<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, 2003
                         COMMISSION FILE NUMBER: 0-29182

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

                      NEVADA                             11-3292094

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

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

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

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

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

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

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

The aggregate market value of the voting and non-voting equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of June 30,
2003 was approximately $4,701,453.

As of April 13, 2004, there were 9,474,856 shares of the registrant's common
stock outstanding.

<PAGE>

                               INDEX TO FORM 10-K

<TABLE>
<CAPTION>
                                                                                                 PAGE
                                                                                                 ----
<S>                                                                                              <C>
PART I
Item 1.           Business                                                                         3
Item 2.           Properties                                                                      26
Item 3.           Legal Proceedings                                                               28
Item 4.           Submission of Matters to a Vote of Security Holders                             31

PART II
Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters           32
Item 6.           Selected Financial Data                                                         34
Item 7.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                       35
Item 7A.          Quantitative and Qualitative Disclosures About Market Risk                      44
Item 8.           Financial Statements and Supplementary Data                                     44
Item 9.           Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure                                                        44
Item 9a.          Controls and Procedures                                                         44

PART III
Item 10.          Directors and Executive Officers of the Registrant                              44
Item 11.          Executive Compensation                                                          47
Item 12.          Security Ownership of Certain Beneficial Owners and Management                  51
Item 13.          Certain Relationships and Related Transactions                                  54
Item 14.          Principal Accountant Fees and Services                                          55

PART IV
Item 15.          Exhibits, Financial Statement Schedules, and Reports on Form 8-K                55

                  Signatures                                                                      67
</TABLE>

                                        2
<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, in 2003, operated 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 2003 Summary

The year 2003 reflected a number of significant events that negatively affected
our business and results of operation. First, we experienced a full year of the
effects of the closing in 2002 of certain of our non-performing or
under-performing dealerships. In addition, we were negatively impacted in the
first half of the year by the combined effects on reduced consumer spending due
to an unusually severe winter in the New York metropolitan area and the
anticipation and aftermath of the war in Iraq. These factors resulted in
operations that generated revenues of approximately $380 million, which was
almost $18 million less than 2002 revenues, and gross profit of approximately
$61 million, which was approximately $3 million less than the prior year. Our
net loss for the year ended December 31, 2003 was approximately $1.1 million,
compared with a net loss of approximately $291,000 for the year ended December
31, 2002.

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<PAGE>

AUTOMOTIVE OPERATIONS

Major Auto Acquisition

On April 21, 1997, we and our wholly-owned subsidiary, Major Acquisition Corp.,
entered into a merger agreement with Major Automotive Group, Inc. ("Major Auto")
and its sole stockholder, Bruce Bendell, our President, Chief Executive Officer,
Acting Chief Financial Officer, Chairman and beneficial owner of approximately
43.0% of our outstanding common stock. Pursuant to the merger agreement, Bruce
Bendell contributed to Major Auto all of his shares of common stock of Major
Chevrolet, Inc., Major Subaru, Inc., Major Dodge, Inc. and Major Chrysler,
Plymouth, Jeep Eagle, Inc. Major Acquisition Corp. then acquired from Bruce
Bendell all of the issued and outstanding shares of common stock of Major Auto
in exchange for shares of a new class of our preferred stock. Major Acquisition
Corp. purchased the remaining 50% of the issued and outstanding shares of common
stock of Major Dodge, Inc. and Major Chrysler, Plymouth, Jeep Eagle, Inc. from
Harold Bendell, Bruce Bendell's brother, for $4 million in cash pursuant to a
stock purchase agreement. In addition, Major Acquisition Corp. acquired certain
real estate components from Bruce Bendell and Harold Bendell (together, "the
Bendells") for $3 million. The foregoing acquisitions are collectively referred
to herein as the "Major Auto Acquisition."

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

General

The Major Dealer Group is one of the largest volume automobile retailers in New
York City. In 2003, Major Auto owned and operated 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 to Eastern European countries.
Through its dealerships, the Major Dealer Group sells new and used automobiles,
provides related financing, sells replacement parts and provides vehicle repair
service and maintenance. See "Sale and Termination of Franchise Agreements."

Our President, Chief Executive Officer, Acting Chief Financial Officer and
Chairman, Bruce Bendell, has more than 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 $380 million in revenues and more
than 400 employees in 2003.

Industry Background

According to industry data from the National Automobile Dealers Association
("NADA Data"), on average in 2003, new vehicle sales constituted 59.9% of a
franchised dealership's total sales. Unit sales of new vehicles decreased 1.2%
in 2003 to a total of 16.6 million units sold. At an average retail-selling
price of $27,565 per vehicle, new vehicle sales totaled approximately $457.6
billion in 2003. From 1999 to 2003, sales revenue from the sale of new

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vehicles increased approximately 10.8%. The average dealership's gross profit as
a percentage of selling price for new vehicles was 5.4% in 2003.

According to NADA Data, on average in 2003, used vehicle sales constituted 28.3%
of a franchised dealership's total sales. In 2003, franchised new vehicle
dealers sold approximately 11.6 million retail used vehicles. At an average
selling price of $13,473 per vehicle, used vehicle sales totaled approximately
$155.8 billion in 2003. From 1999 to 2003, sales revenue from the retail sale of
used vehicles increased approximately 6.1%. The average dealership's gross
profit as a percentage of selling price for used vehicles was 11.5% in 2003.

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>
                                          1999        2000       2001        2002        2003
                                                (Units in millions; dollars in billions)
<S>                                     <C>         <C>         <C>        <C>         <C>
New vehicle unit sales                     16.9        17.4        17.1       16.8        16.6
New vehicle sales revenue (1)           $ 413.1     $ 433.7     $ 441.1    $ 439.5     $ 457.6
Used vehicle unit sales                    11.1        12.6        12.9       11.6        11.6
Used vehicle sales revenue (1)          $ 146.9     $ 172.0     $ 179.8    $ 160.6     $ 155.8
</TABLE>

(1) Sales revenue figures were generated by multiplying the total unit sales by
the average retail-selling price of the vehicle for the given year. Source: NADA
Data, 2003.

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 3.1% in 2003 for franchised dealerships. In 2003,
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 2003, total franchised dealership gross
profits were, on average, $4.3 million, with an average net profit before taxes
of $564,000.

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

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

                                        5
<PAGE>

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
21,650 at the end of 2003.

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 2003, approximately
11.6 million used cars were sold retail by dealers, which is approximately the
same number of such sales in 2002. Sales of used vehicles are generally more
profitable than sales of new vehicles. For the industry as a whole, average
gross profit on used vehicles sales was 11.5%, compared with new vehicle average
gross profits of 5.4%. In 2003, our dealerships' average gross profit on used
vehicles was approximately 17.4% and on new vehicles was approximately 10.3%.

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

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

Provide a Broad Range of Products and Services. We offer a broad range of
products and services, including an extensive selection of new and used cars and
light trucks, vehicle financing, replacement parts and service. In 2003, at our
various locations, we offered eight (8) makes of new vehicles- Chevrolet,
Chrysler, Dodge, Jeep, Subaru, Kia, Nissan and Suzuki. In addition, we sold a
variety of used vehicles at a wide range of prices. We believe that offering

                                        6
<PAGE>

numerous makes and models of vehicles, both new and used, appeals to a broad
cross section of customers, minimizes dependence on any one automobile
manufacturer and helps reduce our exposure to supply problems and product
cycles.

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

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

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

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

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

Growth Strategy

Historically, our strategy for growth was focused on expanding our dealership
group by making acquisitions of non-performing or underperforming dealerships in
the New York metropolitan area. When this strategy was formulated, our common
stock price was relatively attractive and thus, a key component of the purchase
price was the use of our

                                        7
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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 seek to grow our volume and hope to achieve profitability by focusing on our
core dealership group and expanding and enhancing those operations. Part of this
focus will be to continue to build on our new and used vehicle sales. In
particular, we believe that we can enhance used vehicle sales by capitalizing on
our Major World brand and by continuing and expanding our successful sales
efforts. In addition to thorough training of our sales and service staff and
attentive customer service at the dealership level, we expect to expand our
advertising in all media outlets. In addition, we continuously look to find
attractive and viable financing products for our customers. We will look to
improve upon our used car vehicle choices for our customers and maintain and
augment our already wide range of late model used vehicles, which go from entry
level to luxury and include custom vans and specialty vehicles.

To attain profitability, we will continue to utilize our expertise, buying power
and facilities to take advantage of opportunities to obtain substantial numbers
of quality used vehicles at attractive prices from public auctions and off-lease
programs. 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 savings 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

In 2003, we owned and operated 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 offered the following eight (8) makes of new vehicles: Chevrolet,
Chrysler, Dodge, Jeep, Subaru, Kia, Nissan and Suzuki. Each of our locations is
run by a separate manager who is responsible for overseeing all aspects of the
business conducted at that location. Each of the parts and service locations has
two (2) managers, one for parts and one for service. Each manager meets with our
senior management on a weekly basis.

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

New Vehicle Sales. In 2003, we sold 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,
2003, our dealerships sold new vehicles generating revenue of approximately
$131.7 million, which constituted

                                        8
<PAGE>

approximately 34.6% of our total dealerships' revenues. Our gross profit margin
on new vehicle sales for the year ended December 31, 2003 was approximately
10.3%, as compared to the industry average of 5.4%. 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, 2003 was as
follows:

<TABLE>
<CAPTION>
                                              Percentage of
Manufacturer                                New Vehicle Sales
------------                                -----------------
<S>                                         <C>
Chevrolet                                         44.0%
Dodge, Chrysler and Jeep                          22.2%
Subaru and Kia                                     6.6%
Nissan                                            26.3%
Suzuki                                             0.9%
</TABLE>

The following table sets forth information with respect to our new vehicle sales
for the year ended December 31, 2003:

         NEW VEHICLE SALES
       (dollars in millions)

<TABLE>
<S>                            <C>
Unit sales                         4,997
----------------------------------------
Sales revenue                  $   131.7
----------------------------------------
Gross profit                   $    13.6
----------------------------------------
Gross profit margin                 10.3%
----------------------------------------
</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 a number of Eastern European countries, primarily, Ukraine,
Belarus and Kazakhstan and, to a lesser extent Uzbekistan, Turkmenistan,
Georgia, Armenia and others. We generally receive a deposit on the purchase
price of the vehicle from the local dealer and release the vehicle to the dealer
upon full payment of the balance of the wholesale purchase price plus a
percentage of the dealer's profit on the sale. We have started, on a limited
basis, the sale of used vehicles to these Eastern European countries. Amounts of
such new vehicle sales have not been material in relation to our aggregate
revenues and such used vehicle sales have been insignificant. We are considering
initiatives and additional areas in which to expand our overseas sales.

Used Vehicle Sales. We offer a wide variety of makes and models of used
vehicles, retail and wholesale, for sale. For the year ended December 31, 2003,
we sold 16,555 used vehicles, retail and wholesale, generating revenues of
approximately $231.6 million, which constituted approximately 60.9% of our total
dealerships' revenues. Our gross profit margin on used vehicle sales for the
year ended December 31, 2003 was approximately 17.4%, as compared with the
industry average of 11.5%. We believe we are one of the largest sellers of used
vehicles in the New York metropolitan area.

Our primary location for used vehicle sales is at a single site at Long Island
City, New York. We also sell used vehicles, 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

                                        9
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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, 2003:

         USED VEHICLE SALES
        (dollars in millions)
<TABLE>
<S>                             <C>
Unit sales                        16,555
----------------------------------------
Sales revenue                  $   231.6
----------------------------------------
Gross profit                   $    40.3
----------------------------------------
Gross profit margin                 17.4%
----------------------------------------
</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, 2003, our parts and service operations generated revenues of approximately
$15.5 million, which constituted approximately 4.1% of our total dealerships'
revenues at a gross profit margin of approximately 33.5%.

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

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

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

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

The following table sets forth information with respect to our sales of parts
and services for the year ended December 31, 2003:

         SALES OF PARTS AND SERVICES
           (dollars in millions)
<TABLE>
<S>                            <C>
Sales revenue                  $    15.5
----------------------------------------
Gross profit                   $     5.2
----------------------------------------
Gross profit margin                 33.5%
----------------------------------------
</TABLE>

                                       10
<PAGE>

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

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

Sales and Marketing

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

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

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

Relationships with Manufacturers

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

                                       11
<PAGE>

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

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

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

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

Competition

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

                                       12
<PAGE>

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, Paragon, Koeppel and Auto-Land, each of which is privately
held.

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

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

Governmental Regulation

Automobile dealers and manufacturers are subject to various federal and state
laws established to protect consumers, including the so-called "Lemon Laws,"
which require a dealer or manufacturer to replace a new vehicle or accept it for
a full refund within a specified period of time, generally one (1) year after
the initial purchase, if the vehicle does not conform to the manufacturer's
express warranties and the dealer or manufacturer, after a reasonable number of
attempts, is unable to correct or repair the defect. Federal laws require that
certain written disclosures be provided on new vehicles, including mileage and
pricing information. In addition, our financing activities are subject to
certain statutes governing credit reporting and debt collection.

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.

Leasing Operations

Our subsidiary, Major Fleet, has historically provided lease financing solely
for motor vehicles. Major Fleet typically arranges for the sale or lease to its
customers of new or used vehicles of all makes and models. Major Fleet will
purchase the desired vehicle from an automobile dealer and either resell it to
its customer for a markup over its cost, or lease the vehicle to the customer
and provide the related lease financing. If a customer of Major Fleet wants to

                                       13
<PAGE>

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. Our strategy, in effect for more than
a year, has been validated, in part, by a recent article by the American
International Automobile Dealers Association, which stated that "analysts are
encouraging public dealerships to slow down, cut costs and reduce debt."
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 the
write-off of notes receivable relating to sales of discontinued operations.

RECENT DEVELOPMENTS

Floor Plan Financing

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.

In order to obtain floor plan financing for our various dealership's at
favorable rates, each of the Bendells agreed to either guarantee certain of our
floor plan debt or provide certain collateral in connection with our floor plan
or other borrowings. Our Board of Directors agreed to obtain independent
valuations of such credit enhancement and collateral usage and compensate each
of the Bendells the fair value of his respective contributions. We engaged an

                                       14
<PAGE>

independent valuation firm to value the credit enhancement and have received a
preliminary valuation from such firm of $160,000 for the economic risk value of
the credit enhancement. Accordingly, we accrued such amount as a liability in
the third quarter of 2002. In the third quarter of 2003, our Board of Directors
received additional indications that the value of the Credit Enhancement may
approximate $450,000. As such, we accrued an additional $290,000 in the third
quarter of 2003. In March 2004, our Board of Directors concluded that the
$450,000, as accrued, is the appropriate value of the Credit Enhancement.

Sale and Termination of Franchise Agreements

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

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

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

EMPLOYEES

As of April 13, 2004, we had 518 employees, of whom twenty are part-time
employees. We believe that we have good relations with our employees.

RISK FACTORS

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

CONTINUED LOSSES MAY AFFECT THE VIABILITY OF OUR BUSINESS.

We have experienced net loss of approximately $1 million in 2003 and
approximately $291,000 in 2002. While we believe that we are taking the
necessary steps to return to profitability, there is no assurance that we will
do so. If we continue to incur significant losses in the future, our business
could be materially and adversely affected.

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

At December 31, 2003, our total cash and cash equivalents was approximately $1
million and our working capital was approximately $2.5 million. If we were to
incur net losses in 2004 or subsequent years, then we may have insufficient
working capital to maintain our current level of operations or provide for
unexpected contingencies. In such event, we will need to seek additional capital
from public or private equity or debt funding sources and we may not be able to
raise needed cash on terms acceptable to us or at all. Financings, if available,
may be on terms that are dilutive or potentially dilutive to our stockholders.
If sources of financing are required, but are insufficient or unavailable, we
will be required to modify our growth and operating plans to the extent of
available funding, which could have an adverse effect on our business.

                                       15
<PAGE>

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.

Historically, manufacturers have exercised significant control over dealerships
through the terms and conditions of the franchise agreements pursuant to which
our dealerships operate. These franchise agreements restrict dealerships to
specific locations and retain for the manufacturers approval rights over changes
in the dealerships' ownership and management. Our ability to expand through the
acquisition of new dealerships requires the consent of the manufacturers. To
date, our acquisitions have been approved by the respective manufacturer 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.

                                       16
<PAGE>

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, 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

                                       17
<PAGE>

and credit availability. Historically, unit sales of motor vehicles,
particularly new vehicles, have been cyclical, fluctuating with general economic
cycles. During economic downturns, retail new vehicle sales tend to experience
periods of decline characterized by oversupply and weak demand. The automotive
retail industry may experience sustained periods of decline in vehicle sales in
the future. In addition, changes in interest rates could significantly impact
our vehicle sales because a significant portion of vehicle buyers finance their
purchases. Any decline 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. For instance, during 2001,
we were notified by Chrysler Financial Company, LLC ("CFC") that it was
terminating its financing. In order to obtain floor plan financing for our
various dealership's at favorable rates, each of Bruce Bendell and Harold
Bendell agreed to either guarantee certain of our floor plan debt or provide
certain collateral in connection with our floor plan or other borrowings.
Although we were successfully able to replace CFC and our other floor plan
lenders, there can be no assurance that we will be able to continue to obtain
capital for our current or expanded operations on terms and conditions that are
acceptable to us.

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

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

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

         -        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.

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.

                                       18
<PAGE>

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

Many manufacturers attempt to measure customers' satisfaction with automobile
dealerships through a customer satisfaction index ("CSI") score, or customer
satisfaction index, rating system. These manufacturers may use a dealership's
CSI scores as a factor in evaluating applications for additional dealership
acquisitions and participation by a dealership in incentive programs. The
dealerships operated by us currently meet or exceed their manufacturers' CSI
standards. However, there can be no assurance that either our dealerships or
other subsequently acquired 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, both of whom are parties to employment agreements. The loss of the
services of these employees, or certain other key employees, are likely have a
material adverse effect on our business. See "Executive Compensation: Employment
Contracts, Termination of Employment and Change-In-Control Arrangements." We do
not maintain "key person" life insurance for any of our personnel. Our future
success will depend on our continuing ability to attract, retain and motivate
other highly skilled employees. Competition for such personnel in our industry
is intense. We may be unable to retain our key employees or attract, assimilate
or retain other highly qualified employees in the future. If we do not succeed
in attracting new personnel or retaining and motivating our current personnel,
our business, financial condition and operations may be adversely affected.

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

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

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

         -        We acquired Major Auto from the Bendells in May 1998. In this
                  transaction, the Bendells received shares of our 1997A-Major
                  Automotive Group Series of Preferred Stock and Bruce Bendell
                  received a proxy to vote the 50 shares of the 1997A-Major
                  Automotive Group Series of Preferred Stock owned by Harold
                  Bendell for a seven-year period, which commenced on January 7,
                  1998. These shares allow the Bendells to elect a majority of
                  the directors of Major Auto. The Bendells are also parties to
                  a management agreement with us that gives them control over
                  the day-to-day operations of Major Auto. Should 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. However, the management agreement
                  does prohibit certain actions from being taken without the
                  prior approval of our Board of Directors, including: (i)
                  disposition of any of the

                                       19
<PAGE>

                  Major Auto dealerships; (ii) acquisition of new dealerships;
                  and (iii) our incurring liability for Major Auto indebtedness.

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

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

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

         -        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 the Bendells has total or partial ownership interests
                  in dealerships that are not owned by us. We have ongoing
                  business relationships with each of these unrelated
                  dealerships, whereby we sell vehicles to them and they sell
                  vehicles to us. In 2003, we had sales aggregating $5.3 million
                  to dealerships owned by the Bendells and had purchases
                  aggregating $13.8 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

                                       20
<PAGE>

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

OUR FOCUS ON EXISTING DEALERSHIPS CHANGE MAY AFFECT OUR OPERATIONS.

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

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

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

         -        automobile dealers;

         -        private sellers of used vehicles;

         -        used vehicle dealers;

         -        other franchised dealers;

         -        service center chains; and

         -        independent service and repair shops.

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

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

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

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

                                       21
<PAGE>

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

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

         -        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.

                                       22
<PAGE>

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

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

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

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

         -        Autoweb.com;

         -        Autobytel.com;

         -        Carsdirect.com;

         -        eBay; and

         -        Microsoft Corporation's Carpoint and Stoneage Corporation.

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

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

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

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

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

                                       23
<PAGE>

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

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

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

Bruce Bendell is the beneficial owner of approximately 43.0% 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.

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

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

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

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

                                       24
<PAGE>

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

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

WE HAVE NEVER PAID CASH DIVIDENDS ON OUR COMMON STOCK.

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

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

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

WE MAY BE SUBJECT TO BLUE SKY COMPLIANCE.

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

OUR COMMON STOCK MAY BE DE-LISTED 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 the
minimum bid price per share ($1.00) required for continued listing on the Nasdaq
National Market. We were given until November 20, 2002 to demonstrate compliance
with this rule or face de-listing or the option of applying to transfer our
securities to the Nasdaq SmallCap Market.

                                       25
<PAGE>

Accordingly, inasmuch as we did not achieve compliance with the minimum bid
requirement by November 20, 2002, we applied 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 and we were
granted until February 18, 2003 to demonstrate compliance with the $1.00 minimum
bid requirement. We failed to demonstrate compliance with this rule by February
18, 2003. However, since we met the initial listing criteria for listing on the
Nasdaq SmallCap Market, we were granted an additional 180-calendar day grace
period, until August 18, 2003, to demonstrate compliance with the rule.

We were 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, and thus, we were notified by Nasdaq on November 19, 2003 that
our common stock would be de-listed from the Nasdaq SmallCap Market at the
opening of business on December 1, 2003.

On November 15, 2003, we requested an oral hearing with the Nasdaq Listing
Qualifications Hearing Department in order to stay the de-listing of our common
stock pending a determination by a Nasdaq Listing Qualifications Panel (the
"Panel"). In a letter dated December 2, 2003, the Panel stayed the de-listing of
our common stock pending a de-listing decision by the Panel pursuant to an oral
hearing with us that was scheduled to be held on January 15, 2004. On that date,
we made our appeal before the Panel and on March 9, 2004 we were notified that
the Panel was of the opinion that, we demonstrated compliance with the minimum
bid price requirement by evidencing a closing bid price of at least $1.00 for
the ten-day trading period ended March 8, 2004. The Panel also noted that we
appeared to satisfy all other requirements for continued listing on The Nasdaq
SmallCap Market. Accordingly, the Panel determined to continue the listing of
our common stock on The Nasdaq SmallCap Market.

Our common stock continues to trade, at times, below $1.00 per share. If a
de-listing did occur, our common stock would then 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, could be adversely
impacted as a result.

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

In February 2004, we were notified by the New York State Department of Taxation
& Finance of an assessment of $4,000,000, including interest and penalties,
after their audit concluded that certain of our subsidiaries had failed to pay
sales and use taxes of approximately $2,000,000 from February 1999 through
August 2001. We believe that all sales taxes due were properly paid. We have
notified the taxing authorities that we are preparing an appeal. Should we not
prevail on a substantial portion of our appeal, the resulting assessment could
have a material adverse effect on our results of operations and cash position.

ITEM 2. PROPERTIES

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

One of our subsidiaries, Major Motors of Long Island City, Inc. (formerly,
Subaru, Inc.), 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.

In addition, we have an interest in the following leases, under which Major
Dealer Group presently pays aggregate annual rental payments of $891,700:

                                       26
<PAGE>

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

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

         -        One of our subsidiaries, Compass Lincoln Mercury, Inc.
                  ("Compass"), whose franchise was voluntarily surrendered in
                  2002, leases from Ford Motor Car Company, an unrelated third
                  party, approximately 30,000 square feet used for showroom,
                  office, service department and storage facilities in Orange,
                  New Jersey on behalf of our subsidiary, Compass Dodge, Inc.
                  This lease is currently on a month-to-month basis at an annual
                  rental 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 rent of
                  $90,000, which has not been paid since November 2002. This
                  lease is scheduled to expire on March 31, 2009 and is the
                  subject of litigation. See "Legal Proceedings - Tillroe Realty
                  Co. vs. Compass Lincoln Mercury, Inc. and Fidelity Holdings
                  Co., Inc." Compass also leases space for a service department
                  and storage facilities in Orange, New Jersey, at an annual
                  rent of $150,000. This lease expires on August 31, 2006.
                  Finally, Compass leases additional space for storage
                  facilities, on a month-to-month basis, from an unaffiliated
                  third party at an annual rent of $19,200.

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

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

Major Nissan leases from 316 N. Franklin LLC, a company owned by the Bendells,
approximately 105,000 square feet used for showroom, office, service department
and storage facilities. The property is located on the borderline of Hempstead,
New York and Garden City, New York. The current annual rent is $384,000 and the
lease expires on June 30, 2007. We originally had an option on the purchase of
the property, but were unable to obtain financing to consummate the purchase.
The Bendells agreed to buy the property and lease it to Major Nissan at a fair
market rent and pay us the fair value of the purchase option, approximately
$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).

                                       27
<PAGE>

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.

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.
The settlement has been funded by our insurance company.

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

In and around July 10, 2001, Daniel Tepper commenced suit in the Southern
District of New York against Bruce Bendell, Doron Cohen and Richard Feinstein,
our former Chief Financial Officer. While the initial complaint had eight (8)
causes of action, three (3) remain: (i) conversion; (ii) breach of fiduciary
duty and (iii) negligence. The claims allege that we failed to remove
restrictive legends that appeared on certain stock certificates held by Mr.
Tepper. This action mirrors a Nevada action brought by Mr. Tepper several years
ago for which he obtained a judgment of $553,000, which has been satisfied. In
light of the satisfaction of the Nevada judgment, the Court directed that a
motion be made to dismiss the New York action to ban a double recovery. The
motion was made in July 2003 and was denied in lieu of a settlement conference.
Such conference was held and failed. A second motion to dismiss is expected to
be filed in July 2004. We believe that these allegations have no merit and
intend to vigorously defend this suit.

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 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 had been stayed as a result of IG2, Inc. filing for
bankruptcy protection in January 2003. The stay has been lifted, and the matter
is expected to go to trial in May 2004. We believe that these allegations have
no merit and intend to vigorously defend this suit.

                                       28
<PAGE>

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

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

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 (10) 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.

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

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

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

On October 24, 2001, Zanett Lombardier Ltd. and others ("Zanett") filed a suit
against us for breach of contract and for our failure to issue shares in
exchange for certain warrants held by Zanett. The alleged damages totaled
$856,011.50. This matter was settled in the first quarter of 2003 for payment of
$130,000 and issuance of shares of our common stock with a value of $40,000. The
$130,000 was paid in five (5) equal installments during 2003 and 49,876 shares
of the Company's common stock were issued in April 2003 in full satisfaction of
this settlement.

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

                                       29
<PAGE>

In and around September 2002, an action was commenced against us and our former
subsidiary, Computer Business Sciences, Inc., in Pennsylvania, Allegheny County
by Steel City Telecom, Inc. ("Steel City") for up to $300,000. The complaint
alleged that certain software sold to Steel City was defective and that we were
negligent in its production. The case is currently in discovery phase. 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 claims that we failed to pay him $546,249.99 under an alleged letter
dated June 5, 1996 to that certain Master Agreement dated April 18, 1996 between
us and Dr. Barak. We brought a motion before the Ontario Superior Court of
Justice seeking a permanent stay of Dr. Barak's application on grounds which
include, but are not limited to: (a) Ontario is not a convenient forum for the
hearing of the application; and (b) the Ontario Superior Court of Justice does
not have jurisdiction over the subject matter of the parties. The motion was
heard by the Court in Toronto on February 18, 2003. At that time, our motion was
denied and we subsequently filed a motion for leave to appeal. In July 2003, our
motion for leave to appeal was denied. We expect that arbitration will begin in
the second half of 2004. We believe that Dr. Barak's claims have no merit and
intend to vigorously defend this action.

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

On September 4, 2003, an action was commenced against us and our subsidiary
Compass Lincoln Mercury, Inc. in the Superior Court of New Jersey, Essex County
by a landlord of our former Compass Lincoln Mercury showroom in Orange, New
Jersey. The suit alleges that current rent and damages to the showroom space at
170 Central Avenue, Orange New Jersey are presently due and owing by us. The
suit alleges damages in the amount of $123,556 and rent of approximately $7,900
per month. The suit is currently in the beginning stages of discovery. We
believe that these allegations have no merit and intend to vigorously defend
this suit.

GRIT, LLC vs. Major Automotive Companies, Inc.

On September 24, 2003 we received notice of a default judgment in the Superior
Court of the State of California, Los Angeles, for an aggregate amount of
$66,718 stemming from the plaintiff's purchase in 1998 of a Talkie Communication
Server from a former subsidiary. We successfully reopened the default judgment
and believe that this dispute was already settled by the parties through the
settlement of a previous complaint by this plaintiff in August 2001 and,
accordingly, we intend to vigorously defend this suit.

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.

                                       30
<PAGE>

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

On December 5, 2003, we held our Annual Meeting of Shareholders. Proxies were
solicited by us pursuant to Regulation 14A under the Exchange Act. On October
22, 2003, the record date for the Annual Meeting, there were approximately
9,702,047 shares of common stock outstanding and entitled to vote, of which
8,507,335 shares of common stock were present in person or by proxy and voted at
the meeting. At the Annual Meeting, our shareholders approved the following
proposals:

1.       To elect two (2) Class III Directors, Jeffrey Weiner and David
         Edelstein, for terms ending in 2006.

<TABLE>
<CAPTION>
                                    FOR              ABSTAIN           AGAINST          NOT VOTED
-------------------------------------------------------------------------------------------------
<S>                              <C>                 <C>               <C>              <C>
Jeffrey Weiner                   8,489,499           17,706               0                130
----------------------------------------------------------------------------------------------
David Edelstein                  8,489,499           17,706               0                130
----------------------------------------------------------------------------------------------
</TABLE>

The terms of Bruce Bendell and Steven Nawi, Class I Directors, and Steven
Hornstock, Class II Director, continued after the Annual Meeting.

2.       To ratify the appointment of BDO Seidman LLP as our independent
         auditors for the year 2003.

<TABLE>
<S>                                            <C>
For.......................                     8,500,244
--------------------------------------------------------
Against..................                          6,678
--------------------------------------------------------
Abstain..................                            413
--------------------------------------------------------
Not Voted...............                               0
--------------------------------------------------------
</TABLE>

                                       31
<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 sales prices 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:

<TABLE>
<CAPTION>
  Quarter Ended             High             Low
  -------------             ----             ---
<S>                        <C>              <C>
March 31, 2004             $1.370           $0.580
December 31, 2003          $0.810           $0.720
September 30, 2003         $0.800           $0.800
June 30, 2003              $0.870           $0.800
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
</TABLE>

Shareholders

As of April 13, 2004 there were approximately 492 holders of record of our
common stock.

Dividends

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

Securities Authorized for Issuance Under Equity Compensation Plans.

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

Recent Sales of Unregistered Securities

The securities described below were sold by us during the fiscal year 2003
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 March 2003, we issued 69,800 shares of our common stock to Ronald
      Primo, at a per share price of $0.85, in connection with settlement of a
      litigation.

2.    In April 2003, we issued 49,876 shares of our common stock to Zanett
      Lombardier Master Fund II, LLP, at a per share price of $0.80, in
      connection with settlement of a litigation.

                                       32
<PAGE>

3.    On April 30, 2003, we issued 4,500 shares of common stock to David
      Edelstein, at a per share price of $0.74, as compensation for services as
      a member of our Board of Directors.

4.    On April 30, 2003, we issued 4,500 shares of common stock to Jeffrey
      Weiner, at a per share price of $0.74, as compensation for services as a
      member of our Board of Directors.

5.    On April 30, 2003, we issued 4,500 shares of common stock to Steven Nawi,
      at a per share price of $0.74, as compensation for services as a member of
      our Board of Directors.

6.    On April 30, 2003, we issued 4,500 shares of common stock to Steven
      Hornstock, at a per share price of $0.74, as compensation for services as
      a member of our Board of Directors.

                                       33
<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, 2003, 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,
                                                         2003            2002            2001             2000           1999
                                                     -----------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA
Revenues                                             $ 380,298,852   $ 397,947,494   $ 375,114,505   $ 322,142,231   $ 209,531,993

Income (loss) from continuing operations                (1,130,264)        (84,772)      2,089,524       1,302,247         815,955

Income (loss) from discontinued operations                       -        (206,000)        590,000     (22,427,322)     (4,006,103)

Net income (loss)                                       (1,130,264)       (290,772)      2,679,524     (21,125,075)     (3,190,148)

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

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

   Net income (loss)
      Basic                                                  (0.12)          (0.03)           0.41           (4.14)          (0.76)
      Diluted                                                (0.12)          (0.03)           0.31           (4.14)          (0.76)

Average number of shares used in computation
      Basic                                              9,436,969       8,947,332       6,558,356       5,101,829       4,210,837
      Diluted                                            9,436,969       8,947,332       8,662,979       6,791,104       4,210,837

BALANCE SHEET DATA
Total assets                                         $  87,612,939   $  87,247,341   $  82,329,517   $  86,781,397   $  68,319,331
Long-term liabilities, less current portion              7,156,125       7,701,700       9,853,587      10,411,463       7,416,784
Total stockholders' equity                              16,870,654      17,947,597      17,948,321      15,599,970      28,917,595
</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 Registrant's Common Equity and Related Stockholder Matters" for a
discussion of our dividend policy.

                                       34
<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 2003 saw a decrease in our revenues. Our management believes that the
effects of our dealerships that were closed during the prior year and, to a
lesser extent, our performance in the first half of 2003 that was adversely
impacted by an unusually severe winter in our operating area and consumer
reluctance based on anticipation of war with Iraq, contributed to our decline in
dealership revenues and profits. Revenues and gross profits declined
approximately $17.6 million and $3.5 million, respectively.

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

                                       35

<PAGE>
property and equipment, which constitute a significant component of our
consolidated balance sheets, require that we evaluate such assets for impairment
when events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable through the estimated undiscounted future
cash flows resulting from the use of those assets. If any impairment is found to
exist, the related assets will be written down to fair value. Additionally,
these policies affect the amount and timing of future amortization. Intangible
assets consist primarily of the cost of businesses acquired in excess of the
fair value of net assets acquired. In accordance with Statements of Financial
Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and
Statements of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"), goodwill and intangible assets deemed to have
indefinite lives are no longer amortized but, instead, are subject to impairment
tests at least annually. We have applied the new rules on accounting for
goodwill and other intangible assets beginning in the first quarter of 2002.
During 2003, we performed the required impairment tests of goodwill and
indefinite lived intangible assets as of December 31, 2003. 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 December 31, 2003. 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.

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

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

For the years ended December 31, 2003, 2002 and 2001, aggregate floor plan
interest included in operating expense was $2,187,296, $1,695,960 and
$2,349,451, respectively. The increase in 2003 of interest expense relative to
decreased sales volume is primarily attributable to the higher levels of
inventory, i.e. reduced turnover, caused by the lower sales levels during 2003,
most significantly during the first two quarters.

For the years ended December 31, 2003, 2002 and 2001, aggregate floor plan
assistance now included as a reduction of cost of sales was $1,195,534,
$1,294,109 and $986,635, respectively.

Advertising assistance received from manufacturers for the years ended December
31, 2003, 2002 and 2001,now included as a reduction of cost of sales was
$723,112, $714,216 and $357,042, 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.

                                       36

<PAGE>

Furthermore, we were notified of an assessment of $4,000,000, including interest
and penalties, by the New York State taxing authorities. While we are confident
that we have paid all sales taxes that are due and have notified the taxing
authorities that we intend to appeal their findings. Should we not prevail on a
substantial portion of our appeal, the resulting assessment could have a
material adverse effect on our business, financial condition, results of
operations, cash flows and prospects.

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.

                                       37

<PAGE>

SELECTED OPERATING DATA

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                           ----------------------------------------------------------------------------------------
($ in millions, except per vehicle data)                                  2003 vs. 2002                          2002 vs. 2001
                                                                    ------------------------               ------------------------
                                                                      Variance -                             Variance -
                                                                      Favorable         %                    Favorable         %
                                             2003         2002      (Unfavorable)   Variance     2001      (Unfavorable)   Variance
                                           ---------   ----------   -------------   --------   ---------   -------------   --------
<S>                                        <C>         <C>          <C>             <C>        <C>         <C>             <C>
Revenues
     New vehicles                          $   131.7   $    140.7   $        (9.0)      (6.4)  $   143.1   $        (2.4)    (1.7)
     Used vehicles                             231.6        236.8            (5.2)      (2.2)      211.8            25.0     11.8
     Service and parts                          15.5         19.3            (3.8)     (19.7)       18.3             1.0      5.5
     Other                                       1.5          1.1             0.4       36.4         1.9            (0.8)   (42.1)
                                           ---------   ----------   -------------   --------   ---------   -------------   ------
           Total revenues                  $   380.3   $    397.9   $       (17.6)      (4.4)  $   375.1   $        22.8      6.1
                                           =========   ==========   =============   ========   =========   =============   ======

GROSS PROFIT
     New vehicles                          $    13.6   $     14.4   $        (0.8)      (5.6)  $    13.0   $         1.4     10.8
     Used vehicles                              40.3         42.4            (2.1)      (5.0)       39.0             3.4      8.7
     Service and parts                           5.2          6.2            (1.0)     (16.1)        6.8            (0.6)    (8.8)
     Other                                       1.5          1.1             0.4       36.4         1.8            (0.7)   (38.9)
                                           ---------   ----------   -------------   --------   ---------   -------------   ------
           Total gross profit              $    60.6   $     64.1   $        (3.5)  $   (5.5)  $    60.6   $         3.5      5.8
                                           =========   ==========   =============   ========   =========   =============   ======
NEW VEHICLES
Unit sales                                     4,997        5,557            (560)     (10.1)      5,820            (263)    (4.5)
Revenue per vehicle                        $  26,351   $   25,320   $       1,031        4.1   $  24,595   $         725      2.9
Gross profit per vehicle                   $   2,712   $    2,590   $         122        4.7   $   2,228   $         362     16.2
Gross profit percentage                         10.3%        10.2%            0.1%       1.0         9.1%            1.1%    12.1

                                                                                                                       -
USED VEHICLES
Unit sales                                    16,555       16,050             505        3.1      14,329           1,721     12.0
Revenue per vehicle                        $  13,988   $   14,754   $        (766)      (5.2)  $  14,783   $         (29)    (0.2)
Gross profit per vehicle                   $   2,435   $    2,644   $        (209)      (7.9)  $   2,724   $         (80)    (2.9)
Gross profit percentage                         17.4%        17.9%           -0.5%      (2.8)       18.4%           -0.5%    (2.7)

PERCENTAGE OF TOTAL REVENUES
New vehicles                                    34.6%        35.4%           -0.8%      (2.3)       38.1%           -2.7%    (7.1)
Used vehicles                                   60.9%        59.5%            1.4%       2.4        56.5%            3.0%     5.3
Service and parts                                4.1%         4.9%           -0.8%     (16.3)        4.9%            0.0%       -
Other                                            0.4%         0.2%            0.2%     100.0         0.5%           -0.3%   (60.0)
                                           ---------   ----------   -------------   --------   ---------   -------------   ------
                                               100.0%       100.0%            0.0%       0.0%      100.0%            0.0%     0.0%
                                           =========   ==========   =============   ========   =========   =============   ======

OTHER OPERATING DATA
Total operating expenses                   $    60.9   $     61.7   $        (0.8)      (1.3)  $    56.6   $         5.1      9.0
Floor plan interest                              2.2          1.7             0.5       29.4         2.3            (0.6)   (26.1)
Advertising expense                             15.8         14.5             1.3        9.0        11.5             3.0     26.1
</TABLE>

                                       38

<PAGE>

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

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

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

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

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

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

                                       39

<PAGE>

each had an average decrease of $209 in gross profit. This resulted in a net
decrease in used vehicle gross profit. Our dealerships' overall gross profit as
a percentage of sales was 15.9%, compared with the industry average of 13.4%.
Our gross profit percentage on new vehicles of 10.3% is above the industry
average of 5.4%, while our gross profit percentage on used vehicle sales of
17.4%, is significantly over the industry average used vehicle gross profit of
11.5%. We believe that our product mix, i.e., our concentration on the more
profitable used vehicle segment, our ability to buy, at favorable prices,
quality used vehicles, ranging from entry level to luxury, and our ability to
find competitive financing sources for our customers are the significant factors
in our relatively high gross profit percentages.

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

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

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

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

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
form our continuing dealerships.

                                       40

<PAGE>

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 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 $19.3 million, or 6.1%, to $333.8
million in the year 2002 from $314.5 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 $363 or 1.6% in the average cost of new
vehicles and an increase of only $51 or .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 $64.1 million for the year ended December 31, 2002
compared with the 2001 amount of $60.6 million, an increase of $3.5 million or
5.8%. 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 38.1% of total revenues generated by new vehicle sales and
56.5% generated by used vehicles sales in 2001 to 35.4% of total revenues
generated by new vehicle sales and 59.5% 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
16.0%, compared with the industry average of 13.4%. Our gross profit percentage
on new vehicles of 10.2% is above the industry average of 5.9%, while our gross
profit percentage on used vehicle sales of 17.9%, 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 $5.1 million to approximately $61.7 million, from $56.6
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
reflective of the significant increase in sales during 2002. The balance of the
increase, $2.1 million, is significantly attributable to the costs associated
with increased sales efforts and results, principally, personnel-related.

                                       41

<PAGE>

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 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.

ASSETS, LIQUIDITY AND CAPITAL RESOURCES - DECEMBER 31, 2003

At December 31, 2003, our total assets were approximately $87.6 million,
approximately the same as our assets December 31, 2002, although there were
significant changes among the components. Such changes included a net decrease
in accounts receivable of $3.7 million. Our inventories increased by $3.7
million over the prior year and due from related parties increased by $1.4
million.

Our cash increase of $207,063 in the year ended December 31, 2003 was primarily
attributable to our operating activities, which provided cash of $1,046,831.
This increase is primarily attributable to our net increase in liabilities,
aggregating $1,961,826 (significantly, increases in accounts payable of
$1,034,414 and floor plan notes payable of $3,374,659, as partially offset by
decreases in accrued expenses of $2,036,112 and customer deposits and other
liabilities of $411,135) as partially offset by a net increase in assets of
$450,457 (principally, increases in inventories and other assets of $3,736,982
and $560,598, respectively, as partially offset by decreases in accounts
receivable of $3,724,715 and investments in direct financing leases of $122,408)
and cash used for our loss of $464,538 (our net loss of $1,130,264, less
non-cash charges aggregating $665,726). Our inventories increased, primarily, as
a result of our taking advantage of favorable buying opportunities in
anticipation of the spring selling season and our accounts receivable decreased,
primarily, as a result of our significantly lower sales volume in the fourth
quarter of 2003 as compared to the same quarter in the prior year.

Our investing activities used $320,482 of cash, with $398,358 used for additions
to property and equipment. We do not anticipate any significant increases in
spending for property and equipment in 2004.

Our financing activities used $519,286 of cash for payments of long-term debt.

The foregoing activities, i.e., operating, investing and financing, resulted in
a net cash increase of $207,063 for the year ended December 31, 2003.

In September 2001, CFC, one of our primary floor plan credit sources for
approximately $30 million for the financing of our vehicle inventory, notified
us that CFC had re-evaluated its credit and lending relationship with us and was
requiring us to seek a replacement lending institution to refinance and replace
all existing CFC credit facilities. Consequently, in March 2002, we entered into
a floor plan financing arrangement with GMAC for GMAC to provide the floor plan
credit for the financing of our Chevrolet dealership's new and used vehicle
inventory. This is the flagship dealership of our operations and accounted for
more than 30% of our new vehicle revenues and more than 80% of our consolidated
used vehicle revenues in the year 2003. 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

                                       42

<PAGE>

credit facilities, we completed the replacement of financing for all of the
dealerships that were previously financed by CFC.

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

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

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

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

<TABLE>
<CAPTION>
                                 TOTAL           < 1 YEAR         1-3 YEARS      4-5 YEARS     > 5 YEARS
                             --------------    --------------    ------------    ----------    ----------
<S>                          <C>               <C>               <C>             <C>           <C>
CONTRACTUAL OBLIGATIONS:
Floor Plan Notes             $   49,599,366    $   49,599,366    $          -    $        -    $        -
Long-Term Debt                    7,857,866           701,741       3,054,089     1,235,255     2,866,781
Operating Lease Obligation        6,115,600         1,411,500       2,517,000     1,691,000       496,000
                             --------------    --------------    ------------    ----------    ----------
                             $   63,572,832    $   51,712,607    $  5,571,089    $2,926,255    $3,362,781
                             --------------    --------------    ------------    ----------    ----------
</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

                                       43

<PAGE>

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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

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

INTEREST RATE RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer, who is also our Acting Chief Financial Officer,
after evaluating the effectiveness of our disclosure controls and procedures (as
defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c) as
of the end of the period covered by 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 us and our 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.

CHANGES IN INTERNAL CONTROLS

There were no significant changes in our internal controls or in other factors
that could significantly affect our disclosure controls and procedures
during the fourth quarter of 2003, nor any significant deficiencies or material
weaknesses in such disclosure controls and procedures requiring corrective
actions. As a result, no corrective actions were taken.

                                       44

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

As of April 13, 2004, our current directors and executive officer and their
respective ages are as follows:

<TABLE>
<CAPTION>
                NAME                     AGE                           POSITION
                ----                     ---                           --------
<S>                                      <C>     <C>
Bruce Bendell  ........................  50      Chairman of the Board, President, Chief Executive Officer and
                                                 Acting Chief Financial Officer

David Edelstein  (1)(2)................  50      Director

Steven Hornstock.......................  54      Director

Steven Nawi (1) .......................  56      Director

Jeffrey Weiner  (1)(2).................  46      Director
</TABLE>

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

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

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

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

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

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.,
an 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.

                                       45
<PAGE>

Key Employee

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

Harold Bendell. Mr. Bendell, age 55, has served as a senior executive of Major
Dealer Group since December 1985. He, together with his brother, Bruce Bendell,
is responsible for the day-to-day operations of the Major Dealer Group.

COMMITTEES OF THE BOARD OF DIRECTORS

We have the following standing committees: a Compensation Committee and an Audit
Committee. The Compensation Committee is comprised of Mr. Edelstein and Mr.
Weiner, each of whom is a non-employee director. Mr. Weiner, however, is not
independent, as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the
Exchange Act. The Compensation Committee determines the compensation of our
Chief Executive and recommends to the Board of Directors the compensation of
other principal executive officers.

The Audit Committee reviews, acts on and reports to our Board of Directors with
respect to various auditing and accounting matters, including selecting our
independent auditors, the scope of the annual audits, fees to be paid to the
auditors, the performance of our independent auditors and our accounting
practices. The members of the Audit Committee currently are Mr. Edelstein, Mr.
Nawi and Mr. Weiner, each of whom is a non-employee director. Mr. Nawi and Mr.
Weiner, however, are not independent, as that term is used in Item 7(d)(3)(iv)
of Schedule 14A under the Exchange Act.

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

Audit Committee Financial Expert

Our Board of Directors has determined that Mr. Weiner, the Chairman of our Audit
Committee, is an audit committee financial expert, as that term is defined under
Regulation S-K, Item 401(h). Mr. Weiner, however, is not independent, as that
term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our officers and directors, and
persons who own more than ten percent (10%) of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the
Commission. Officers, directors and greater than ten percent (10%) stockholders
are required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file. Based solely on our review of the copies of such forms received
by us, or written representations from certain reporting persons, we believe
that all required reports have been filed timely during 2003.

Code of Ethics

We have adopted a "Code of Ethics," as defined by regulations promulgated under
the Securities Act and the Exchange Act and a "Code of Conduct," as defined by
qualitative listing requirements promulgated by the Nasdaq National Market, that
apply to all of our directors, officers and employees, including our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. We

                                       46

<PAGE>

collectively refer to these codes as our Code of Conduct and Ethics, a current
copy of which is attached as an exhibit to this Annual Report on Form 10-K. A
copy of the Code of Conduct and Ethics is available on our website at
www.majorworld.com and print copies are available to any shareholder who
requests a copy. Any amendment to the Code of Conduct and Ethics or any waiver
of the Code of Conduct and Ethics will be disclosed on our website promptly
following the date of such amendment or waiver.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information for each of our fiscal years ended
December 31, 2003, 2002 and 2001 concerning compensation of our sole executive
office (the "Named Executive Officer"):

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).............................     2003     $ 500,000      $ 77,336        0               0
Chairman of the Board, President,
Chief Executive Officer and Acting                 2002     $ 500,000      $461,379        0               0
Chief Financial Officer                            2001     $ 369,837      $756,665        0               0
</TABLE>

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

OPTION/SAR GRANTS IN LAST FISCAL YEAR

No stock options were granted to the Named Executive Officer during 2003. We
have never granted any stock appreciation rights.

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

No options were exercised by the Named Executive Officer during the fiscal year
ended December 31, 2003. There were no unexercised "in-the-money" options held
by the Named Executive Officer as of December 31, 2003.

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 2003 under our 2001 Outside
Directors Stock Plan. We reimburse directors for their expenses of attending
meetings of the Board of Directors.

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

On July 24, 2003, we entered into an employment agreement effective January 1,
2003 with Bruce Bendell, pursuant

                                       47

<PAGE>

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

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

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of our Board of Directors consists of Messrs.
Edelstein and Weiner, neither of whom has been an officer or employee at any
time since our inception. Our executive officer does not serve as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of our Board of Directors or
Compensation Committee. Prior to the formation of the Compensation Committee,
the Board of Directors as a whole made decisions relating to the compensation of
our executive officers.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

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

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

Base Salary. The salaries for our executive officer for 2003 was generally
determined by the Board of Directors by taking into account the individual's
experience and performance and our specific needs. For 2004, the Compensation
Committee will review the base salaries of executive officers by evaluating each
executive's scope of

                                       48

<PAGE>

responsibility, performance, prior experience and salary history, as well as the
salaries for similar positions at comparable companies.

Bonus. We award bonuses as a reward for performance based principally on our
overall financial results and or achievements of specified business objectives.
We believe that bonuses properly motivate the officers to perform to the
greatest extent of their abilities to generate the highest attainable profits
for us. In 2003, 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. Bruce Bendell was paid a base salary of
$500,000 for the year ended December 31, 2003. See "Employment Contracts,
Termination of Employment and Change-In-Control Arrangements."

Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
publicly held companies for compensation exceeding $1 million paid to certain of
our executive officers. The limitation applies only to compensation that is not
considered to be performance-based. The non-performance based compensation paid
to our executive officers in 2003 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.

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, 2003. The graph assumes
that $100.00 was invested in the common stock and in each index on December 31,
1997. The total return for the common stock and the indices used assumes the
reinvestment of dividends, even though dividends have not been declared on the
common stock. The information contained in the graph does not reflect present
performance of our stock.

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

                                       49

<PAGE>

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

                                  [LINE GRAPH]

                                                              Begin:  12/31/1998
                                                         Period End:  12/31/2003
MAJOR AUTOMOTIVE COS INC                                        End:  12/31/2003

<TABLE>
<CAPTION>
                                    Beginning
           Transaction   Closing      No. Of    Dividend    Dividend    Shares      Ending    Cum. Tot.
Date*          Type      Price**    Shares***  per Share      Paid    Reinvested    Shares     Return
-----          ----      -------    ---------  ---------      ----    ----------    ------     ------
<S>        <C>           <C>        <C>        <C>          <C>       <C>           <C>       <C>
31-Dec-98     Begin        9.445      10.59                                         10.588     100.00
31-Dec-99    Year End     63.130      10.59                                         10.588     668.40
31-Dec-00    Year End      2.345      10.59                                         10.588      24.83
31-Dec-01    Year End      0.800      10.59                                         10.588       8.47
31-Dec-02    Year End      0.840      10.59                                         10.588       8.89
31-Dec-03      End         0.810      10.59                                         10.588       8.58
</TABLE>

* Specified ending dates or ex-dividends dates.

** All Closing Prices and Dividends are adjusted for stock splits and stock
dividends.

***'Begin Shares' based on $100 investment.

* $100 invested on 12/31/98 in stock or index-including reinvestment of
dividends.

Fiscal year ending December 31.

                                       50

<PAGE>

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

Stock Option Plans

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

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

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

Securities Authorized for Issuance Under Equity Compensation Plans.

The following table sets forth information as of December 31, 2003 with respect
to compensation plans under which our equity securities are authorized for
issuance.

<TABLE>
<CAPTION>
                                                                                           Number of securities
                                                                                         remaining available for
                           Number of securities to be                                  future issuance under equity
                            issued upon exercise of       Weighted-average exercise         compensation plans
                              outstanding options,           price of outstanding         (excluding securities
    Plan Category             warrants and rights       options, warrants and rights     reflected in column (a))
-------------------------------------------------------------------------------------------------------------------
<S>                        <C>                          <C>                            <C>
Equity compensation
plans approved by
security holders                  262,888 (1)                       $3.57                     1,457,112 (2)
-------------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by                  -                                -                             -
security holders
-------------------------------------------------------------------------------------------------------------------
Total                             262,888                           $3.57                     1,499,112
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       51

<PAGE>

(1) Includes 213,388 options issued and outstanding under the 1999 Plan with an
average exercise price of $4.24 per share, and 49,500 options issued and
outstanding under the 2001 Outside Director Plan with an average exercise price
of $0.68 per share.

(2) Includes 146,612 shares available for issuance under the 1999 Plan and
200,500 shares available for issuance under the 2001 Plan.

As of April 13, 2004, 360,000 options were authorized under the 1999 Plan and
options to purchase 213,388 shares were outstanding and 146,612 options were
available for future grants. As of April 11, 2004, 250,000 options were
authorized under the 2001 Plan, 49,500 options to purchase shares had been
granted and 200,500 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 13, 2004, 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>
                                                                                         PERCENT OF
         NAME AND ADDRESS OF BENEFICIAL OWNER                   NUMBER OF SHARES         CLASS (1)
---------------------------------------------------------------------------------------------------
<S>                                                             <C>                      <C>
Executive Officers and Directors:
---------------------------------------------------------------------------------------------------
Bruce Bendell...........................................         4,121,727 (2)              43.0%
---------------------------------------------------------------------------------------------------
David Edelstein.........................................            51,080 (3)(4)              *
---------------------------------------------------------------------------------------------------
Steven Hornstock .......................................            13,590 (5)                 *
---------------------------------------------------------------------------------------------------
Steven Nawi........................................... .            23,300 (6)                 *
---------------------------------------------------------------------------------------------------
Jeffrey Weiner..........................................           114,590 (7)               1.1%
---------------------------------------------------------------------------------------------------
All directors and executive officers as a group.........        4,324 ,287 (8)(9)           44.5%
---------------------------------------------------------------------------------------------------
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 9,474,856 shares of common stock outstanding on April 13,
         2004, 2004.

(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 39,200 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 9,000 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 13,500 shares of common stock,
         which are immediately exercisable.

                                       52

<PAGE>

(7)      Includes options for 89,200 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
         230,900 shares of common stock which are immediately exercisable.

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

(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.

                                       53

<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 2003, we
were billed approximately $75,000 by Marcum & Kliegman LLP for its services. Mr.
Weiner, one of our directors, is the Managing Partner of Marcum & Kliegman LLP.

The Bendells have interests in several non-affiliated auto dealerships,
including Five Towns Nissan, Bronx Automotive Group, HB Automotive, Mitsubishi
of Hempstead and Major of Pennsylvania, for which we purchase cars and provide
other services, and from which we buy vehicles. We charge a fee to offset any
expenses incurred in providing our services. The volume of such transactions is
immaterial to our operations, with such related-party sales aggregating
approximately $5.3 million and such related-party purchases aggregating
approximately $13.7 million in 2003. At December 31, 2003, these affiliated
dealerships were indebted to us in an aggregate amount of approximately $2.1
million.

On December 11, 2000, we issued to M&K Equities, Ltd., a New York corporation
("M&K"), which is an affiliate of Jeffrey Weiner, a member of our Board of
Directors, a senior subordinated secured promissory note in the principal amount
of $2,000,000 in consideration for a $2,000,000 loan from M&K. The note was
initially due on December 11, 2002 (the "Maturity Date") at a rate per annum of
ten percent (10%). The Maturity Date of the note has been extended until January
3, 2005. The total amount outstanding at December 31, 2003 was $1,270,000.
Interest under the note is payable in monthly installments with all outstanding
principal and interest due on the Maturity Date. In order to induce M&K to make
the loan, we also agreed to grant a lien on and security interest in all of our
assets, other than our technology assets, as collateral security for the due
payment and performance of all indebtedness, liabilities and obligations under
the note, which collateral is set forth in a security agreement, subject to
prior senior liens. Mr. Weiner also received options under the 1999 Plan to
purchase 50,000 shares of our common stock at an exercise price of $2.35. The
fair value ascribed to the options was approximately $95,000, based on the
Black-Scholes option-pricing model. Such amount was recorded as a deferred
charge and as additional paid-in-capital of stockholders equity. The amount of
the deferred charge has been amortized over the initial term of the note, with
the Company having charged $47,500 to operations in each of the years 2002 and
2001.

We purchase from and sell vehicles to Nawi Leasing, Inc., a company of which
Steven Nawi is President. Mr. Nawi is a member of our Board of Directors. During
the year 2003, there were no sales to Nawi Leasing, Inc. and purchases from Nawi
Leasing, Inc. and its affiliates represented less than $60,000.

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

In unrelated transactions, in order to obtain floor plan financing at favorable
rates, each of the Bendells has agreed to either guarantee certain of our floor
plan debt or provide certain collateral in connection with our floor plan or
other borrowings. Our Board of Directors agreed to obtain independent valuations
the Credit Enhancements and pay each of the Bendells the fair value of his
respective contributions. We engaged an independent valuation firm

                                       54
<PAGE>
and received a preliminary valuation from such firm of $160,000 for the economic
risk value of the Credit Enhancement. Accordingly, we accrued such amount as a
liability in the third quarter of 2002. In the third quarter of 2003, our Board
of Directors received additional indications that the value of the Credit
Enhancement may approximate $450,000. As such, we accrued an additional $290,000
in the third quarter of 2003. In March 2004, our Board of Directors concluded
that the $450,000, as accrued, was the appropriate value of the Credit
Enhancement.

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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. All of the fees billed by our principal accountant, BDO Seidman,
LLP, in 2003 and 2002 were audit fees incurred in connection with our annual
audit and reporting on Forms 10-K and for reviews in connection with our
quarterly reporting on Forms 10-Q. The aggregate fees billed for such services
were $314,434 and $513,334 in 2003 and 2002, respectively.

Audit-Related Fees. There were no other audit-related services performed or fees
billed by our principal accountant, BDO Seidman, LLP, in 2003 and 2002.

Tax Fees. There were no tax services performed or fees billed by our principal
accountant, BDO Seidman, LLP, in 2003 and 2002.

All Other Fees. There were no other services performed or fees billed by our
principal accountant, BDO Seidman, LLP, in 2003 and 2002.

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

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 Exh ibit 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>

                                       55
<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.                               N/A

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

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

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

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

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

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

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

                                       56

<PAGE>

<TABLE>
<S>                <C>                                                               <C>
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.,
                   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
                   refrence to Exhibit 10.4 of Company's Registration Statement on
</TABLE>

                                       57
<PAGE>

<TABLE>
<S>                <C>                                                               <C>
                   reference to Exhibit 10.4 of Company's Registration Statement
                   on Form 10-SB as amended, filed with the Securities and           N/A
                   Exchange Commission on March 7, 1997.

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

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
</TABLE>

                                       58
<PAGE>

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

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
</TABLE>

                                       59
<PAGE>

<TABLE>
<S>                <C>                                                               <C>
                   South Wall Capital Corp. (formerly known as Sun Coast Capital     N/A
                   Corp.)

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

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
</TABLE>

                                       60
<PAGE>

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

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
</TABLE>

                                       61
<PAGE>

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

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

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

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

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

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

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

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

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

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

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
</TABLE>

                                       62
<PAGE>

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

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

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

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

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

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

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

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

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

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

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
</TABLE>

                                       63
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

14.1               Code of Ethics and Conduct                                         -

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

21.1               List of Subsidiaries of the Company.                               -

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

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

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

                                       64
<PAGE>

<TABLE>
<S>                <C>
(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 quarterly
                   report on Form 10-Q, dated August 21, 2000
                   (File No. 0-29182).

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

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

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

                                       65
<PAGE>

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

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

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

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

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

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

(b)      Reports on Form 8-K

None.

(c)      Financial Statement and Financial Statement Schedule.

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

                                       66
<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 14, 2004                    /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 14, 2004
---------------------      Financial Officer and Director
Bruce Bendell

/s/ David Edelstein        Director                                             April 14, 2004
---------------------
David Edelstein

/s/ Steven Hornstock       Director                                             April 14, 2004
---------------------
Steven Hornstock

/s/Steven Nawi             Director                                             April 14, 2004
---------------------
Steven Nawi

/s/ Jeffrey Weiner         Director                                             April 14, 2004
--------------------
Jeffrey Weiner
</TABLE>

                                       67
<PAGE>

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                               CONSOLIDATED FINANCIAL STATEMENTS
                                    YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


























































                                      F-1
<PAGE>

                      THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                                                        CONTENTS

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

CONSOLIDATED FINANCIAL STATEMENTS:
  Balance sheets as of December 31, 2003 and 2002                              F-4
  Statements of operations for the years ended December 31, 2003,
    2002 and 2001                                                              F-5
  Statements of stockholders' equity for the years ended
    December 31, 2003, 2002 and 2001                                     F-6 - F-8
  Statements of cash flows for the years ended December 31, 2003,
    2002 and 2001                                                       F-9 - F-10
  Notes to consolidated financial statements                           F-11 - F-65
</TABLE>

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

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

We have audited the consolidated balance sheets of The Major Automotive
Companies, Inc. and subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2003. 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, 2003 and 2002, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 1 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."

New York, New York
April 12, 2004

                                                     /s/ BDO Seidman, LLP
                                                     --------------------
                                                         BDO Seidman, LLP


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

                                                     CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                         December 31,                                     2003            2002
                         ------------                                 ------------    ------------
<S>                                                                   <C>             <C>
ASSETS
CURRENT:
   Cash and cash equivalents                                          $  1,003,137    $    796,074
   Short-term investment                                                   430,325         425,930
   Net investment in direct financing leases, current                      213,311         164,555
   Accounts receivable, net of allowance for doubtful accounts of
      $492,000 and $507,000                                             11,204,480      15,179,194
   Inventories                                                          50,257,955      46,520,973
   Due from related parties                                              2,515,749       1,130,966
   Other current assets                                                    277,942         506,435
                                                                      ------------    ------------
      TOTAL CURRENT ASSETS                                              65,902,899      64,724,127
NET INVESTMENT IN DIRECT FINANCING LEASES, NET OF CURRENT PORTION           62,773         233,937
PROPERTY AND EQUIPMENT, NET                                              4,899,059       4,938,545
DEFERRED INCOME TAXES                                                    1,576,000       1,576,000
GOODWILL                                                                13,589,000      13,589,000
DUE FROM OFFICER                                                         1,395,358       1,395,358
NOTES RECEIVABLE AND OTHER ASSETS                                          187,850         790,374
                                                                      ------------    ------------
                                                                      $ 87,612,939    $ 87,247,341
                                                                      ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Notes payable - floor plan                                         $ 49,599,366    $ 46,224,707
   Accounts payable                                                      7,761,992       6,727,578
   Accrued expenses                                                      4,955,215       6,991,326
   Current maturities of long-term debt                                    701,741         675,452
   Customer deposits and other current liabilities                         567,846         978,981
                                                                      ------------    ------------
        TOTAL CURRENT LIABILITIES                                       63,586,160      61,598,044
LONG-TERM DEBT, LESS CURRENT MATURITIES                                  7,156,125       7,701,700
                                                                      ------------    ------------
        TOTAL LIABILITIES                                               70,742,285      69,299,744
                                                                      ------------    ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value - 2,000,000 shares authorized; 0
      and 100,000 shares issued and outstanding                                  -               -
   Common stock, $.01 par value - 50,000,000 shares authorized;
      9,702,047 and 9,564,371 shares issued and 9,474,856 and
      9,337,180 shares outstanding in 2003 and 2002, respectively           97,020          95,643
   Additional paid-in capital                                           40,175,709      40,123,765
   Treasury stock, at cost                                              (1,963,764)     (1,963,764)
   Deficit                                                             (21,438,311)    (20,308,047)
                                                                      ------------    ------------
        TOTAL STOCKHOLDERS' EQUITY                                      16,870,654      17,947,597
                                                                      ------------    ------------
                                                                      $ 87,612,939    $ 87,247,341
                                                                      ============    ============
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                 Years ended December 31,                        2003             2002             2001
                 ------------------------                   -------------    -------------    -------------
<S>                                                         <C>              <C>              <C>
REVENUES:
   Sales                                                    $ 380,298,852    $ 397,947,494    $ 375,114,505
   Cost of sales                                              319,655,160      333,809,386      314,506,772
                                                            -------------    -------------    -------------
        GROSS PROFIT                                           60,643,692       64,138,108       60,607,733
OPERATING EXPENSES                                             60,912,306       61,723,054       56,581,524
LITIGATION COSTS                                                        -        1,348,000        1,085,893
INTEREST EXPENSE, NET OF INTEREST INCOME                          779,732          961,826        1,141,792
                                                            -------------    -------------    -------------
        INCOME(LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
           AND INCOME (LOSS) FROM DISCONTINUED OPERATIONS      (1,048,346)         105,228        1,798,524
INCOME TAX EXPENSE (BENEFIT)                                       81,918          190,000         (291,000)
                                                            -------------    -------------    -------------
              INCOME (LOSS) FROM CONTINUING OPERATIONS         (1,130,264)         (84,772)       2,089,524
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (NET OF INCOME
   TAX BENEFIT)                                                         -         (206,000)         590,000
                                                            -------------    -------------    -------------
NET INCOME (LOSS)                                           $  (1,130,264)   $    (290,772)   $   2,679,524
                                                            =============    =============    =============
Income (loss) per common share - continuing operations:
      Basic                                                 $       (0.12)   $       (0.01)   $        0.32
      Diluted                                                       (0.12)           (0.01)            0.24
                                                            =============    =============    =============
Income (loss) per common share - discontinued operations:
      Basic                                                         $   -    $       (0.02)   $        0.09
      Diluted                                                           -            (0.02)            0.07
                                                            =============    =============    =============
Net income (loss) per common share:
   Basic                                                    $       (0.12)   $       (0.03)   $        0.41
   Diluted                                                          (0.12)           (0.03)            0.31
                                                            =============    =============    =============
Average number of shares used in computation:
      Basic                                                     9,436,969        8,947,332        6,558,356
      Diluted                                                   9,436,969        8,947,332        8,662,976
                                                            =============    =============    =============
</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, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                                   Preferred stock               Common stock             Treasury stock
                                               ----------------------     ------------------------    ----------------------
                                                Shares         Amount        Shares        Amount      Shares       Amount
                                               --------       -------     -----------    ---------    --------   ------------
<S>                                            <C>            <C>         <C>            <C>          <C>        <C>
BALANCE, DECEMBER 31, 2000                      500,000       $ 5,000      26,085,698    $ 260,859     162,417   $  (894,970)
Net income                                            -             -               -            -           -             -
One-for-five reverse split                            -             -     (20,868,558)    (208,686)   (129,934)            -
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                            -             -               -            -     194,708    (1,068,794)
Conversion from preferred                      (400,000)       (4,000)      1,777,778       17,778           -             -
Stock options granted                                               -               -            -           -             -
Amortization of deferred income                       -             -               -            -           -             -
                                               --------       -------     -----------    ---------    --------   -----------
BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)    100,000         1,000       7,994,338       79,943     227,191    (1,963,764)
                                               ========       =======     ===========    =========    ========   ===========

<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, 2000                     $39,210,271    $(22,696,799)     $       -      $(284,391)    $15,599,970
Net income                                               -       2,679,524              -              -       2,679,524
One-for-five reverse split                         208,686               -              -              -               -
Issuance of common stock for:
   Services                                        200,516               -              -              -         201,505
   Business combinations                            (4,271)              -              -              -               -
   Litigation                                      250,932               -              -              -         255,655
   Stock compensation, net of deferred
      amounts                                        2,007               -              -              -           2,016
Redemption of warrants in connection with
   private placements                             (150,000)              -              -              -        (150,000)
Purchase of treasury stock                               -               -              -              -      (1,068,794)
Conversion from preferred                          (13,778)              -              -              -               -
Stock options granted                              260,000               -              -              -         260,000
Amortization of deferred income                          -               -              -        168,445         168,445
                                               -----------    ------------      ---------      ---------     -----------
BALANCE, DECEMBER 31, 2001 (CARRIED FORWARD)    39,964,363     (20,017,275)             -       (115,946)     17,948,321
                                               ===========    ============      =========      =========     ===========
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                                                  THE MAJOR AUTOMOTIVE COMPANIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                                    Preferred stock       Common stock            Treasury stock
                                                   -----------------   -------------------     --------------------     Additional
                                                    Shares    Amount     Shares     Amount      Shares     Amount    paid-in capital
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>       <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)    $39,964,363
Net loss                                                 -         -           -         -           -            -               -
Issuance of common stock for:
   Settlement of litigation                              -         -     225,000     2,250           -            -         159,750
   Stock compensation, net of deferred
      amounts                                            -         -      16,200       162           -            -          11,940
Cancellation of shares                                   -         -      (4,500)      (45)          -            -              45
Conversion of preferred stock                     (100,000)   (1,000)  1,333,333    13,333           -            -         (12,333)
Amortization of deferred income                          -         -           -         -           -            -               -
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 (CARRIED FORWARD)             -         -   9,564,371    95,643     227,191   (1,963,764)     40,123,765
===================================================================================================================================

<CAPTION>
                                                                   Cumulative
                                                   Retained         currency      unearned       Total
                                                   earnings        translation   stock-based  stockholders'
                                                   (deficit)       adjustment   compensation     equity
-----------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>          <C>           <C>
BALANCE, DECEMBER 31, 2001 (BROUGHT FORWARD)     $(20,017,275)      $      -      $(115,946)  $ 17,948,321
Net loss                                             (290,772)             -              -       (290,772)
Issuance of common stock for:
   Settlement of litigation                                 -              -              -        162,000
   Stock compensation, net of deferred
      amounts                                               -              -              -         12,102
Cancellation of shares                                      -              -              -              -
Conversion of preferred stock                               -              -              -              -
Amortization of deferred income                             -              -        115,946        115,946
----------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 (CARRIED FORWARD)      (20,308,047)             -              -     17,947,597
==========================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-7

<PAGE>

                                                  THE MAJOR AUTOMOTIVE COMPANIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                               Preferred stock        Common stock             Treasury stock
                                              -----------------   ----------------------     --------------------     Additional
                                               Shares    Amount    Shares       Amount        Shares     Amount     paid-in capital
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>       <C>       <C>         <C>            <C>      <C>           <C>
BALANCE, DECEMBER 31, 2002 (BROUGHT FORWARD)        -   $     -   9,564,371   $   95,643     227,191  $(1,963,764)    $40,123,765
Net loss
Issuance of common stock for:
   Settlements of litigation                                        119,676        1,197                                   38,803
   Stock compensation, net of deferred
      amounts                                                        18,000          180                                   13,141
Cancellation of shares
Conversion of preferred stock
Amortization of deferred income
---------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003                          -         -   9,702,047   $   97,020     227,191  $(1,963,764)    $40,175,709
=================================================================================================================================

<CAPTION>
                                                                       Cumulative
                                                       Retained         currency      unearned       Total
                                                       earnings        translation   stock-based  stockholders'
                                                      (deficit)        adjustment   compensation     equity
----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>          <C>           <C>
BALANCE, DECEMBER 31, 2002 (BROUGHT FORWARD)         $(20,308,047)     $         -  $          -  $  17,947,597
Net loss                                               (1,130,264)                                   (1,130,264)
Issuance of common stock for:
   Settlements of litigation                                                                             40,000
   Stock compensation, net of deferred
      amounts                                                                                            13,321
Cancellation of shares
Conversion of preferred stock
Amortization of deferred income
---------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003                           $(21,438,311)     $         -  $          -  $  16,870,654
===============================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-8

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,                                              2003                  2002                 2001
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                               $ (1,130,264)        $   (290,772)        $  2,679,524
   Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
        Amortization of intangible assets                                     -              395,000              679,000
        Depreciation                                                    362,405              397,947              190,313
        Stock-based compensation                                              -              115,946              430,461
        Discontinued operations                                               -              206,000                    -
        Stock issuance for services and other                            53,321              162,000              201,505
        Bad debt expense                                                250,000              235,000              500,000
        (Increase) decrease in assets:
           Net investment in direct financing leases                    122,408              (72,317)             168,867
           Accounts receivable                                        3,724,715              329,902           (8,165,905)
           Inventories                                               (3,736,982)         (13,847,072)          14,791,360
           Other assets                                                (560,598)           1,120,535             (888,378)
        Increase (decrease) in liabilities:
           Accounts payable                                           1,034,414           (2,590,832)           4,783,932
           Accrued expenses                                          (2,036,112)           1,040,564            1,216,583
           Floor plan notes payable                                   3,374,659           12,260,804          (11,250,541)
           Customer deposits and other liabilities                     (411,135)             208,310               22,708
-------------------------------------------------------------------------------------------------------------------------
              NET CASH PROVIDED BY (USED IN) OPERATING
                ACTIVITIES                                            1,046,831             (378,985)           5,359,349
-------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment                                 (398,358)             (49,760)            (296,548)
   Proceeds from certificate of deposit                                   4,395                    -                    -
   Proceeds from sale of leased equipment                                73,481                    -                    -
   Business combinations                                                      -                    -              (70,000)
-------------------------------------------------------------------------------------------------------------------------
                NET CASH USED IN INVESTING ACTIVITIES                  (320,482)             (49,760)            (366,548)
-------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt                                               -                    -            3,429,499
   Payments of long-term debt                                          (519,286)          (2,888,656)          (3,841,432)
   Decrease in notes payable                                                  -                    -           (1,250,001)
   Payments from officers                                                     -              200,191                    -
   Capital lease reduction                                                    -             (111,643)                   -
   Loans to officers                                                          -                    -             (766,214)
   Purchase of treasury stock                                                 -                    -           (1,068,794)
-------------------------------------------------------------------------------------------------------------------------
              NET CASH USED IN FINANCING ACTIVITIES                    (519,286)          (2,800,108)          (3,496,942)
-------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    207,063           (3,228,853)           1,495,859
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                            796,074            4,024,927            2,529,068
-------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                             $  1,003,137         $    796,074         $  4,024,927
=========================================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-9

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,                                          2003               2002              2001
-----------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>                 <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for:
      Interest                                                 $ 2,643,773        $ 2,011,288         $ 2,504,608
      Income taxes                                                 123,967             52,000              50,000
   Noncash financing activities:
      Notes issued for redemption of warrants                            -                  -             150,000
      Common stock issued as stock compensation                     13,321             12,002             430,461
      Common stock issued for settlement of litigation              40,000            162,000                   -
      Common stock issued for business combinations and
        services                                                         -                  -             457,160
      Capital lease obligations                                          -         (3,000,000)                  -
=================================================================================================================
</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 AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)      Nature of Business

         The Major Automotive Companies, Inc. (the "Company"), formerly known as
         Fidelity Holdings, 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 15). 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, in periods in
         which they have a dilutive effect, the potential dilutions from all
         potential dilutive securities that would have reduced earnings per
         share.



                                      F-11
<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,              2003          2002          2001
-----------------------            --------     ---------     ---------
<S>                               <C>           <C>           <C>
Basic                             9,436,969     8,947,332     6,558,356
Effect of assumed
   conversions of options,
   preferred stock and
   warrants                               -             -     2,104,620
                                  ---------     ---------     ---------
Diluted                           9,436,969     8,947,332     8,662,976
                                  =========     =========     =========
</TABLE>

         Potential common shares of 411,413 and 385,163 related to the Company's
         outstanding stock options and warrants were excluded from the
         computation of diluted net loss per shares for the years ended December
         31, 2003 and 2002, respectively, because their effect on net loss per
         share is anti-dilutive.

(d)      Cash Equivalents and Short-term Investment

         Cash equivalents consist of highly liquid investments, principally
         money market accounts with a maturity of three months or less at the
         time of purchase. Cash equivalents are stated at cost, which
         approximates market value. At December 31, 2003 and 2002, the Company
         had an investment in a certificate of deposit with a financial
         institution. The amount shown at the balance sheet date is at the fair
         value of the investment, which approximates its cost.

                                      F-12
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 its
         final approval and funds the transaction, and until such final approval
         is given, the contracts in transit represent amounts due from the
         customer to the Company. Contracts in transit are included in
         receivables on the accompanying consolidated balance sheets and totaled
         $6.7 million at December 31, 2003 and $7.8 million at December 31,
         2002.

(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 uncollectibility on warranty receivables. The Company
         evaluates fleet sales, parts and other receivables for collectibility
         based on the age of the receivable, the credit history of the customer
         and past collection experience.

                                      F-13
<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.

                                      F-14
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

(j)      Comprehensive Income (Loss)

         The Company has no comprehensive income or loss.

(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.

                                      F-15
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(l)      Goodwill

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

         Effective January 1, 2002, the Company also adopted the provisions of
         SFAS No. 142, "Goodwill and Other Intangible Assets." Among other
         things, SFAS No. 142 no longer permits the amortization of goodwill or
         intangible assets with indefinite lives, but requires that the carrying
         amount of such assets be reviewed for impairment and reduced against
         operations if they are found to be impaired. Prior to the adoption of
         SFAS No. 142, goodwill and intangible assets acquired prior to July 1,
         2001 were amortized over various periods up to 40 years. Effective
         January 1, 2002, such amortization ceased. 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
         No. 142 eliminating goodwill amortization had been applied as of
         January 1, 2000.

                                      F-16
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
       Year ended December 31,                              2003            2002          2001
       -----------------------                         ------------   ------------   ------------
<S>                                                    <C>            <C>            <C>
Income (loss) from continuing operations, as
    reported                                           $ (1,130,264)  $    (84,772)  $  2,089,524

Add back:  amortization of goodwill, net of tax                   -              -        472,000
                                                       ------------   ------------   ------------
           Income (loss) from continuing
                 operations, as adjusted                 (1,130,264)       (84,772)     2,561,524
Income (loss) from discontinued operations (net of
    income tax benefit of $0, $138,000 and
    $590,000)                                                     -       (206,000)       590,000
                                                       ------------   ------------   ------------
Net income (loss), as adjusted                         $ (1,130,264)  $   (290,772)  $  3,151,524
                                                       ============   ============   ============
Basic earnings (loss) per share:

           Reported net income (loss)                  $      (0.12)  $      (0.03)  $       0.41
           Amortization of goodwill, net of tax                   -              -           0.07
                                                       ------------   ------------   ------------
           Basic earnings (loss) per share, as
                 adjusted                              $      (0.12)  $      (0.03)  $       0.48
                                                       ============   ============   ============
Diluted earnings (loss) per share:
           Reported net income (loss)                  $      (0.12)  $      (0.03)  $       0.31
           Amortization of goodwill, net of tax                   -              -           0.05
                                                       ------------   ------------   ------------
Diluted earnings (loss) per share, as adjusted         $      (0.12)  $      (0.03)  $       0.36
                                                       ============   ============   ============
Average number of shares used in computation:
           Basic                                          9,436,969      8,947,332      6,558,356
           Diluted                                        9,436,969      8,947,332      8,662,976
                                                       ============   ============   ============
</TABLE>

                                      F-17
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The Company completed the impairment tests required by SFAS No. 142 for
         goodwill. In order to evaluate goodwill for impairment, the Company
         compared the carrying value to the fair value of the underlying
         businesses. Based on the results of the tests, no impairment was
         indicated for goodwill. The Company will continue to test goodwill for
         impairment annually, or more frequently if events or circumstances
         indicate possible impairment. As of December 31, 2003 and 2002, the
         carrying amount of goodwill was $13,589,000.

(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 15).

(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 is estimated based on current rates
         offered to the Company for similar debt.

                                      F-18
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.

(p)      Stock-Based Compensation

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

                                      F-19
<PAGE>


                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         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 SFAS No 123, "Accounting for
         Stock-Based Compensation, to stock-based employee compensation:

<TABLE>
<CAPTION>
Year ended December 31,                                 2003           2002           2001
-----------------------                             -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>
Reported net income
  (loss)                                            $(1,130,264)   $  (290,772)   $ 2,679,524
Add: Stock-based compensation
  included in reported net
  income (loss), net of tax                              18,000        162,000        631,966
Deduct: Fair value compensation cost,
  net of tax                                            (18,000)      (174,624)      (650,738)
                                                    -----------    -----------    -----------
Pro forma net income (loss)                         $(1,130,264)   $  (303,396)   $ 2,660,752
                                                    ===========    ===========    ===========
Basic net income (loss) per share:
  Reported net income (loss)                        $      (.12)   $      (.03)   $       .41
  Pro forma net income (loss)                              (.12)          (.03)           .41
                                                    ===========    ===========    ===========
Diluted net income (loss) per share:
  Reported net income (loss)                        $      (.12)   $     ( .03)   $       .41
  Pro forma net income (loss)                              (.12)         ( .03)           .31
                                                    ===========    ===========    ===========
</TABLE>

                                      F-20
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The weighted average fair value of options granted or assumed was $.62,
         $.68 and $1.13 per share in 2003, 2002 and 2001, respectively. The fair
         value of each option granted during 2003, 2002 and 2001 was estimated
         using the Black-Scholes option-pricing model with the following
         weighted average assumptions:

<TABLE>
<CAPTION>
                              2003           2002            2001
                            --------       --------        --------
<S>                         <C>            <C>             <C>
Dividend yield                     0%             0%              0%
Risk free interest rate          4.0            4.0             5.7
Expected lives              10 years       10 years        10 years
Volatility                       104%           104%            104%
</TABLE>

(q)      Effect of Recently Issued Accounting Standards

         In November 2002, the FASB reached a consensus regarding EITF Issue No.
         00-21, "Revenue Arrangements with Multiple Deliverables." EITF 00-21
         addresses accounting for arrangements that may involve the delivery or
         performance of multiple products, services, and/or rights to use
         assets. The guidance provided by EITF 00-21 is effective for contracts
         entered into on or after July 1, 2003. The adoption of EITF 00-21 had
         no effect on the Company's 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 adoption of this
         statement had no impact on the Company's financial statements.

                                      F-21
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                                      F-22
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
         133 on Derivative Instruments and Hedging Activities" (SFAS 149). The
         statement amends and clarifies accounting and reporting for derivative
         instruments, including certain derivative instruments embedded in other
         contracts, and hedging activities. This statement is designed to
         improve financial reporting such that contracts with comparable
         characteristics are accounted for similarly. The statement, which is
         generally effective for contracts entered into or modified after June
         30, 2003, had no effect on the Company's financial position or results
         of operations.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity" (SFAS 150). SFAS 150 provides guidance on how an entity
         classifies and measures certain financial instruments with
         characteristics of both liabilities and equity. This statement is
         effective for financial instruments entered into or modified after May
         31, 2003, and otherwise was effective at the beginning of the first
         interim period beginning after June 15, 2003. The adoption of this
         statement had no impact on the Company's financial statements.

                                      F-23
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                                      F-24
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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, 2003, 2002 and 2001, aggregate floor
         plan assistance now included in cost of sales was $1,195,534,
         $1,294,109 and $986,635, respectively.

         The Company expenses the costs associated with advertising as incurred.
         Advertising assistance received from manufacturers for the years ended
         December 31, 2003, 2002 and 2001, now included in cost of sales was
         $723,111, $714,216 and $357,042, respectively.

         Advertising expense for the years ended December 31, 2003, 2002 and
         2001, included in operating expense was $15,768,832, $14,453,062 and
         $11,450,855, respectively.

(s)      Reclassifications

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

                                      F-25
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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.       NOTE RECEIVABLE OFFICER/ STOCKHOLDER

         The Company held a note from one officer/stockholder in the amount of
         $1,395,358 at December 31, 2003 and 2002. The note is non-interest
         bearing and is classified as long term.

                                      F-26
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. NET INVESTMENT IN DIRECT FINANCING LEASES

Components of the net investment in direct financing leases is as follows:

<TABLE>
<CAPTION>
                           December 31,                                     2003         2002
                           ------------                                  ---------    ---------
<S>                                                                      <C>          <C>
Total minimum lease payments to be received                              $ 244,829    $ 408,526
Estimated residual value of leased property                                 71,750       69,250
Unearned income                                                            (40,495)     (79,284)
                                                                         ---------    ---------
                                                                           276,084      398,492
Less:  Current portion                                                    (213,311)    (164,555)
                                                                         ---------    ---------
Net investment in direct financing leases, net of current portion        $  62,773    $ 233,937
                                                                         =========    =========
</TABLE>

Future minimum lease payments receivable at December 31, 2003 are as follows:

<TABLE>
<CAPTION>
Year ending December 31,                                               Amount
------------------------                                              --------
<S>                                                                   <C>
2004                                                                  $204,285
2005                                                                    32,428
2006                                                                     8,116
                                                                      --------
      Total                                                           $244,829
                                                                      ========
</TABLE>

4. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
        December 31,                               2003                2002
        ------------                           -----------         -----------
<S>                                            <C>                 <C>
New automobiles                                $16,339,679         $15,794,564
New trucks and vans                             15,785,288          11,733,652
Used automobiles and trucks                     16,618,207          17,148,771
Parts and accessories                            1,473,761           1,832,196
Other                                               41,020              11,790
                                               -----------         -----------
                                               $50,257,955         $46,520,973
                                               ===========         ===========
</TABLE>

                                      F-27
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
         December 31,                  2003           2002            Lives
         ------------              -----------    -----------       ---------
<S>                                <C>            <C>               <C>
Land                               $ 2,400,000    $ 2,400,000               -
Building                             1,000,000      1,000,000        20 years
Leasehold improvements               1,505,485      1,826,822        15 years
Furniture and fixtures               1,130,984        766,409       3-7 years
Equipment                            1,441,160      1,051,845       3-7 years
                                   -----------    -----------       ---------
                                     7,477,629      7,045,076
Less: Accumulated depreciation
          and amortization          (2,578,570)    (2,106,531)
                                   -----------    -----------       ---------
                                   $ 4,899,059    $ 4,938,545
                                   ===========    ===========       =========
</TABLE>

Depreciation expense was $362,405, $397,947 and $190,313 for the years ended
December 31, 2003, 2002 and 2001, respectively.

6. INCOME TAXES

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

The provision (benefit) for taxes on income, including amounts relating to the
loss from discontinued operations of $(138,000) and $(590,000) in 2002 and 2001,
respectively, is as follows:

<TABLE>
<CAPTION>
Year ended December 31,       2003         2002        2001
-----------------------     ---------   ---------   ----------
<S>                         <C>         <C>         <C>
Federal:
   Current                  $       -   $       -   $       -
   Deferred                         -           -    (867,000)
State:
   Current                     82,000      52,000      50,000
   Deferred                         -           -     (64,000)
                            ---------   ---------   ---------
        Total               $  82,000   $  52,000   $(881,000)
                            =========   =========   =========
</TABLE>

                                      F-28
<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,                              2003           2002           2001
                   -----------------------                          ------------   ------------   ------------
<S>                                                                 <C>            <C>            <C>
Amount using the statutory Federal tax rate                         $  (356,000)   $   (81,000)   $   611,000
Losses of discontinued operations that can not be utilized                    -              -       (590,000)
State and local income taxes, net of Federal tax benefit                 54,000         34,000         (9,000)
Nondeductible amortization of goodwill                                        -              -        162,000
Change in valuation allowance on deferred tax asset                     410,000         96,000     (1,071,000)
Other, net                                                              (26,000)         3,000         16,000
                                                                    -----------    -----------    -----------
Provision (benefit) for taxes on income                             $    82,000    $    52,000    $  (881,000)
                                                                    ===========    ===========    ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                            2003             2002
                                                        ------------     ------------
<S>                                                     <C>              <C>
Current deferred assets:
   Net operating loss carryforwards                     $   910,000      $   554,000
   Reserves and accruals not deductible until paid        1,791,000        1,721,000
   Capital loss carryforward                                517,000          502,000
   Goodwill                                                (244,000)        (149,000)
   Other                                                    331,000          267,000
Less: Valuation allowance                                (1,729,000)      (1,319,000)
                                                        -----------      -----------
Total current deferred tax assets                       $ 1,576,000      $ 1,576,000
                                                        ===========      ===========
</TABLE>

                                      F-29
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2003, the Company had available domestic Federal net operating
loss carryforwards primarily related to continuing operations of approximately
$1.6 million and state and local net operating losses of approximately $6.0
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 such deferred tax assets is not assured.

7. SECURED LINES OF CREDIT AND FLOOR PLAN NOTES PAYABLE

Secured Lines of Credit

The Company has two lines of credit ("Lines") with a bank for a total
availability of $3,000,000. The interest rate is a variable rate based on the
bank's prime rate of interest. Interest is payable monthly.

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

As of December 31, 2003 and 2002, there was no outstanding balance on the Lines.

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-30
<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 inventory, notified the Company that CFC had re-evaluated
its credit and lending relationship with the Company and was requiring the
Company to seek a replacement lending institution to refinance and replace all
existing CFC credit facilities. Consequently, in March 2002, the Company entered
into a floor plan financing arrangement with General Motors Acceptance
Corporation ("GMAC") for GMAC to provide the floor plan credit for the financing
of the Company's Chevrolet dealership's new and used vehicle inventory. This is
the flagship dealership of the Company's operations and accounted for more than
30% of the Company's 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-31
<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 12).

Outstanding borrowings under floor plan financing arrangements amounted to
$49,599,366 and $46,224,707 at December 31, 2003 and 2002, 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, 2003, 2002
and 2001 was $2,187,296, $1,695,960 and $2,349,451, respectively. Interest rates
in effect in the year 2003 ranged between 3.5% and 5.5%. At December 31, 2003,
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,
2003 ranged between 4.0% and 7.8%. Equal monthly installments are paid over the
term of the lease (which range from 12 to 60 months), together with a final
balloon payment, if applicable. These loans are collateralized by the vehicles.

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

                                      F-32
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On August 8, 2000, Doron Cohen, former President, CEO and a Director of the
Company, signed a Separation and Release Agreement (the "Agreement") with the
Company. 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 recorded a deferred charge of $840,000
(included in other assets) as the value of the noncompete and other provisions
of the Agreement, which relates to continuing operations of the Company. This
amount has been fully amortized over twenty-four months starting August 2000.

Additionally, the Company has accrued the liability for the remaining payments
due to Mr. Cohen.

                                      F-33
<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 required payment of the $2,000,000 principal on December
11, 2002. The date of such repayment has been extended to January 2, 2005. In
2003 and 2002 the Company made principal payments of $600,000 and $130,000,
respectively, towards this note, leaving a balance at December 31, 2003 of
$1,270,000. The note requires monthly interest payments at a rate of 10% per
annum. In order to induce M&K to make the loan, the Company granted to M&K a
lien on, and a security interest in, all of its non-technology assets, subject
to prior senior liens. The director also received options under the 1999
Employee Stock Option Plan to purchase 50,000 shares of the Company's common
stock at an exercise price of $2.35 per share. The fair value ascribed to the
options was approximately $95,000 based on the Black-Scholes option-pricing
model; such amount was recorded as a deferred charge and as additional paid-in
capital of stockholders' equity. The amount of the deferred charge has been
amortized over the initial term of the note, with the Company having charged
$47,500 to operations in each of the years 2002 and 2001.

Long-term debt consists of the following:

<TABLE>
<CAPTION>
          December 31,                2003          2002
          ------------             ----------   ----------
<S>                                <C>          <C>
Leasing notes payable              $  570,436   $  560,677
Falcon loan payable                 5,934,097    6,287,308
Note payable to former president       83,333      129,167
M&K Equities note payable           1,270,000    1,400,000
                                   ----------   ----------
                                    7,857,866    8,377,152
Less:  Current portion                701,741      675,452
                                   ----------   ----------
                                   $7,156,125   $7,701,700
                                   ==========   ==========
</TABLE>

                                      F-34
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maturities are as follows:

<TABLE>
<CAPTION>
December 31,
------------
<S>                                                                 <C>
2004                                                                $  701,741
2005                                                                 2,045,516
2006                                                                   478,748
2007                                                                   529,824
2008                                                                   586,350
Thereafter                                                           3,515,687
                                                                    ----------
                                                                    $7,857,866
                                                                    ==========
</TABLE>

9. BUSINESS COMBINATIONS

On April 21, 1997, the Company, through a 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-35
<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 14). The
foregoing acquisitions from Major Auto and Harold Bendell are collectively
referred to herein as the "Major Auto Acquisition."

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

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-36
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 REGULATIONS

Substantially all of the Company's facilities 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 CONTINGENCIES

Operating Leases

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

                                      F-37
<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, 2003 are as follows:

<TABLE>
<CAPTION>
December 31,
------------
<S>                                                                 <C>
2004                                                                $1,411,500
2005                                                                 1,283,500
2006                                                                 1,233,500
2007                                                                   941,500
2008                                                                   749,500
Thereafter                                                             496,100
                                                                    ----------
                                                                    $6,115,600
                                                                    ==========
</TABLE>

Rent expense was $1,950,000, $1,999,000 and $1,974,000 for the years ended
December 31, 2003, 2002 and 2001, respectively.

Capital Leases

In connection with an earlier acquisition, the Company was assigned a lease
agreement for facilities used for operations of the dealership. The lease
agreement provided for the transfer of ownership at the option of the Company at
the end of the lease term for $3 million. In 2002, the Company transferred the
purchase option to a related party and entered into an operating lease
arrangement with such party (see Note 12).

Legal Proceedings

In re: Fidelity Holdings Securities Litigation.

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

                                      F-38
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, the Company's
insurance carrier and the United States District Court Eastern District of New
York consented to and approved, respectively, the settlement. The settlement has
been funded by the Company's insurance company.

                                      F-39


<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

                                      F-40
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In and around July 10, 2001, Daniel Tepper commenced suit in the Southern
District of New York against Bruce Bendell, Doron Cohen and Richard Feinstein.
While the initial complaint had eight causes of action, three remain: (i)
conversion (ii) breach of fiduciary duty and (iii) negligence. The claims allege
that the defendants failed to remove restrictive legends that appeared on
certain stock certificates held by Mr. Tepper. This action mirrors a Nevada
action brought by Mr. Tepper several years ago for which he obtained a judgment
of $553,000, which has been satisfied. In light of the satisfaction of the
Nevada judgment, the Court has directed that a motion be made to dismiss the New
York action as there is a ban to double recovery. The motion was made in July
2003 and was denied in lieu of a settlement conference. Such conference was held
and failed. A second motion to dismiss is expected to be filed in July 2004.
Management believes that the allegations have no merit and intends to vigorously
defend this suit.

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

                                      F-41
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A decision was rendered by the court, which dismissed the claims for tortuous
interference with business opportunities and contract, but denied the remainder
of the motion. The case had been stayed as a result of IG2 filing for bankruptcy
protection in January 2003. The stay has been lifted. Management of the Company
expects that the matter will proceed to trial in July 2004. Management believes
that the allegations have no merit and intends to vigorously defend this suit.

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

On September 23, 2002, a lawsuit was commenced by Ira Hochman and Sanford
Goldfarb against the Company, Robert LeRea, a former consultant to the Company,
Doron Cohen, Bruce Bendell and Kimberly Peacock, a former employee of the
Company. The suit seeks damages of up to $10,000,000 for breach of contract,
quantum merit, unjust enrichment, conversion and fraud. Plaintiffs contend that
they entered into agreements with the Company and the other defendants to
promote the stock of the Company in exchange for stock. Plaintiffs further
contend that, in spite of the substantial time and efforts plaintiffs put in
promoting the stock, the Company and the other defendants failed to compensate
plaintiffs as per the agreements. Plaintiffs also allege that they provided a
bridge loan to defendants in the sum of $1,830,000, which has not been repaid.
In July 2003, the Company had filed a motion to dismiss, which was denied. The
action has moved into the discovery phase. Management believes that these
allegations have no merit and intends to vigorously defend this suit.

                                      F-42
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

                                      F-43
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Ronald K. Premo v. Fidelity Holdings, Inc.

In May 2001, Ronald Premo, a former officer of one of the Company's former
technology subsidiaries, filed suit in Connecticut Supreme Court seeking
employment related damages in excess of $300,000. In October 2001, through an
arbitration proceeding, the Company reached a settlement agreement with Mr.
Premo for $144,158 by which he would be paid an aggregate of $72,079 over ten
months plus 15,000 shares of the Company's common stock with a guaranteed
aggregate value, at the first anniversary date of the shares' issuance, of
$72,079. The aggregate amount of this settlement was included in the
consolidated statement of operations for the year ended December 31, 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 tortuously interfered with the contractual and employment relationship of
Mr. Wallick. Mr. Wallick sought, among other things, compensatory and punitive
damages for the alleged violations in the amount of $540,000. On October 10,
2002, the Company entered into a Separation and Release Agreement with Mr.
Wallick, wherein the Company settled all matters with Mr. Wallick arising out of
his former employment with the Company and its subsidiaries.

                                      F-44
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

                                      F-45
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On October 24, 2001, Zanett Lombardier Ltd. and others ("Zanett") filed a suit
against the Company for breach of contract and for the Company's failure to
issue shares in exchange for certain warrants held by Zanett. The alleged
damages totaled $856,011. This matter was settled in the first quarter of 2003
for payment of $130,000 and issuance of shares of the Company's common stock
with a value of $40,000, which was included in the consolidated statement of
operations for the year ended December 31, 2002. The $130,000 was paid in five
equal installments during 2003 and 49,876 shares of the Company's common stock
were issued in April 2003 in full satisfaction of this settlement.

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

In and around September, 2002, an action was commenced against the Company and
its former subsidiary, Computer Business Sciences, Inc., in Pennsylvania,
Allegheny County by Steel City Telecom, Inc. ("Steel City") for up to $300,000.
The complaint alleges that the software sold to Steel City was defective and
that the Company was negligent in its production. The case is currently in
discovery phase. 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 claims that we failed to pay him $546,249.99 under
an alleged letter dated June 5, 1996 to that certain Master Agreement dated
April 18, 1996 between the Company and Zvi Barak

                                      F-46

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company brought a motion before the Ontario Superior Court of Justice
seeking a permanent stay of Zvi Barak's application on grounds which include,
but are not limited to: a) Ontario is not a convenient forum for the hearing of
the application; and b) the Ontario Superior Court of Justice does not have
jurisdiction over the subject matter or the parties. The motion was heard by the
Court in Toronto on February 18, 2003. At that time, the Company's motion was
denied and the Company subsequently filed a motion for leave to appeal. In July
2003, the Company's motion for leave to appeal was denied. It is expected that
arbitration will begin in the second half of 2004. Management believes that Zvi
Barak's claims have no merit and intends to vigorously defend this action.

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

On September 4, 2003, an action was commenced against the Company and its
subsidiary Compass Lincoln Mercury, Inc. in the Superior Court of New Jersey,
Essex County by a landlord of the Company's former Compass Lincoln Mercury
showroom in Orange New Jersey. The suit alleges that current rent and damages to
the showroom space at 170 Central Avenue, Orange New Jersey are presently due
and owing by the Company. The suit alleges damages in the amount of $123,556 and
rent of approximately $7,900 per month. Management believes that these
allegations have no merit and intends to vigorously defend this suit.

                                      F-47


<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GRIT, LLC vs. Major Automotive Companies, Inc.

On September 24, 2003 the Company received notice of a default judgment in the
Superior Court of the State of California, Los Angeles, for an aggregate amount
of $66,718 stemming from the plaintiff's purchase in 1998 of a Talkie
Communication Server from a former subsidiary. The Company successfully reopened
the default judgment and it is Management's belief that this dispute was already
settled by the parties through the settlement of a previous complaint by this
plaintiff in August 2001 and, accordingly, Management 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-48

<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
net income, as defined, of the Company's automotive operations after all
expenses, including any other bonuses paid or accrued. This bonus plan was
approved retroactively to April 1, 2002. Accordingly, the Company recorded
additional compensation expense of $257,000 for this bonus in 2002. In 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 2003, Mr. Bendell earned an aggregate of $577,500
pursuant to all of his employment arrangements. In addition to his employment
arrangements, Mr. Bendell earned $450,000 in connection with a credit
enhancement arrangement for the benefit of the Company. (See Note 12 Related
Party Transactions.)

Sale Tax Audit

In February 2004, the Company was notified by the New York State Department of
Taxation & Finance of an assessment of $4,000,000, including interest and
penalties, after their audit concluded that certain of the Company's
subsidiaries had failed to pay sales and use taxes of approximately $2,000,000
from February 1999 through August 2001. Management believes that the tax
authorities based their assessment on an extrapolation from a sample of certain
transactions that were not representative and that all sales taxes that are due
have been paid. Accordingly, the Company has not accrued any liability in
connection with this matter. The Company is preparing to appeal the findings of
the taxing authorities.

                                      F-49

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.      RELATED PARTY TRANSACTIONS

Amounts due from related parties result from 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 years
ended December 31, 2003 and 2002, the related party sales aggregated $5,305,953
and $4,028,810, respectively. For the year 2001, 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.

Additionally, the Company purchases vehicles from the Bendell Dealerships. All
of the purchases and sales to and from the related dealerships are made at
wholesale cost plus related fees and have, therefore, resulted in no profit or
loss to the Company. For the years ended December 31, 2003 and 2002, the
purchases from related parties aggregated $13,717,387 and $14,914,950,
respectively. For the year ended 2001, the related party purchases amounted to
less than 1% of aggregate purchases.

                                      F-50

<PAGE>
                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to a management agreement with Harold Bendell, the Company has accrued
a management fee for services performed by Harold Bendell. For the years ended
December 31, 2002 and 2001, such accrual amounted to $624,359 and $1,057,411,
respectively. Mr. Harold Bendell's management agreement expired at December 31,
2002. Starting in 2002, the Company entered into negotiations with Harold
Bendell regarding his fees for 2003 and future periods. In 2003, the Company
accrued $361,361 as a management fee for Mr. Bendell pursuant to the provisions
of the expired agreement. Additionally, the Company's Board of Directors awarded
him an additional $500,000, which was accrued in the fourth quarter of 2003, for
his services. In March 2004, the Company concluded its negotiations and agreed
in principle as to a new consulting agreement with a company owned by Harold
Bendell, HB Automotive, Inc. This agreement will be effective January 1, 2004
through the year ending December 31, 2005. It provides for a management fee
equal to $200 per used vehicle sold at retail by the Company's Chevrolet
dealership and 10% of the pre-tax profits from the Company's dealerships in Long
Island City, New York. Had the per-vehicle fee provision been in effect on
January 1, 2003, HB Automotive would have earned an additional $2 million in
2003.

In connection with the Company's acquisition of its Nissan dealership in
Hempstead, New York, the Company obtained an option to acquire that dealership's
land and building from the landlord who held the lease on that property. The
Company exercised its option, but was unable to obtain the financing necessary
to effect the purchase. Since the lease expiration was concurrent with the
required property acquisition date and the Company was unsuccessful in obtaining
an extension of the lease term, it became imperative to the Nissan dealership's
operations to maintain its presence at the location.

                                      F-51

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In order to ensure continuity of the dealership's operations, in a transaction
approved by the Company's Board of Directors, the Company's Chairman and his
brother agreed to personally acquire the property through a company they formed
and lease it back to the Company. The result of this transaction was to
eliminate the capitalized lease of approximately $3.6 million and the related
liability of $3.0 million that the Company had recorded in connection with this
property. The difference of $637,000, the book value of the purchase option, was
recorded as a short-term related party receivable, which is included in due from
related parties. The Company entered into a lease with the new landlord for five
years, through June 2007 with a five-year renewal option for approximately the
same rent, $32,000 per month, it was previously paying.

An independent appraiser was retained in order to determine a fair market rent,
so that the current rent could be adjusted and the lease revised accordingly, if
necessary. Similarly, the value of the purchase option was required to be
determined so that an adjustment to the related party receivable could be made
and a loss could be recorded, at that time, if the value of the option at the
date of transfer exceeded its book value of $637,000. The receivable will be
repaid, ratably, through monthly payments over the remaining term of the lease,
together with related interest at the market rate. Based on the report of the
appraiser, no adjustment is required for either the rental rate or the
receivable balance.

                                      F-52

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In unrelated transactions, in order to obtain floor plan financing at favorable
rates (see Note 7), each of Bruce Bendell and Harold Bendell has agreed to
either guarantee certain floor plan debt of the Company or provide certain
collateral in connection with the Company's floor plan or other borrowings. The
Board of Directors has agreed to obtain independent valuations of such credit
enhancement and collateral usage (together, "Credit Enhancements") and pay each
of the Bendell's the fair value of his respective contributions. The Company
engaged an independent valuation firm and received a preliminary valuation from
such firm of $160,000 for the economic risk value of the Credit Enhancements.
Accordingly, the Company accrued such amount as a liability in the third quarter
of 2002. In the third quarter of 2003, the Company's Board of Directors received
additional indications that the value of the Credit Enhancement may approximate
$450,000. As such, the Company accrued an additional $290,000 in the third
quarter of 2003. In March 2004, the Company's Board of Directors concluded that
the $450,000, that has been accrued as deferred debt costs, is the appropriate
value of the Credit Enhancement. It is expected that this amount will be paid
to Mr. Bendell in 2004.

Additionally, Harold Bendell has acquired the right to an off- premises storage
facility that was previously leased by the Company, on a month-to-month basis,
from an independent third party. Accordingly, the Company is now leasing such
facility from Mr. Bendell on the same basis for approximately the same monthly
rental, $33,000, it was paying to the prior landlord.

                                      F-53

<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, 2003, 2002 and
2001, the Company's purchases from and sales to Nawi Leasing, Inc. and its
affiliates represented less than 1% of the Company's aggregate sales and
purchases.

Marcum & Kliegman LLP, an accounting firm of which a director is a member,
charged the Company approximately $75,000, $105,000 and $120,000 in fees for
accounting services for the years ended December 31, 2003, 2002 and 2001,
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, 2003.

         (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, 2003, these warrants are still outstanding.

                                      F-54

<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 14, 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 the 1999 Stock Option Plan
         (the "Plan") pursuant to which 360,000 shares of common stock are
         reserved for issuance upon the exercise of options, designated as 1999
         options. At the discretion of the Company's Board of Directors or
         members of any committee the Board of Directors has designated, options
         may be granted to consultants, non-employee members of the Board of
         Directors, employees, officers or anyone who performs services for the
         Company. The Plan will terminate upon the date on which all shares of
         the Plan have been exercised. In December 2001, the Company amended the
         Plan to increase the shares reserved for issuance by 750,000 shares to
         1,110,000.

         Options granted under the Plan expire not more than 10 years from the
         date of grant. Generally, options vest in 3 years beginning on the date
         of grant.

         In consideration for certain consulting services related to the
         acquisition of the Major Auto Group, the Company issued options to
         purchase 22,500 shares of the Company's common stock for $10.00 per
         share (market price), exercisable until May 2002.

                                      F-55

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         In December 2000, the Company adopted the 2001 Outside Director Stock
         Plan (the "2001 Plan") pursuant to which 250,000 shares are reserved
         for issuance to non-employee members of the Board of Directors
         ("Outside Directors"). The Plan provides, that, commencing on the date
         of the annual stockholders' meeting in 2001 and on each anniversary
         thereafter, each Outside Director who served as a member of the Board
         of Directors shall automatically be granted an option to purchase 4,500
         shares. The term of the option shall be ten years. The option shall be
         immediately exercisable, but only while the optionee serves as a member
         of the Board of Directors and for the 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.

                                      F-56

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         During 2001, pursuant to a separation agreement, the Company granted
         options to an employee of IG2 for 30,000 shares of common stock. The
         Company recorded a charge of $260,616 against the reserve established
         for discontinued operations and a corresponding increase in additional
         paid-in capital.

         In 2001, the Company issued options for an aggregate of 25,200 shares
         of common stock to Outside Directors at an average exercise price of
         $.85 per share, the market price at the date of grant.

         In 2002, the Company issued options for an aggregate of 18,000 shares
         of common stock to Outside Directors at an average exercise price of
         $.68 per share, the market price at the date of grant. In addition, the
         Company cancelled options for 134,800 shares of common stock, with an
         average exercise price of $13.71.

         In 2003, the Company issued options for an aggregate of 18,000 shares
         of common stock to Outside Directors at an average exercise price of
         $.62 per share, the market price at the date of grant.

                                      F-57


<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, 2003 and changes during the period January 1, 2001 through
         December 31, 2003 is presented below:

<TABLE>
<CAPTION>
                                                  Weighted
                                                  average
                         Number of   Expiration   exercise
                          shares        date       price
----------------------------------------------------------
<S>                      <C>         <C>          <C>
Options outstanding at
  December 31, 2000        306,488    2002-2010   $   8.71
Options granted             55,200         2011       1.66
----------------------------------------------------------
Options outstanding at
  December 31, 2001        361,688    2002-2011       7.64
Options granted             18,000         2012        .68
Options cancelled and
  expired                 (134,800)   2002-2011      13.71
----------------------------------------------------------
Options outstanding at
  December 31, 2002        244,888    2004-2012       3.78
----------------------------------------------------------
Options granted             18,000         2013        .62
----------------------------------------------------------
Options outstanding at
  December 31, 2003        262,888    2004-2013       3.57
==========================================================
</TABLE>

                                      F-58
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about stock options outstanding at
December 31, 2003.

<TABLE>
<CAPTION>
                                     Options Outstanding                     Options Exercisable
                      --------------------------------------------------------------------------------
                          Number          Weighted                          Number
                      Outstanding at      Average          Weighted     Exercisable at     Weighted
                       December 31,      Remaining          Average      December 31,      Average
Exercise Price Range       2003       Contractual Life  Exercise Price       2003       Exercise Price
------------------------------------------------------------------------------------------------------
<S>                   <C>             <C>               <C>             <C>             <C>
   $24.44-$38.75            4,388            0.6           $  33.25          4,388         $  33.25
   $13.40                   1,200            1.4              13.40          1,200            13.40
   $4.38                  126,000            1.8               4.38        126,000             4.38
   $2.34-$2.35             80,000            3.9               2.35         74,000             2.35
   $1.65                    1,800            1.3               1.65          1,800             1.65
   $0.62-$0.68             49,500            9.0               0.68         49,500             0.68
---------------------------------------------------------------------------------------------------
                          262,888            3.8           $   3.57        256,288         $   3.60
===================================================================================================
</TABLE>

                                      F-59

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.      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-60

<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-61

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.      DISCONTINUED OPERATIONS

On November 3, 2000, the Board of Directors determined to divest the Company's
non-automotive operations within the next twelve months. Continuing operations
are represented by the Company's automotive dealership activities, including its
automotive leasing subsidiary, Major Fleet and Leasing, Inc. Non-automotive
operations are reported as discontinued operations.

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

<TABLE>
<CAPTION>
Year ended December 31,             2002          2001
---------------------------------------------------------
<S>                              <C>           <C>
Loss from discontinued           $ (344,000)   $        -
  operations
Loss from disposition of
  discontinued operations                 -             -
Provision for estimated
  operating losses during
  period of disposition                   -             -
---------------------------------------------------------
                                   (344,000)            -
Income tax benefit                  138,000      (590,000)
---------------------------------------------------------
                                 $ (206,000)   $  590,000
=========================================================
</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 2003 and 2002.

                                      F-62

<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, 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 2003 and 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 2003 and 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 2003 and 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-63

<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The gains on the sales of these discontinued operations were deferred due to a
lack of credit history. Such gains were to be reflected when collectibility was
reasonably assured. Accordingly, the Company had reclassified the balance of
$1,000,000 from assets held for sale at December 31, 2000 to notes receivable at
December 31, 2001 and recorded a valuation allowance of $300,000 at that date to
reflect the estimated realizable value of the amounts expected to be received
from the sale of its discontinued operations. The balance of the related
receivables of approximately $182,000 was written off in 2002 because of the
uncertainty of collectibility.

16.      QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                    First        Second        Third       Fourth
2003                               quarter      quarter       quarter     quarter
-----------------------------------------------------------------------------------
                                      (In thousands except for per share data)
<S>                              <C>           <C>          <C>          <C>
Sales                            $   91,146    $   98,873   $  103,957   $   86,323
Gross profit                         14,530        16,075       17,361       12,677
Operating income (loss)
  from continuing
  operations                           (477)          600          812       (2,076)
Net income (loss)                      (477)          600          812       (2,076)
Income (loss) from
  continuing operations
  per share - diluted            $     (.05)   $      .06   $      .09   $     (.22)
Net income (loss) per
  share - (diluted)                    (.05)          .06          .09         (.22)
===================================================================================
</TABLE>

                                      F-64
<PAGE>

                                            THE MAJOR AUTOMOTIVE COMPANIES, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                    First        Second        Third       Fourth
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                         15,606       17,288       16,996       14,248
Operating income (loss)
  from continuing
  operations                            550          510        1,417       (2,561)
Income (loss) from
  discontinued
  operations, net of tax
  benefits                                -            -          206            -
Net income (loss)                       550          510        1,211       (2,767)
Income (loss) from
  continuing operations
  per share - diluted                   .06          .06          .15         (.27)
Net income (loss) per
  share - (diluted)                     .06          .05          .13         (.27)
==================================================================================
</TABLE>

Income (loss) per share data are computed independently for each of the periods
presented; therefore the sum of the income (loss) per share amounts for the
quarters may not equal the total for the year.

17.      SUBSEQUENT EVENTS

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

In March 2004, the Company received notice from American Suzuki Motor
Corporation, the franchisor of the Company's Suzuki dealership in Hempstead, NY,
that they have terminated the franchise agreement.

Neither the Subaru nor Suzuki dealerships were material to the Company's
operations and management does not expect the sale and termination of such
dealerships to have a significant effect on results of operations or cash flow.

                                      F-65

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

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

         The audits referred to in our report dated April 12, 2004 relating to
the consolidated financial statements of The Major Automotive Companies, Inc.,
which is contained in Item 8 of this Form 10-K included the audits of the
financial statement 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 audits.

         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 12, 2004               --------------------
                                 BDO Seidman, LLP

                                      S-1

<PAGE>

SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNT
              For the Years Ended December 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                                  Additions
                                   Balance at     Charged to   Deductions,    Balance at
                                  Beginning of    Costs and       Net of        End of
Account Description                   Year         Expenses     Write-offs       Year
                                  ------------   -----------   -----------   ------------
<S>                               <C>            <C>           <C>           <C>
Allowance for doubtful accounts
 Year ended December 31, 2003       $507,000       $250,000     $(265,000)      $492,000
                                    ========       ========     =========       ========
 Year ended December 31, 2002       $700,000       $235,000     $(428,000)      $507,000
                                    ========       ========     =========       ========
 Year ended December 31, 2001       $200,000       $500,000     $       -       $700,000
                                    ========      ==========    =========       ========
</TABLE>



<TABLE>
<CAPTION>

                                   Balance at    Reserves on    Sales of     Balance at
                                  Beginning of   Current Year   Prior Year      End of
Inventory reserves                   Year         Purchases     Inventory       Year
                                  ------------   ------------  -----------   ------------
<S>                               <C>            <C>            <C>          <C>
Year ended December 31, 2003       $1,016,000     $  720,000    $(1,016,000)   $  720,000
                                   ==========     ==========    ===========    ==========
Year ended December 31, 2002       $  756,000     $1,016,000    $  (756,000)   $1,016,000
                                   ==========     ==========    ===========    ==========
Year ended December 31, 2001       $  884,000     $  756,000    $  (884,000)   $  756,000
                                   ==========     ==========    ===========    ==========
</TABLE>


                                      S-2