      $3.95 per share in 2002, 2001 and 2000
                                      respectively. The fair value of each
                                      option granted during 2002, 2001 and 2000
                                      was estimated using the Black-Scholes
                                      option-pricing model with the following
                                      weighted average assumptions:

<Table>
<Caption>
                                                      2002      2001      2000
                                                    --------  --------  --------
<S>                                                 <C>       <C>       <C>
                                 Dividend yield ...       0%        0%        0%
                                 Risk free interest
                                   rate ...........     4.0%      5.7%      5.7%
                                 Expected lives ... 10 years  10 years   5 years
                                 Volatility .......     104%      104%      104%
</Table>

                                (q)   Effect of Recently Issued Accounting
                                      Standards

                                      Effective January 1, 2002, the Company
                                      adopted SFAS No. 144, "Accounting for the
                                      Impairment or Disposal of Long-Lived
                                      Assets". This statement addresses
                                      financial accounting and reporting for the
                                      impairment or disposal of long-lived
                                      assets. This statement supersedes FASB
                                      Statement No. 121, "Accounting for the
                                      Impairment of Long-Lived Assets and for
                                      Long-Lived Assets to Be Disposed Of", APB
                                      Opinion No. 30, "Reporting the Results of
                                      Operations - Reporting the Effects of
                                      Disposal of a Segment of a Business, and
                                      Extraordinary, Unusual and Infrequently
                                      Occurring Events and Transactions" and ARB
                                      No. 51, "Consolidated Financial
                                      Statements". This statement is effective
                                      for fiscal years beginning after December
                                      15, 2001, and interim periods within those
                                      fiscal years. The adoption of SFAS No. 144
                                      has had no impact on the Company's
                                      consolidated financial position or results
                                      of operations.


                                      F-16
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      In July 2002, FASB issued SFAS No. 146,
                                      "Accounting for Costs Associated with Exit
                                      or Disposal Activities. SFAS No. 146
                                      addresses financial accounting and
                                      reporting for costs associated with exit
                                      or disposal activities and nullifies
                                      Emerging Issues Task Force ("EITF") Issue
                                      No. 94-3, "Liability Recognition for
                                      Certain Employee Termination Benefits and
                                      Other Costs to Exit an Activity (including
                                      Certain Costs Incurred in a
                                      Restructuring)". SFAS No. 146 requires
                                      that a company recognize a liability for a
                                      cost associated with an exit or disposal
                                      activity only when it meets the definition
                                      of liability (i.e., when the liability is
                                      incurred). SFAS No. 146 also requires that
                                      the initial measurement of the liability
                                      be at its fair value. This statement is
                                      effective on a prospective basis for exit
                                      or disposal activities that are initiated
                                      after December 31, 2002, with early
                                      application encouraged. The Company has
                                      adopted the provisions of SFAS No. 146 in
                                      August 2002. The adoption of SFAS No. 146
                                      had no impact on the consolidated
                                      financial statements of the Company as
                                      reported in the prior periods.

                                      In April 2002, the FASB issued SFAS No.
                                      145, "Rescission of FASB Statements No. 4,
                                      44 and 64, Amendment of FASB Statement No.
                                      13 and Technical Corrections". Prior to
                                      adoption, gains or losses resulting from
                                      extinguishment of debt were required to be
                                      classified as extraordinary items, net of
                                      related tax effects. Upon adoption of SFAS
                                      No. 145, however, the classification of
                                      such gains or losses as extraordinary must
                                      be evaluated based on the criteria
                                      established in APB Opinion No. 30. Gains
                                      and losses not meeting the criterion,
                                      including gains and losses classified as
                                      extraordinary in prior periods, must be
                                      classified in income from operations. The
                                      Company has adopted the provisions of SFAS
                                      No. 145 effective July 1, 2002.






                                      F-17
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      The adoption of SFAS No. 145 has had no
                                      impact on the Company's consolidated
                                      financial position or results of
                                      operations.

                                      In November 2002, the FASB issued FASB
                                      Interpretation ("FIN") No. 45,
                                      "Guarantor's Accounting and Disclosure
                                      Requirements for Guarantees of
                                      Indebtedness of Others". FIN 45 requires
                                      the recognition of a liability for certain
                                      guarantees issued after December 31, 2002,
                                      or for modifications made after December
                                      31, 2002 to previously issued guarantees,
                                      and clarifies disclosure requirements for
                                      certain guarantees. The disclosure
                                      provisions of FIN 45 are effective for
                                      fiscal years ended after December 15,
                                      2002. The Company has adopted the
                                      disclosure provisions of FIN 45 as of
                                      December 31, 2002.

                                      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 is not
                                      expected to have a material impact on the
                                      Company's consolidated results of
                                      operations, financial position or cash
                                      flows.


                                      F-18
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      In December 2002, the FASB issued SFAS No.
                                      148, "Accounting for Stock-Based
                                      Compensation - Transition and Disclosure",
                                      an amendment of SFAS No. 123. SFAS No. 148
                                      amends SFAS No. 123 to provide alternative
                                      methods of transition for a voluntary
                                      change to the fair value based method of
                                      accounting for stock-based employee
                                      compensation. The three methods allowed
                                      are the (1) prospective method, (2)
                                      modified prospective method, and (3)
                                      retroactive restatement method. The
                                      prospective method was previously the only
                                      permitted transition method under SFAS No.
                                      123. Under this method, the recognition
                                      provisions apply to all employee awards
                                      granted, modified or settled after the
                                      beginning of the fiscal year of adoption
                                      of SFAS No. 123. The Company would
                                      continue to use the Opinion No. 25
                                      intrinsic value method to account for all
                                      prior awards. Under the modified
                                      prospective method, SFAS No. 123 fair
                                      value based accounting is applied to all
                                      awards granted, modified or settled in
                                      fiscal years beginning after December 15,
                                      1994, the effective date of SFAS No. 123,
                                      but only for measuring compensation cost
                                      for the year of change and future years.
                                      No prior years are restated. Under the
                                      retroactive restatement method, the
                                      Company applies the fair value method to
                                      all awards granted, modified, or settled
                                      in fiscal years beginning after December
                                      51, 1994. The Company would be required to
                                      restate compensation cost and net income
                                      for all income statements presented.
                                      Restatement of periods prior to the
                                      presented is permitted but not required.


                                      F-19
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      In addition, this statement amends the
                                      disclosure requirements of SFAS No. 123 to
                                      require prominent disclosures in both
                                      annual and interim financial statements
                                      about the method of accounting for
                                      stock-based employee compensation and the
                                      effect of the method used on reported
                                      results. This statement is effective for
                                      financial statements with fiscal years
                                      ended after December 15, 2002. As allowed
                                      by SFAS No. 148, the Company has elected
                                      not to use one of the alternative methods
                                      of transition available for a voluntary
                                      change to the fair value based method of
                                      accounting for stock-based employee
                                      compensation. The Company accounts for
                                      this plan under the recognition and
                                      measurement principles of APB Opinion No.
                                      25, "Accounting for Stock Issued to
                                      Employees", and related interpretations
                                      (see Note 13, Warrants and Options, for
                                      additional disclosure).

                                (r)   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,
                                      which were previously accounted for as a
                                      reduction of floor plan interest expense,
                                      have been included as offsets to cost of
                                      sales. Floor plan interest expense, which
                                      was previously classified as interest
                                      expense below operating income, is now
                                      presented as a component of operating
                                      expense in the accompanying consolidated
                                      statement of operations to provide more
                                      meaningful information regarding the
                                      Company's margin performance.

                                      For the years ended December 31, 2002,
                                      2001 and 2000, aggregate floor plan
                                      assistance now included in cost of sales
                                      was $1,294,109, $986,635 and $889,473,
                                      respectively.

                                      Advertising assistance received from
                                      manufacturers for the years ended December
                                      31, 2002, 2001 and 2000, now included in
                                      cost of sales was $714,216, $357,042 and
                                      $482,626, respectively.

                                      Advertising expense for the years ended
                                      December 31, 2002, 2001 and 2000, included
                                      in operating expense was $14,453,062,
                                      $11,450,855 and $9,205,733,
                                      respectively.

                                (s)   Reclassifications

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

                                (t)   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.

2. DUE FROM -                   The Company held a note from one
   OFFICER/ STOCKHOLDER         officer/stockholder in the amount of $1,395,358
                                at December 31, 2002. The note is non-interest
                                bearing and is classified as long term.


                                      F-20
<PAGE>
                                            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>
<CAPTION>
December 31,                             2002           2001
--------------                      ---------      ---------
<S>                                 <C>            <C>
Total minimum lease payments to
  be received                       $ 408,526      $ 353,893
Estimated residual value of
  leased property                      69,250         49,291
Unearned income                       (79,284)       (77,009)
                                    ---------      ---------
                                      398,492        326,175
Less:  Current portion               (164,555)      (135,122)
                                    ---------      ---------
Net investment in direct
  financing leases, net of
  current portion                   $ 233,937      $ 191,053
                                    =========      =========
</TABLE>



                                Future minimum lease payments receivable at
                                December 31, 2002 are as follows:


<TABLE>
<CAPTION>
Year ending December 31,       Amount
------------------------     --------
<S>                          <C>
2003                         $164,555
2004                          231,022
2005                           12,949
                             --------
Total                        $408,526
                             ========
</TABLE>

4. INVENTORIES                  Inventories consist of the following:


<TABLE>
<CAPTION>
December 31,                       2002            2001
----------------                -----------     -----------
<S>                             <C>             <C>
New automobiles                 $15,794,564     $12,488,449
New trucks and vans              11,733,652       7,282,158
Used automobiles and trucks      17,148,771      11,137,581
Parts and accessories             1,832,196       1,676,534
Other                                11,790          89,179
                                -----------     -----------
                                $46,520,973     $32,673,901
                                ===========     ===========
</TABLE>


                                      F-21
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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


<TABLE>
<CAPTION>
December 31,                          2002            2001           Lives
---------------                       ----            ----           -----
<S>                                <C>            <C>              <C>
Land                               $  2,400,000   $  2,776,096             --
Building                              1,000,000      4,384,883       20 years
Leasehold improvements                1,826,822      2,023,686       15 years
Furniture and fixtures                  766,409        758,820      3-7 years
Equipment                             1,051,845      1,177,776      3-7 years
                                   ------------   ------------
                                      7,045,076     11,121,242
Less:  Accumulated
        depreciation and
        amortization                 (2,106,531)    (2,220,024)
                                   ------------   ------------
                                   $  4,938,545   $  8,901,218
                                   ============   ============
</TABLE>



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),
                                $(590,000) and $(1,804,000) in 2002, 2001 and
                                2000, respectively, is as follows:

<TABLE>
<CAPTION>
Year ended December 31,          2002            2001          2000
------------------------       ---------      ---------     ---------
<S>                             <C>           <C>           <C>
Federal:
   Current                      $    --       $      --     $      --
   Deferred                          --        (867,000)     (442,000)
State:
   Current                       52,000          50,000       100,000
   Deferred                          --         (64,000)      (78,000)
                                -------       ---------     ---------
      Total                     $52,000       $(881,000)    $(420,000)
                                =======       =========     =========
</TABLE>


                                      F-22
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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


<TABLE>
<CAPTION>
Year ended December 31,                2002             2001             2000
                                   -----------      -----------      -----------
<S>                                <C>              <C>              <C>
Amount using the
  statutory Federal tax
  rate                              $(81,000)        $  611,000      $(7,325,000)
Losses of discontinued
  operations that can
  not be utilized                         --           (590,000)         970,000
State and local income
  taxes, net of Federal
  tax benefit                         34,000             (9,000)        (900,000)
Nondeductible
  amortization of
  goodwill                                --            162,000          310,000
Change in valuation
  allowance on deferred
  tax asset                           96,000         (1,071,000)              --
Discontinued operations
  asset writedown                         --                 --        6,528,000
Other, net                             3,000             16,000           (3,000)
                                   -----------      -----------      -----------
Provision (Benefit) for taxes
   on income                        $ 52,000        $  (881,000)     $  (420,000)
                                   ===========      ===========      ===========
</TABLE>


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


<TABLE>
<CAPTION>
                                                        2002             2001
                                                   -----------       -----------
<S>                                               <C>                <C>
Current deferred assets:
   Net operating loss
     carryforwards                               $    449,000         $   758,000
   Reserves and accruals not
     deductible until paid                          1,542,000           1,646,000
     Capital loss carry forward                       502,000                 --
     Goodwill                                       1,196,000           1,291,000
     Other                                            146,000              44,000
Less:  Valuation allowance                         (2,259,000)         (2,163,000)
                                                 ------------         -----------
Total current deferred tax assets                $  1,576,000         $ 1,576,000
                                                 ============         ===========
</TABLE>


                                      F-23
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                At December 31, 2002, the Company had available
                                net operating loss carryforwards primarily
                                related to continuing operations of
                                approximately $1.2 million which begin to expire
                                in the year 2012. The Company believes that
                                valuation allowances to offset portions of
                                deferred tax assets are necessary since the
                                realization of these 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
                                $2,500,000. 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 and UCC filing on 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, 2002 and 2001, the
                                outstanding balance on the lines was $0 and
                                $500,000 respectively.

                                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-24
<PAGE>
                                            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
                                inventories, 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 30% of the Company's
                                consolidated new vehicle revenues and more than
                                80% of the Company's consolidated used vehicle
                                revenues in the year 2002. 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. Subsequently,
                                in December 2002, NMAC took over the floor plan
                                financing for the Company's Suzuki dealership up
                                to an aggregate of $2 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.


                                      F-25
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                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 13).

                                Outstanding borrowings under floor plan
                                financing arrangements amounted to $46,224,707
                                and $33,963,903 at December 31, 2002 and 2001,
                                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, 2002,
                                2001 and 2000 was $1,695,960, $2,349,451 and
                                $1,749,307, respectively. Interest rates in
                                effect in the year 2002 ranged between 4.35% and
                                8.0%. At December 31, 2002, committed capacity
                                of the facilities was approximately $50 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, 2002 ranged
                                between 4.75% and 9.50%. Equal monthly
                                installments are paid over the term of the lease
                                (which range from 36 to 60 months), together
                                with a final balloon payment, if applicable.
                                These loans are collateralized by the vehicles.


                                      F-26
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                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 10). 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.

                                On August 8, 2000, Doron Cohen, former
                                President, CEO and a Director of the Company,
                                signed a Separation and Release Agreement (the
                                "Agreement"). Assuming compliance with its
                                provisions, 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 payments began in August 2000.
                                Based on the report of an independent appraiser,
                                the Company has recorded a deferred charge of
                                $840,000 (included in other assets), in August
                                2000, as the value of the noncompete and other
                                provisions of the Agreement, which relates to
                                continuing operations of the Company. This
                                amount is being amortized over twenty-four
                                months starting August 2000. Accordingly,
                                $245,000, $420,800 and $175,000 has been
                                charged in the years ended December 31, 2002,
                                2001 and 2000, respectively.

                                Additionally, the Company has accrued the
                                liability for the remaining payments due to Mr.
                                Cohen and has provided a valuation allowance for
                                the difference between the loan receivable from
                                Mr. Cohen and the aggregate amount of the
                                deferred charge. Accordingly, the Company has
                                expensed a total of $829,096 in 2000
                                representing the difference between the
                                aggregate potential of payments and forgiveness
                                provided for in the Agreement and the
                                non-compete amount determined by the independent
                                appraiser. This expense is directly attributable
                                to the value of Mr. Cohen's noncompete
                                provisions related to the Company's technology
                                operations. As such, it was included in the
                                estimated loss from discontinued operations in
                                2000.


                                      F-27
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                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 require payment
                                of the $2,000,000 principal on December 11,
                                2002. The date of such repayment has been
                                extended to January 2, 2004. 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 them 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 ratably
                                over the term of the note. Accordingly, the
                                Company charged $47,500 and $47,500 to
                                operations in 2002 and 2001, respectively.

                                Long-term debt consists of the following:


<TABLE>
<CAPTION>
December 31,                             2002            2001
                                     -----------     -----------
<S>                                  <C>             <C>
Leasing notes payable                $   560,677     $   538,642
Falcon loan payable                    6,287,308       6,606,467
Note payable to former president         129,167         278,001
M&K Equities note payable              1,400,000       2,000,000
World Omni note payable (see
  Note 10)                                    --       1,306,672
Other                                         --          36,026
                                     -----------     -----------
                                       8,377,152      10,765,808
Less:  Current portion                   675,452         912,221
                                     -----------     -----------
                                     $ 7,701,700     $ 9,853,587
                                     ===========     ===========
</TABLE>


                                      F-28
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                Maturities are as follows:


<TABLE>
<CAPTION>
December 31,
<S>                                 <C>
2003                                $  675,452
2004                                 2,036,760
2005                                   543,984
2006                                   489,095
2007                                   529,824
Thereafter                           4,102,037
                                    ----------
                                    $8,377,152
                                    ==========
</TABLE>



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.


                                      F-29
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                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 15).
                                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 is not
                                permitted for the first five years, after which
                                prepayment may be made, in full only, along with
                                the payment of a premium.

                                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.


                                      F-30
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                In November 1999, the Company's former
                                subsidiary, IG2, entered into an agreement (the
                                "Nissko Agreement") with certain persons (the
                                "Nissko Group") and Nissko Telecom Ltd. to
                                purchase their interest in a joint venture which
                                is a master agent to provide certain telephone
                                services. In connection with this transaction,
                                the Company placed 236,400 shares of its common
                                stock in escrow to guarantee the value of IG2
                                stock. By November 30, 2001, all such shares
                                were issued to satisfy the Company's obligations
                                hereunder. In addition, 60,000 restricted shares
                                of the Company's common stock have been reserved
                                to cover personal guarantees of the Nissko
                                Group.


                                      F-31
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                On February 23, 2000, in exchange for 115,172
                                shares of its common stock valued at $6,975,480,
                                the Company acquired CarsTV.com. This company is
                                a Richmond, Virginia based regional,
                                full-service Internet service provider and
                                digital subscriber line ("DSL") provider, as
                                well as a content supplier for the cable
                                industry focused on the automotive industry. The
                                acquisition was treated as a purchase and the
                                excess cost over the net assets acquired was
                                approximately $7,108,000, and was allocated to
                                goodwill, of which the unamortized balance has
                                been charged to discontinued operations (see
                                Note 16). Accordingly, the results of operations
                                of CarsTV.com have been included as of February
                                23, 2000 and included in discontinued
                                operations. Pursuant to the Merger Agreement, if
                                IG2 undergoes an initial public offering
                                ("IPO"), as defined in the agreement, the
                                selling shareholders of CarsTV.com have the
                                option to convert up to 287,931 common shares of
                                the Company's common stock into IPO common
                                stock, at a conversion price as defined in the
                                agreement.

                                On August 9, 2000, the Company purchased assets
                                of Compass Dodge for approximately $402,000 of
                                which $385,000 was in cash and 12,500 shares of
                                the Company's common stock having a fair market
                                value of approximately $17,000. The Company
                                accounted for this acquisition as a purchase,
                                and the excess cost over the fair market value
                                of the net tangible assets acquired was
                                approximately $299,000 and was allocated to
                                goodwill. Results of operations have been
                                included in the Company's consolidated financial
                                statements since the purchase date.


                                      F-32
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                On September 7, 2000, the Company acquired
                                substantially all of the assets of the Hempstead
                                Nissan automobile dealership, a full-service
                                retail new and used vehicle dealership based on
                                Long Island in New York, for approximately $6.9
                                million, which included assumption of certain
                                liabilities. The purchase price was allocated to
                                the assets acquired based on their estimated
                                fair values, of which $5.0 million was allocated
                                to inventories and property and equipment. The
                                excess of the purchase price over the fair value
                                of net assets acquired (goodwill) was
                                approximately $1.8 million. The acquisition was
                                financed through available cash and a note of
                                $1.5 million that were paid in 2002 to World
                                Omni. The acquisition was accounted for as a
                                purchase. Results of operations have been
                                included in the Company's consolidated financial
                                statements since the purchase date.

                                In May 2001, the Company acquired a Suzuki
                                franchise and certain Suzuki vehicles and parts
                                from Hempstead F.S. Motors, Ltd. and a
                                debtor-in-possession. The purchase price of
                                $309,877 out of a total deposit of $500,000 for
                                this and other potential, but subsequently
                                abandoned, acquisitions, was paid on May 4,
                                2001. The balance of the deposit is being held
                                in escrow pending resolution of certain issues
                                relating to the closing.


10. GOVERNMENTAL                Substantially all of the Company's facilities
    REGULATIONS                 are 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.


11. COMMITMENTS AND             Operating Leases
    CONTINGENCIES

                                The Company leases real property under various
                                operating leases, most of which have terms from
                                1 to 6 years.


                                      F-33
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                Future net minimum lease payments under
                                noncancelable operating lease agreements as of
                                December 31, 2002 are as follows:


<TABLE>
<CAPTION>
December 31,
<S>                                                   <C>
2003                                                  $1,381,500
2004                                                   1,106,500
2005                                                     953,500
2006                                                     903,500
2007                                                     611,500
Thereafter                                               888,100
                                                      ----------
                                                      $5,884,600
                                                      ==========
</TABLE>




                                Rent expense was $1,999,000, $1,974,000 and
                                $1,841,000 for the years ended December 31,
                                2002, 2001 and 2000, respectively.

                                Capital Leases

                                In connection with the acquisition of Hempstead
                                Nissan (see Note 9), 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 12).



                                      F-34
<PAGE>
                               LEGAL PROCEEDINGS

                               In re: Fidelity Holdings Securities Litigation.

                               This class action, in the United States District
                               Court for the Eastern District of New York, was
                               purportedly brought on behalf of all persons who
                               acquired shares of the Company's common stock
                               between June 24, 1999 and April 17, 2000. Named
                               as defendants along with the Company were Doron
                               Cohen, Richard L. Feinstein and Bruce Bendell.

                               In August 2001, the lead plaintiffs in this class
                               action served a Consolidated and Amended Class
                               Action Complaint. This Complaint alleged, among
                               other things, that plaintiffs and other members
                               of the putative class were damaged when they
                               acquired shares of the Company's common stock
                               because defendants allegedly issued materially
                               false and misleading statements and failed to
                               disclose material information which purportedly
                               cause such stock to trade at artificially
                               inflated prices during the class period. The
                               complaint alleged violations of Sections 10(b)
                               and 20(a) of the 1934 Exchange Act, as amended
                               (the "Exchange Act") and Rule 10b-5 promulgated
                               thereunder. The allegedly misstated and omitted
                               information concerned primarily the prospects for
                               the Company's former technology business. The
                               complaint sought, among other things, damages in
                               an unspecified amount. In September 2001, the
                               Company moved to dismiss the complaint for
                               failure to state a claim upon which relief can be
                               granted and for failure to plead with the
                               legally-required factual particularity. In
                               October 2001, the Company reached an agreement
                               with lead plaintiffs to settle this action for
                               $4.45 million, subject to the consent thereto of
                               the Company's insurance carrier and court
                               approval. Subsequently, in March 2003, our
                               insurance carrier and the United States District
                               Court Eastern District of New York consented to
                               and approved, respectively, the settlement.

                               Stephen B. Wechsler, et al. v. Fidelity Holdings,
                               Inc. et al.

                               On December 26, 2000, an action was commenced
                               against the Company in the United States District
                               Court for the Eastern District of New York. This
                               action was brought on behalf of certain persons
                               who acquired an unstated number of shares of the
                               Company's common stock between December 1999 and
                               May 2000. The Company was named as a defendant in
                               this case along with Doron Cohen, Richard L.
                               Feinstein and Bruce Bendell. On December 26,
                               2000, plaintiffs filed a Second Amended
                               Complaint, which alleged, among other things,
                               that the plaintiffs sustained damages when they
                               acquired shares of the Company's common stock
                               because the Company allegedly issued materially
                               false and misleading statements and failed to
                               disclose material information which purportedly
                               caused such stock to trade at artificially
                               inflated prices. The Second Amended Complaint
                               alleged violations of Sections 10(b) and 20(a) of
                               the Exchange Act and Rule 10b-5 promulgated
                               thereunder. The allegedly misstated and omitted
                               information concerned the Company's reported
                               income for the first three quarters of 1999 and
                               the prospects for the Company's former technology
                               business. The Second Amended Complaint sought,
                               among other things, damages "in an amount, not
                               less than" one million dollars. On February 16,
                               2001, the Company and Messrs. Bendell and
                               Feinstein filed a motion to dismiss the Second
                               Amended Complaint for failure to plead with the
                               legally-required factual particularity. (The
                               Company understands that Mr. Cohen has not been
                               served with process in this action.) In the
                               fourth quarter of 2002, the action was settled
                               for $120,000, which has been funded by the
                               Company's insurance carrier.

                               Daniel Tepper v. Fidelity Holdings, Inc; Fidelity
                               Holding, 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

                                      F-35
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               action, as a result of successful motion practice
                               there are three (3) remaining causes of action
                               (i) conversion, (ii) breach of fiduciary duty;
                               and (iii) negligence. The claims underlying this
                               action are that s failed to remove restrictive
                               legends that appeared on Mr. Tepper's stock
                               certificates. 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. As the
                               motion is only returnable in July of 2003, the
                               Company is unable to predict the outcome.

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

                               The Company and the Company's former subsidiaries
                               IG2, Inc. 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) tortious 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. 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 is currently
                               stayed as a result of IG2, Inc. filing for
                               bankruptcy protection in January 2003. If the
                               stay is lifted, management of the Company
                               believes that the matter will proceed to trial
                               quickly, but is unable to predict the outcome.

                               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 Robert
                               LeRea, Doron Cohen, Bruce Bendell, The Major
                               Automotive Companies, Inc. and Kimberly Peacock.
                               The suit seeks damages of up to $10,000,000 for
                               breach of contract, quantum merit, unjust
                               enrichment, conversion and fraud. It is
                               plaintiff's contention that they entered into
                               agreements with the Company and the other
                               defendants to promote the stock of Fidelity
                               Holdings, Inc. (n/k/a The Major Automotive
                               Companies, Inc.) in exchange for stock. It is
                               plaintiffs' further contention 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
                               agreed. Plaintiffs also allege that they provided
                               a bridge loan to defendants in the sum of
                               $1,830,000, which has not been repaid. Currently,
                               there is a motion to dismiss pending. There is no
                               documentation to support any of plaintiffs'
                               contentions. In fact, plaintiffs admit all the
                               alleged agreements were oral. If the motion
                               fails, the action will proceed into the discovery
                               stage and the Company will be in a better
                               position to assess the outcome. In any event,
                               management believes that these allegations have
                               no merit and intend to vigorously defend this
                               suit.

                               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,
                               2002 and which was paid, in full, by February 1,
                               2003.


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


                                      F-36
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                               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., of Dr. Nassim's telephony business to
                               various countries. The purchase price was
                               approximately $500,000 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.

                               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, 2001. 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
                               tortiously 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. 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 for the lawsuit was 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, 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.

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


                                      F-37
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                               On October 24, 2001, Zannett Lombardier Ltd. and
                               others filed a suit against the Company for
                               breach of contract and for the Company's failure
                               to issue shares in exchange for warrants. The
                               alleged damages totaled $856,011.50. This matter
                               was settled in the first quarter of 2003 for
                               payment of $130,000.00 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, 2002. The $130,000 is to be paid in
                               five (5) equal installments during 2003.
                               Payments will commence and the shares will be
                               issued upon completion of the final documents.


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

                               In and around September, 2002, an action was
                               commenced in Pennsylvania, Allegheny County by
                               Steel City Telecom, Inc. for $25,000 against The
                               Major Automotive Companies, Inc. The complaint
                               and the allegations contained therein, are
                               directed against Computer Business Sciences, Inc.
                               a former subsidiary that is no longer part of the
                               Company. It is alleged that the software sold was
                               defective and that the Company was negligent in
                               its production. The case is currently in
                               discovery and once completed management will be
                               in a better position to provide an analysis of
                               the outcome. In any event, management believes
                               that these 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 claimed entitlements
                               under an alleged side letter dated June 5, 1996
                               to the Master Agreement dated April 18, 1996
                               between Zvi Barak and Fidelity Holdings Inc. Dr.
                               Barak claims payment of the amount of
                               US$546,249.99, failing which he will commence
                               appropriate proceedings for recovery of this
                               amount.

                               The Company denies Zvi Barak's claims. The
                               Company has 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, which is scheduled
                               to be heard on April 25,2003. Management
                               believes that Zvi Barak's claims have no merit
                               and intends to vigorously defend this suit.

                               Various claims against the Company's
                               subsidiaries.

                               Various 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-38
<PAGE>
                                           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 for the period July 1, 2001
                                to June 30, 2004. Additional approval was given
                                to a bonus plan under which Mr. Bendell receives
                                a bonus equal to 10% of the 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 has recorded additional compensation
                                expense of $257,000 for this bonus. 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
                                2002 Mr. Bendell earned an aggregate of
                                $956,216, pursuant to all of his employment
                                arrangements.


12. RELATED PARTY               Amounts due from related parties result from
    TRANSACTIONS                sales 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. As part of its arrangement with the
                                Bendell Dealerships, the Company maintains
                                inventory of consigned vehicles on its premises.
                                For the year ended December 31, 2002, the
                                related party sales aggregated $4,028,810. For
                                each of the years 2001 and 2000, the related
                                party sales amounted to less than 1% of
                                aggregate sales. Amounts due from related
                                parties are reflected in due from related
                                parties. These amounts are all due on demand
                                and are non-interest bearing.


                                      F-39
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                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 year
                                ended December 31, 2002, the purchases from
                                related parties aggregated $14,914,950. For
                                each of the years ended 2001 and 2000, the
                                related party purchases amounted to less than
                                1% of aggregate purchases.

                                Pursuant to a management agreement with Harold
                                Bendell, the Company has accrued a management
                                fee for services performed by Harold Bendell.
                                For the years ended December 31, 2002, 2001 and
                                2000, such accrual amounted to $624,359,
                                $1,057,411 and $790,356, respectively. Mr.
                                Harold Bendell's management agreement expired at
                                December 31, 2002 and is in the process of
                                renegotiation.

                                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.

                                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 long-term related party
                                receivable, which is included in other
                                noncurrent assets. The Company entered into a
                                lease with the new landlord for five years with
                                a five-year renewal option for approximately the
                                same monthly rental it was previously paying.


                                      F-40
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                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
                                gain or 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, together with related interest at a
                                market rate. Based on the final report of
                                the appraiser, no adjustment is required for
                                either the rental rate or the receivable
                                balance.

                                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. When the final such valuations have
                                been completed, and the Company's Board of
                                Directors has reviewed the results and evaluated
                                the circumstances of the Credit Enhancements
                                relative to the enterprise value of the Company,
                                adjustment, if necessary and warranted, will be
                                made for any difference from the preliminary
                                estimate.

                                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 for approximately
                                the same monthly rental it was paying to the
                                prior landlord.

                                      F-41
<PAGE>
                                           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 is a
                                member of the Company's Board of Directors. For
                                each of the years ended December 31, 2002, 2001
                                and 2000, the Company's purchases from and
                                sales to Nawi Leasing, Inc. and its affiliates
                                respresented 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 $105,000, $120,000 and
                                $95,000 in fees for accounting services for the
                                years ended December 31, 2002, 2001 and 2000,
                                respectively.

13. WARRANTS AND OPTIONS        (a)  Warrants

                                     (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, 2002.

                                     (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, 2002, these warrants are still
                                            outstanding.


                                      F-42
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                     (iii)  In connection with the private
                                            placement of its common stock, as
                                            described in Note 15, 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.
                                (b)  Stock Options

                                      During November 2000, the Company adopted
                                      a 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 (the
                                      "Board"), or members of any committee the
                                      Board has designated, options may be
                                      granted to consultants, non-employee
                                      members of the Board, 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.

                                      During August 1999, the Company granted
                                      consultants options to purchase 750 shares
                                      of the Company's common stock at an
                                      exercise price of $36.65. The charge to
                                      the Company was immaterial.


                                      F-43
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      During 2000, the Company granted officers,
                                      directors and employees options to
                                      purchase shares of the Company's common
                                      stock at the market price on the date of
                                      grant. Of these options, an aggregate of
                                      178,000 have an exercise price of $4.375
                                      per share and 50,000 have an exercise
                                      price of $.235.

                                      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
                                      outside directors of the Company ("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 months following
                                      service. 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.

                                      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.

                                      During 2001, pursuant to a separating
                                      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.


                                      F-44
<PAGE>
                                           THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      In 2001, the Company issued options for an
                                      aggregate of 25,200 shares of common stock
                                      to non-employee members of the Board at an
                                      average exercise price of $.81 per share,
                                      the market price at the date of grant.

                                      In 2002, the Company issued options for an
                                      aggregate of 18,000 shares of common stock
                                      to non-employee members of the Board at an
                                      average exercise price of $.76 per share,
                                      the market price at the date of grant. In
                                      addition, the Company cancelled options
                                      for 103,300 shares of common stock, with
                                      an average exercise price of $7.72.


                                      F-45
<PAGE>
                                           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, 2002
                                      and changes during the period January 1,
                                      2000 through December 31, 2002 is
                                      presented below:

<TABLE>
<CAPTION>
                                                                                  Weighted
                                                                                   average
                                                     Number of     Expiration     exercise
                                                      shares          date         price
                                                     --------      ---------     ---------
<S>                                                  <C>           <C>           <C>
Options outstanding
  at December 31, 1999                                 76,688      2002-2004     $   28.15
Options granted                                       229,800           2010          4.01
                                                      --------      ---------
Options outstanding
  at December 31, 2000                                306,488      2002-2010          8.71
Options granted                                        31,200           2011          1.13
                                                     --------      ---------
Options outstanding
  at December 31, 2001                                337,688      2002-2011          8.01
Options granted                                        18,000           2012           .68
Options cancelled
  and expired                                        (134,800)     2002-2011         13.71
                                                     --------      ---------     ---------
Options outstanding
  at December 31, 2002                                220,888      2004-2012     $    3.94
                                                     ========      =========     =========
</TABLE>


                                      F-46

<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                The following table summarizes information about
                                stock options outstanding at December 31, 2002.


<TABLE>
<CAPTION>
                                       Options Outstanding                    Options Exercisable
                                       -------------------                    -------------------
                                             Weighted
                               Number        Average       Weighted          Number        Weighted
                             Outstanding    Remaining      Average         Exercisable     Average
                             at December   Contractual     Exercise        at December     Exercise
Exercise Price Range          31, 2002         Life         Price           31, 2002        Price
--------------------          --------         ----         -----           --------        -----
<S>                          <C>           <C>             <C>             <C>             <C>
  $24.44-$38.75                  4,388          1.6         $33.25             4,388        $33.25
  $13.40                         1,200          2.4          13.40             1,200         13.40
  $ 4.38                       126,000          2.8           4.38           126,000          4.38
  $ 2.34-$ 2.35                 56,000          3.5           2.35            54,400          2.35
  $ 1.65                         1,800          2.3           1.65             1,800          1.65
  $  .58-$  .71                 31,500          9.5            .71            31,500           .71
                               -------          ---        -------           -------       -------
                               220,888          3.9        $  3.94           219,288       $  3.95
                               =======          ===        =======           =======       =======
</TABLE>


                                      F-47
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



15.STOCKHOLDERS' EQUITY         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.

                                Common Stock

                                On June 24,1999, the Company entered into an
                                agreement with three investors, pursuant to
                                which the Company had the right or obligation to
                                sell, under certain circumstances, in a series
                                of private placement transactions, up to $20
                                million of common stock, warrants and adjustable
                                warrants.


                                      F-48
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                The calculation of amounts due pursuant to the
                                Adjustable Warrants issued in the second
                                tranche, resulted in a potential liability to
                                the Company for approximately 4.7 million shares
                                or the Company could elect to issue only the
                                minimum number of 393,587 shares plus a cash
                                payment of $6,625,016. The Company entered into
                                a Redemption Agreement and promissory note with
                                the investors whereby the Company would issue
                                the minimum number of shares and make cash
                                payments aggregating $6,000,000 to be paid in
                                installments of varying amounts over time.
                                Accordingly, the Company issued 393,587 shares
                                of common stock on August 28, 2000 and made
                                aggregate cash payments of $4,750,000 through
                                December 31, 2000 and owed a balance $1,250,000
                                at that date. Pursuant to the terms of the note,
                                this balance is due to be paid in aggregate
                                installments of $250,000 in each of the five
                                months beginning in February 2002. The Company
                                did not make any of these required payments. The
                                terms of the Redemption Agreement required that
                                the balance be adjusted to $1,666,667, an
                                increase of $416,667 plus interest and
                                reasonable attorneys' fees. Subsequently, the
                                Company reached agreement with the institutional
                                investors and settled the matter for a total of
                                $1,400,000. The $266,667 reduction of the
                                liability previously recorded was adjusted as a
                                credit to additional paid-in capital in the
                                third quarter of 2001. By December 31, 2001, the
                                $1,400,000 balance has been fully paid.


                                      F-49
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 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 and the consolidated balance sheets
                                have been reclassified to segregate the net
                                assets of these businesses. Assets and
                                liabilities related to discontinued operations
                                included on the Company's consolidated balance
                                sheets at December 31, 2001 represented the
                                estimated net realizable value of the Company's
                                discontinued operations. There were no such
                                assets and liabilities at December 31, 2002 (see
                                below).


                                The income (loss) from discontinued operations
                                is comprised of the following:



<TABLE>
<CAPTION>
Year ended December 31,           2002              2001              2000
                              ------------      ------------      ------------
<S>                           <C>               <C>               <C>
Loss from discontinued
  operations                  $   (344,000)     $         --      $ (8,613,907)
Loss from disposition of
  discontinued operations               --                --       (13,617,415)
Provision for estimated
  operating losses during
  period of disposition                 --                --        (2,000,000)
                              ------------      ------------      ------------
                                                          --       (24,231,322)
Income tax benefit                 138,000           590,000         1,804,000
                              ------------      ------------      ------------
                              $   (206,000)     $    590,000      $(22,427,322)
                              ============      ============      ============
</TABLE>


                                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 in 2002.


                                      F-50
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                Effective March 27, 2001, the Company sold its
                                interest in its telecommunications subsidiary,
                                IG2, Inc., 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 in
                                2002.

                                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 in
                                2002.

                                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 in
                                2002.

                                The aggregate sales price of the assets of these
                                discontinued operations was $3.6 million. The
                                book value of these assets was $1 million.


                                      F-51

<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                The gains on the sales of these discontinued
                                operations have been deferred due to a lack of
                                credit history. Such gains will be reflected
                                when collectibility is reasonably assured.
                                Accordingly, the Company has 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.


<TABLE>
<CAPTION>
17. QUARTERLY FINANCIAL                                    First      Second     Third     Fourth
    DATA (UNAUDITED)             2002                     quarter    quarter   quarter    quarter
                              ----------                ---------- ---------- ---------  ---------
                                                        (In thousands except for per share data)
<S>                                                     <C>        <C>        <C>         <C>
                              Sales                     $91,346    $103,532   $111,809    $91,261
                              Gross profit               16,303      18,082     17,849     14,941
                              Operating income
                                (loss) from
                                continuing
                                operations                  550         510     1,417      (2,562)
                              Income from
                                discontinued
                                operations, net of
                                tax benefits                  -           -       206           -
                              Net income (loss)             550         510     1,211      (2,562)
                              Income (loss) from
                                continuing
                                operations per
                                share - diluted             .06           .0      .15        (.27)
                              Net income (loss) per
                                share - (diluted)           .06           .0      .13        (.27)
                                                        ========== ========== =========
</TABLE>


                                      F-52
<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                      First      Second     Third     Fourth
                                2001                   quarter    quarter   quarter    quarter
                              ----------              ---------- ---------- --------- ---------
                                                      (In thousands except for per share data)
<S>                                                   <C>        <C>        <C>       <C>
                              Sales                   $88,112    $102,324   $91,250   $93,429
                              Gross profit             14,230      16,561    16,382    16,074
                              Operating income
                                (loss) from
                                continuing
                                operations                786         (62)      797       569
                              Income from
                                discontinued
                                operations, net of
                                tax benefits                -           -         -       590
                              Net income (loss)           786         (62)      797     1,159
                              Income (loss) from
                                continuing
                                operations per
                                share - diluted           .11          (.0 )    .10       .06
                              Net income (loss) per
                                share - (diluted)         .11          (.0 )    .10       .13
                                                      ========== ========== ========= =========
</TABLE>


                                      F-53



<PAGE>
             REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

To the Shareholders and Directors of The Major Automotive Companies, Inc.

        The audit referred to in our report dated April 11, 2003 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 audit of the
financial statement schedules listed in the accompanying index.  These
financial statement schedules are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statement schedules based upon our audit.

        In our opinion such financial statement schedules present fairly, in
all material respects, the information set forth therein.


New York, New York                      /s/ BDO Seidman, LLP
April 11, 2003                          --------------------
                                        BDO Seidman, LLP

                                     S-1



<PAGE>
                                 SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNT
             For the years ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>

                                                        Additions
                                        Balance at      charged to      Deductions,      Balance at
                                        Beginning       Costs and       net of           End
Account Description                     of Year         Expenses        Write-offs       of Year
                                        -----------     -----------     -----------      -----------
                                        <C>             <C>             <C>              <C>

Allowance for doubtful accounts
  Year ended December 31, 2002          $ 700,000       $ 234,866       $(428,366)       $  506,500
                                        -----------     -----------     -----------      -----------

  Year ended December 31,2001           $ 200,000       $ 500,000       $    --          $  700,000
                                        -----------     -----------     -----------      -----------

  Year ended December 31, 2000          $ 385,000       $  98,115       $(283,115)       $  200,000
                                        -----------     -----------     -----------      -----------

</TABLE>

                                     S-2