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

                                    FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

         For the quarterly period ended September 30, 2005 or

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For the transition period from _______________ to _______________

Commission File Number: 000-29182


                      THE MAJOR AUTOMOTIVE COMPANIES, INC.
                      ------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


                  Nevada                              11-3292094
       (State or Other Jurisdiction                 (IRS Employer
     of Incorporation or Organization)            Identification No.)


                            43-40 Northern Boulevard
                        Long Island City, New York 11101
                        --------------------------------
                    (Address of Principal Executive Offices)


                                 (718) 937-3700
                                 --------------
                         (Registrant's Telephone Number)

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

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

As of January 25, 2006, there were 9,222,228 shares of the registrant's common
stock outstanding.






                                      INDEX



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                                                                                     Page No.
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PART I.  FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)........................................         3
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Consolidated Condensed Balance Sheets ..........................................         3
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Consolidated Condensed Statements of Operations ................................         5
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Consolidated Condensed Statements of Cash Flows ................................         6
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Notes to Consolidated Condensed Financial Statements ...........................         8
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations ..................................................................        13
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Item 3. Quantitative and Qualitative Disclosures About Market Risk .............        22
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Item 4. Controls and Procedures.................................................        22
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PART II.  OTHER INFORMATION
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Item 1. Legal Proceedings.......................................................        23
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.............        24
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Item 3. Defaults Upon Senior Securities ........................................        24
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Item 4. Submission of Matters to a Vote of Security Holders.....................        24
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Item 5. Other Information ......................................................        24
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Item 6. Exhibits ...............................................................        24
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Signatures .....................................................................        24
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                                    2





PART I - FINANCIAL INFORMATION

              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS



                                                                          September 30, 2005    December 31, 2004
                                                                          ------------------    -----------------
                                                                              (Unaudited)

ASSETS

Current assets
     Cash and cash equivalents                                            $    4,619,505        $   3,723,500
     Short-term investments                                                      435,510              433,145
     Net investment in direct financing leases, current                          152,248              181,079
     Accounts receivable, net                                                 14,963,828           11,849,314
     Inventories                                                              56,812,310           53,719,844
     Due from related parties                                                    843,675            1,216,925
     Other current assets                                                        185,212              224,416
                                                                          ---------------       --------------
           Total current assets                                               78,012,288           71,348,223

Net investment in direct financing leases,
     net of current portion                                                      233,932              285,495
Property and equipment, net                                                    5,017,039            5,028,024
Deferred income taxes                                                          1,459,535            1,459,535
Goodwill                                                                       5,260,000            5,260,000
Due from related parties                                                         457,745              493,745
Due from officer                                                               1,395,358            1,395,358
Notes receivable and other assets                                                793,518              744,087
                                                                          ---------------       --------------
           Total assets                                                   $   92,629,415        $  86,014,467
                                                                          ===============       ==============



See accompanying notes to consolidated condensed financial statements.



                                       3




LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Floor plan notes payable to trade creditors                          $   20,841,002        $  34,692,049
     Floor plan notes payable to non-trade creditors                          33,000,727           16,688,261
     Accounts payable                                                          7,759,623            8,565,886
     Accrued expenses                                                          9,381,234            8,018,320
     Current maturities of long-term debt                                      2,181,328              895,409
     Customer deposits and other current liabilities                             942,267              548,749
                                                                          ---------------       --------------
           Total current liabilities                                          74,106,181            69,408,674
Long-term debt, less current maturities                                        5,322,076             6,910,269
                                                                          ---------------       --------------
           Total liabilities                                                  79,428,257            76,318,943

Commitments and contingencies
Stockholders' equity
     Preferred stock, $.01 par value- 2,000,000 shares
           authorized; 0 shares issued and
           outstanding in 2005 and 2004                                                -                     -
     Common stock, $.01 par value- 50,000,000 shares
           authorized; 9,738,047 and 9,720,047 shares issued;
           and 9,222,228 and 9,204,228 shares outstanding in
           2005 and 2004, respectively                                            97,380                97,200
     Additional paid-in capital                                               40,207,569            40,189,749
     Deficit                                                                 (24,788,639)          (28,276,273)
     Treasury stock, at cost; 515,819 shares in 2005 and 2004                 (2,315,152)           (2,315,152)
                                                                          ---------------       --------------
           Total stockholders' equity                                         13,201,1587            9,695,524
                                                                          ---------------       --------------
           Total liabilities and stockholders' equity                     $   92,629,415        $   86,014,467
                                                                          ===============       ==============



See accompanying notes to consolidated condensed financial statements.



                                       4





              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)



                                                       Nine Months Ended September 30,          Three months Ended September 30,
                                                       -------------------------------          --------------------------------
                                                         2005                 2004                  2005                2004
                                                         ----                 ----                  ----                ----

Sales                                              $    366,756,150    $    292,912,584      $    130,471,213     $    104,117,742
Cost of sales                                           306,337,237         245,815,740           109,086,958           88,124,462
                                                   ----------------    ----------------      ----------------     ------------------
   Gross profit                                          60,418,913          47,096,844            21,384,255           15,993,280

Operating expenses                                       52,567,005          43,266,545            18,824,845           14,537,566
Interest expense, net of interest income                  2,983,201           1,998,814             1,091,225              739,882
                                                   ----------------    ----------------      ----------------     ------------------
   Income before income taxes                             4,868,707           1,831,485             1,468,185              716,032

Income tax expense                                        1,381,073             184,294               312,590              124,079
                                                   ----------------    ----------------      ----------------     ------------------
Net income                                         $      3,487,634    $      1,647,191      $      1,155,595     $        591,953
                                                   ================    ================      ================     ==================
Net income per common share:
     Basic                                         $           0.38    $           0.17      $           0.13     $           0.06
     Diluted                                       $           0.38    $           0.17      $           0.13     $           0.06
                                                   ================    ================      ================     ==================

Average number of shares used in computation:
     Basic                                                9,214,382           9,484,907             9,222,228            9,492,856
     Diluted                                              9,235,497           9,494,217             9,244,708            9,505,551
                                                   ================    ================      ================     ==================




See accompanying notes to condensed consolidated financial statements.



                                       5


              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         NINE MONTHS ENDED SEPTEMBER 30,
                                   (Unaudited)



                                                                                          2005                  2004
                                                                                          ----                  ----

CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                    $    3,487,634            $   1,647,191
     Adjustments to reconcile net income to
        net cash provided by (used in) operating activities
            Depreciation and amortization                                                 344,551                  301,974
            Reduction of deferred income taxes                                               -                     116,465
            Additions to allowance for doubtful accounts                                  114,405                   79,560
            Reductions of inventory reserves                                             (405,022)                    -
            Loss on sale of equipment, net                                                 36,119                     -
            Stock issued for compensation and services                                     18,000                   14,220
            Goodwill write off on franchise termination                                      -                     213,000
     (Increase) decrease in assets:
            Net investment in direct financing leases                                      80,394                  134,427
            Accounts receivable                                                        (3,228,919)              (1,760,742)
            Inventories                                                                (2,687,444)              10,217,826
            Due from related parties                                                      409,250                  612,542
            notes receivable and other assets                                             (10,227)                 (73,843)
     Increase or (decrease) in liabilities
            Accounts payable                                                             (806,263)               1,261,789
            Accrued expenses                                                            1,362,914                1,441,538
            Customer deposits and other liabilities                                       393,518                 (109,097)
            Floor plan notes payable to trade creditors                                  (302,685)              (5,584,536)
                                                                                   --------------            -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                    (1,193,775)               8,512,314
                                                                                   --------------            -------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from certificate of deposit                                                  (2,365)                  (1,415)
     Purchase of property and equipment                                                  (538,562)                (512,263)
     Proceeds from sale of leased equipment                                               168,877                   30,159
                                                                                   --------------            -------------
NET CASH USED IN INVESTING ACTIVITIES                                                    (372,050)                (483,519)
                                                                                   --------------            -------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Increase in floor plan notes payable to non-trade creditors                      144,128,942              103,645,260
     Payments of floor plan notes payable to non-trade creditors                     (141,364,838)            (108,643,149)
     Payments of long-term debt                                                          (302,274)                (295,678)
                                                                                   --------------            -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                     2,461,830               (5,293,567)
                                                                                   --------------            -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                                 896,005                2,735,228
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                          3,723,500                1,003,137
                                                                                   --------------            -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $    4,619,505            $   3,738,365
                                                                                   ==============            =============
Supplemental disclosures of cash flow information
   Cash paid during the period for:
     Interest                                                                           2,892,779                1,798,120
     Income taxes                                                                         103,000                   73,000


See accompanying notes to condensed consolidated financial statements.




                                       6




              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                    Unaudited
                               September 30, 2005

1.       Basis of Presentation and Significant Accounting Policies

         In the opinion of The Major Automotive Companies, Inc. (the "Company"),
the accompanying unaudited consolidated condensed financial statements contain
all adjustments (consisting primarily of normal recurring adjustments) necessary
to fairly present, in all material respects, the Company's financial position
and its results of operations and cash flows as of the dates and for the periods
indicated.

         Certain information and footnote disclosure normally contained in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and related notes included in the Company's Form 10-K for the year ended
December 31, 2004. The results of operations for the interim periods are not
necessarily indicative of the operating results for the full year.

          In order to maintain consistency and comparability of financial
information between periods presented, certain reclassifications have been made
to the Company's prior year financial statements. In particular, the notes
payable - floor plan as presented in the prior period's balance sheet and
statement of cash flow has been reclassified to its trade and non-trade
components.

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.

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

2.       Floor Plan Interest, Floor Plan Assistance and Advertising Assistance

         Floor plan and advertising assistance received from manufacturers are
recorded as offsets to the cost of the vehicle and recognized into 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 inventory and cost of sales, as appropriate. Floor plan interest expense is
presented as a component of operating expense in the accompanying consolidated
condensed statement of operations to provide more meaningful information
regarding the Company's margin performance.

         For the nine months ended September 30, 2005 and 2004, aggregate floor
plan interest included in interest expense was approximately $2,444,000 and
$1,440,000, respectively. For the three months ended September 30, 2005 and
2004, aggregate floor plan interest included in interest expense was
approximately $912,000 and $554,000, respectively.



                                       7



              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                    Unaudited
                               September 30, 2005
                                   (Continued)

     For the nine-month and three-month periods ended September 30, 2005 and
2004, aggregate floor plan assistance received was, as follows:



                                            Nine Months Ended September 30,    Three Months Ended September 30,
                                            -------------------------------    --------------------------------
                                                2005              2004               2005             2004
                                                ----              ----               ----             ----

Total floor plan assistance received       $ 1,705,008       $ 1,359,060        $   652,530      $   732,264
                                           ===========       ===========        ===========      ===========

Amount included in cost of sales           $ 1,600,538       $ 1,168,934        $   581,948      $   243,482
                                           ===========       ===========        ===========      ===========


     For the nine-month and three-month periods ended September 30, 2005 and
2004, aggregate advertising assistance received was, as follows:



                                            Nine Months Ended September 30,    Three Months Ended September 30,
                                            -------------------------------    --------------------------------
                                                2005              2004               2005             2004
                                                ----              ----               ----             ----

Total advertising assistance received      $    880,447      $  1,230,462       $   363,930      $   818,234
                                           ============      ============       ===========      ===========

Amount included in cost of sales           $    893,476      $    770,940       $   387,685      $   265,692
                                           ============      ============       ===========      ===========


3.       Inventories

      Inventories are comprised of the following:



                                             September 30, 2005      December 31, 2004
                                             ------------------      -----------------

  New automobiles                                $   17,146,250      $    16,187,727
  New trucks and vans                                13,667,324           14,583,590
  Used automobiles, vans and trucks                  24,461,028           21,547,355
  Parts and accessories                               1,456,998            1,348,715
  Other                                                  80,710               52,457
                                                ---------------      -----------------
                                                 $   56,812,310       $   53,719,844
                                                ===============      =================


Aggregate reserves included in the inventories were $242,000 and $647,000 at
September 30, 2005 and December 31, 2004, respectively.




                                       8




              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                    Unaudited
                               September 30, 2005
                                   (Continued)

4.       Related Party Transactions

         Amounts due from related parties result from sales and purchases of
vehicles to and from dealerships owned by Bruce Bendell, the Company's
President, Chief Executive Officer, Acting Chief Financial Officer and Chairman,
and his brother, Harold Bendell, a key employee (the "Bendell Dealerships"), as
well as previous advances made in the ordinary course of business. All of the
sales and purchases to and from the Bendell Dealerships are made at wholesale
cost plus related fees and have, therefore, resulted in no significant profit or
loss to the Company. For the nine-month and three-month periods ended September
30, 2005 and 2004, the related party sales and purchases were as follows:



                                    Nine Months Ended September 30,     Three Months Ended September 30,
                                    -------------------------------     --------------------------------
                                         2005              2004               2005            2004
                                         ----              ----               ----            ----

Related party sales                $   3,878,542     $   4,441,365       $1,166,018       $1,477,741
                                   =============     =============       ==========       ==========

Related party purchases            $   5,457,641     $   4,747,498       $1,842,753       $1,136,627
                                   =============     =============       ==========       ==========


         Pursuant to an agreement in principal, effective January 1, 2004, with
HB Automotive, Inc., a company controlled by Harold Bendell, and a management
agreement with Harold Bendell, the Company has accrued management fees for
services performed for the Company by HB Automotive, Inc. and Harold Bendell.
For the nine months ended September 30, 2005 and 2004, such fees, included in
operating expenses, amounted to $2,354,844 and $1,903,428, respectively. For the
three months ended September 30, 2005 and 2004, such fees, included in operating
expenses, amounted to $774,671 and $677,497, respectively. At September 30,
2005, the Company is indebted to HB Automotive, Inc. in the aggregate amount of
$2,011,873, in connection with such fees, which is included in accrued expenses.

         As of September 30, 2005, the Company was indebted to Bruce Bendell in
the net amount of $566,997. This indebtedness was net of a series of cash
advances to Mr. Bendell, for which no interest has been charged, aggregating
$1,395,358, the latest of which was made prior to June 30, 2002. The Company
expects repayment to be made on these advances, although amounts due to Bruce
Bendell as of September 30, 2005 exceed this amount. At September 30, 2005, the
Company has accrued, but not paid, an aggregate of $1,962,355, due to Bruce
Bendell for bonuses and credit enhancement, which amount is included in accrued
expenses. Included in the amount, is a credit enhancement of $1,237,500, of
which $337,500 and $112,500, respectively, were accrued in the nine months and
three months ended September 30, 2005. This amount was previously approved by
the Company's Board of Directors.



                                        9




              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                    Unaudited
                               September 30, 2005
                                   (Continued)

5.       Subsequent Event

       In October 2005, the Company's board of directors, based on
recommendations of a special committee of independent directors, unanimously,
approved a reverse 1-for-1,000 split of the Company's common stock to be
followed immediately by a forward 1,000-for-1 split (the "Split Transaction").
In the Split Transaction, shareholders with less than 1,000 shares of the
Company's common stock held of record in their name immediately before the Split
Transaction will receive a cash payment equal to $1.90 per pre-split share.
Shareholders holding 1,000 or more shares of the Company's common stock
immediately before the Split Transaction will not receive a cash payment and
will continue to hold the same number of shares after completion of the Split
Transaction. If the Company's shareholders approve the proposed amendments to
the Company's articles of incorporation and the Split Transaction is
implemented, the Company anticipates having fewer than 300 shareholders of
record, which would enable of the Company to voluntarily terminate the
registration of its common stock under the Securities Exchange Act of 1934.

     The board of directors believes that terminating the Company's registration
will eliminate growing expenses and commitments associated with being a public
company. It will also allow the management of the Company to focus additional
attention on operations and financial management, which would further enhance
the Company's financial performance and stockholder value.

6.       Contingencies

     The Company is involved in a number of legal proceedings arising out of the
conduct of our business, including litigation with customers, current and former
business associates and employment-related lawsuits. The Company intends to
vigorously defend itself and assert available defenses with respect to each of
these matters. Where necessary, the Company has accrued its estimate of the
probable costs for the resolution of these proceedings based on consultation
with outside counsel, assuming various strategies. Further, the Company has
certain insurance coverage and rights of indemnification with respect to certain
aspects of these matters. During the nine months ended September 30, 2005, there
were no significant developments in the Company's legal proceedings, which are
discussed in detail in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2004. 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 the Company's business,
financial condition, results of operations, cash flows and prospects.








                                       10




              THE MAJOR AUTOMOTIVE COMPANIES, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                    Unaudited
                               September 30, 2005
                                   (Continued)

7.       Effect of Recently Issued Accounting Standards

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

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

     In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections -- a replacement of APB Opinion No. 20 and FASB Statement No. 3."
This statement changes the requirements for accounting for and reporting a
change in accounting principles and applies to all voluntary changes in
accounting principles. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include
specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. This statement
requires retrospective application to prior periods' financial statements of
changes in accounting principles, unless it is impracticable to determine either
the period-specific effects or the cumulative effect of change. This statement
becomes effective for fiscal years beginning after December 15, 2005. The
adoption of SFAS No. 154 is not expected to have a material impact on the
Company's net income and earnings per share.





                                       11




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

The following discussion of our and our subsidiaries' ("we" or the "Company")
operations, financial condition, liquidity and capital resources should be read
in conjunction with our unaudited Consolidated Condensed Financial Statements
and related notes thereto included elsewhere herein.

This discussion 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. acquired, from a related
party, the Major Automotive Group of dealerships ("Major Auto") and related real
property and leases. Since November 3, 2000, our operations have been comprised
of our automotive dealerships' activities, including our Major Auto subsidiary
and other dealerships, as well as our automotive leasing subsidiary, Major Fleet
and Leasing, Inc.

In the first nine months of 2005, our operations generated pre-tax income of
approximately $4,869,000 and net income of approximately $3,488,000. In the
comparable period of 2004, our operations resulted in pre-tax income of
$1,831,000 and net income of $1,647,000. The most significant factor in this
result was the increase in our gross profits. In the 2005 nine-month period our
sales increased by $73.9 million to $366.8 million, or 25.2%, from $292.9
million in the 2004 comparable period. We believe this sales increase is
attributable to a continuation of a trend that developed in 2004. New vehicle
manufacturers have continued to offer cash-back and other incentives. This has
led more customers who were formerly used car buyers toward purchases of new
vehicles. Revenue per new vehicle sold decreased by approximately $300 and the
gross profit per new vehicle sold increased by approximately $100, but the
volume of new vehicle unit sales increased 25.9%. Our used vehicle unit sales
increased 16.2% during the first nine months of 2005 as compared with the prior
year's first three quarters, and a strong increase in average selling price per
used vehicle sold, which we attribute to both a shortage in the availability of
good quality late-model used vehicles and our customers migrating to higher
value used vehicles, generated an overall revenue increase of 26.1% from used
vehicle sales. The significantly higher volume on new vehicles sales, together
with a slight increase in our gross profit percentage generated more than a 32%
increase in gross profit from new vehicles sold. While our used vehicle gross
profit percentage increased less than 1% period to period, along with the
volume, used vehicle sales generated a gross profit increase on used vehicle
sales of more than 30%. Our total gross profit in the first nine months of 2005
increased to $60.4 million or $13.3 million (28.2%) more than our gross profit
in the comparable period in 2004.









                                       12




CRITICAL ACCOUNTING POLICIES

We prepare our consolidated condensed 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, Basis of Presentation and Significant Accounting Policies, of the Notes
to Consolidated Condensed Financial Statements included elsewhere, herein, and
in our Form 10-K for the year ended December 31, 2004, filed with the Securities
and Exchange Commission (the "Commission").

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. Currently, there are a number of states that have passed legislation
that limits the amounts car dealers can earn from vehicle financing and several
other states' attorneys general have either proposed similar legislation or have
evidenced interest in this area. If this trend continues and becomes an issue in
New York, it may be a limiting factor on our ability to generate revenues and
profits. 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.

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 goodwill
and property and equipment, which constitute a significant component of our
consolidated condensed 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. 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. 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 began applying the
new rules on accounting for goodwill beginning in the first quarter of 2002.
During 2002, we performed the required impairment tests of goodwill as of
January 1, 2002 and December 31, 2002. Additionally, we have performed such
tests as of December 31, 2003 and 2004. We have concluded, based, in part, on
the analysis performed and conclusions




                                       13




reached by an independent valuation appraiser we retained, that there was an
impairment of goodwill as of December 31, 2004 and, accordingly, such goodwill
was written down to its fair value of $5,260,000. We remain, however, subject to
financial statement risk to the extent that intangible assets become
additionally impaired due to decreases in the fair market value of the related
underlying business.

Floor Plan Borrowings. We finance the purchases of a portion of our new vehicle
inventories through floor plan borrowings from certain lenders, which are
affiliated with the automotive manufacturers from which we buy our new vehicles.
Balances due to these lenders are classified as "floor plan notes payable to
trade creditors." At September 30, 2005 and December 31, 2004, outstanding floor
plan borrowings due to trade creditors were approximately $20.8 million and
$34.7 million, respectively. The balance of the Company's new vehicle inventory
and its used vehicle inventory is financed through floor plan borrowings through
lenders who are not affiliated with the vendors of such inventory. Balances due
to these lenders are classified as "floor plan notes payable to non-trade
creditors." At September 30, 2005 and December 31, 2004, outstanding floor plan
borrowings due to trade creditors were approximately $33.0 million and $16.7
million, respectively. Pursuant to SFAS 95, the Company has restated its cash
flow statements to show the borrowings and repayments related to the floor plan
notes payable to non-trade creditors as a financing activity. Previously, all
floor plan borrowings and repayment were classified as operating activities.

Floor Plan and Advertising Assistance. Floor plan and advertising assistance
received from manufacturers are recorded as reductions of inventory or offsets
to the cost of the vehicle, as appropriate, 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 and inventory, as appropriate.

For the nine months ended September 30, 2005 and 2004, aggregate floor plan
interest included in interest expense was approximately $2,444,000 and
$1,440,000, respectively. For the three months ended September 30, 2005 and
2004, aggregate floor plan interest, included in interest expense, was
approximately $912,000 and $554,000, respectively. The increase in floor plan
interest expense incurred in the nine months ended September 30, 2005 compared
with the same period in 2004 reflects both an increase in inventory levels
necessary to support our higher sales volume and, to a lesser extent, higher
interest rates. The increase of floor plan interest for the three months ended
September 30, 2005 compared with the same 2004 period is reflective of the
increased levels of inventory and higher interest rates during the current
period.

For the nine months ended September 30, 2005 and 2004, aggregate floor plan
assistance, included as a reduction of cost of sales, was approximately
$1,601,000 and $1,169,000, respectively. For the three months ended September
30, 2005 and 2004, aggregate floor plan assistance, included as a reduction of
cost of sales, was approximately $582,000 and $243,000, respectively.

Advertising assistance received from manufacturers for the nine months ended
September 30, 2005 and 2004, included as a reduction of cost of sales, was
approximately $893,000 and $771,000, respectively. Advertising assistance
received from manufacturers for the three months ended September 30, 2005 and
2004, included as a reduction of cost of sales, was approximately $388,000 and
$266,000, respectively.

Contingencies. 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



                                       14




business associates and employment-related lawsuits. 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.

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.






















                                       15




SELECTED OPERATING DATA (UNAUDITED)



($ in millions, except                            NINE MONTHS ENDED SEPTEMBER 30,                  THREE MONTHS ENDED SEPTEMBER 30,
                                                  -------------------------------                  --------------------------------
   per vehicle data)                                       Variance -                                       Variance -
                                                            Favorable       %                                Favorable        %
                                      2005         2004   (Unfavorable)  Variance      2005        2004    (Unfavorable)   Variance
                                      ----         ----   -------------  --------      ----        ----    -------------   --------

Revenues
   New vehicles                      $145.9       $117.3      $28.6        24.4        $50.9       $41.9        $9.0         21.5
   Used vehicles                      204.0        161.8       42.2        26.1         73.4        57.5        15.9         27.7
   Service and parts                   15.0         12.4        2.6        21.0          5.0         4.1         0.9         22.0
   Other                                1.9          1.4        0.5        35.7          1.2         0.6         0.6          100
                                    -------      -------     ------        ----      -------     -------      ------         ----
      Total revenues                 $366.8       $292.9      $73.9        25.2       $130.5      $104.1       $26.4         25.4
                                    =======      =======     ======        ====      =======     =======      ======         ====
GROSS PROFIT
   New vehicles                       $14.4        $10.9       $3.5        32.1         $4.7        $3.2        $1.5         46.9
   Used vehicles                       40.2         30.9        9.3        30.1         13.8        10.6         3.2         30.2
   Service and parts                    3.9          3.8        0.1         2.6          1.3         1.1         0.2         18.2
   Other                                1.9          1.5        0.4        26.7          1.6         1.1         0.5         45.5
                                    -------      -------     ------        ----      -------     -------      ------         ----
      Total gross profit              $60.4        $47.1      $13.3        28.2        $21.4       $16.0        $5.4         33.8
                                    =======      =======     ======        ====      =======     =======      ======         ====
   Gross profit percentage             16.5%        16.1%       0.4%        2.4         16.4%       15.4%        1.0%         6.7
                                    =======      =======     ======        ====      =======     =======      ======         ====
New vehicles
Unit sales                            5,150        4,091      1,059        25.9        1,881       1,496         385         25.7
Average revenue per vehicle         $28,322      $28,665      ($343)       (1.2)     $27,064     $27,994       ($930)        (3.3)
Average cost per vehicle            $25,519      $25,996      ($477)       (1.8)     $24,577     $25,860     ($1,283)        (5.0)
Gross profit per vehicle             $2,803       $2,669       $134         5.0       $2,487      $2,134        $353         16.5
Gross profit percentage                 9.9%         9.3%       0.6%        6.5          9.2%        7.6%        1.6%        21.1

USED VEHICLES
Unit sales                           12,777       10,996      1,781        16.2        4,653       3,870         783         20.2
Average revenue per vehicle         $15,965      $14,713     $1,252         8.5      $15,781     $14,869        $912          6.1
Average cost per vehicle            $12,821      $11,902       $919         7.7      $12,814     $12,126        $688          5.7
Gross profit per vehicle             $3,144       $2,811       $333        11.8       $2,967      $2,743        $224          8.2
Gross profit percentage                19.7%        19.1%       0.6%        3.1         18.8%       18.4%        0.4%         2.2

PERCENTAGE OF TOTAL REVENUES
New vehicles                           39.8%        40.0%      -0.2%       (0.5)        39.0%       40.3%       -1.3%        (3.1)
Used vehicles                          55.6%        55.2%       0.4%        0.7         56.2%       55.2%        1.0%         1.8
Service and parts                       4.1%         4.2%      -0.1%       (2.4)         3.8%        3.9%       -0.1%        (2.6)
Other                                   0.5%         0.6%      -0.1%      (16.7)         1.0%        0.6%        0.4%        53.8
                                  ------------------------------------------------------------------------------------------------
                                      100.0%       100.0%       0.0%        0.0%       100.0%      100.0%        0.0%         0.0%
                                  ================================================================================================
OTHER OPERATING DATA
Total operating expenses              $52.6        $43.3       $9.3        21.5        $18.8       $15.1        $3.7         24.5
Floor plan interest, included
   in operating expenses                2.4          1.4       $1.0        71.4          0.9         0.6        $0.3         50.0







                                       16




RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2005 AND NINE MONTHS
ENDED SEPTEMBER 30, 2004

         Revenues. Revenues for the nine-month period ended September 30, 2005
had an increase to approximately $366.6 million, which is $73.9 million, or
25.2%, more than the prior comparable period's revenues of $292.9 million. The
primary reasons for the increase in revenues was the substantial increase in the
number of both new and used vehicles sold, as well as the increase in the
average selling prices for used vehicles, which more than offset the decrease in
average selling price for new vehicles. New vehicles sold increased
significantly by 1,059 units (25.9%) in the first three quarters of 2005 to
5,150 units from 4,091 units in the first three quarters of 2004 primarily, we
believe, because of continuing and increased consumer incentives from new
vehicle manufacturers. Used vehicle unit sales increased by 1,781 units (16.2%)
to 12,777 units in the first three quarters of 2005 from 10,996 units, retail
and wholesale, in the prior year's comparable nine months. We believe this
increase in used vehicle units is primarily attributable to the effects of the
general consumer trend in the industry, our extensive inventory that can provide
consumers with quality used vehicles at all price points, including high line
and luxury vehicles, and our ability to arrange favorable financing for most
customers. Selling prices of new vehicles decreased approximately $343 per
vehicle. However, the increase in units sold generated the increase in new
vehicle sales revenues of $28.6 million (24.4%) to $145.9 million in the first
nine months of 2005 from $117.3 million in the prior year's comparable period.
The average selling price of used vehicles increased by $1,252 per unit, which,
combined with the increase in used vehicle unit sales resulted in a $42.2
million (26.1%) increase in used vehicle sales to $204.0 million in the first
three quarters of 2005 from used vehicle sales of $161.8 million in the
comparable 2004 period.

         We believe that the consumer trend toward new vehicle purchases will
continue as long as manufacturers remain committed to giving new vehicle
purchasers substantial incentives to do so. We also believe that our ability to
provide a wide range of quality used vehicles and to secure financing for most
customers will allow us to continue to grow our used vehicle operations. As a
result of this continuing trend, our mix of new and used vehicle sales to total
revenues remained at approximately the same levels of 55.2% used vehicle sales
and 40.0% new vehicle sales during the first nine months of 2004 and 55.6% used
vehicle sales and 39.8% new vehicle sales during the first nine months of 2005.

         Cost of sales. The aggregate cost of sales increase of $60.6 million,
or 24.7%, to $306.4 million in the first three quarters of 2005 from $245.8
million for the nine months ended September 30, 2004, is reflective of the
significant increase in new and used vehicle unit sales and reflects a decrease
in the average cost of new vehicles sold of $477 as offset by the higher used
vehicle unit costs, from $11,902 in the 2004 nine-month period to $12,821, an
increase of $919, or 7.7%, in the comparable 2005 period, as well as the
increased unit volume of used vehicle sales.

         Gross profit. Our operations generated total gross profit of $60.4
million for the nine months ended September 30, 2005, an increase of
approximately $13.3 million or 28.2%, from gross profits of $47.1 million in the
prior year's comparable period. The increase in gross profit was primarily
attributable to the increase in both new and used vehicle unit sales and, to a
lesser extent, an increase of $134 per vehicle in the average gross profit of
new vehicles sold and an increase in average gross profit of $333 per used
vehicle sold. Total gross profits as a percentage of revenues were 16.5% and
16.1% in the nine months ended September 30, 2005 and 2004, respectively.




                                       17





         Operating expenses. In the nine months ended September 30, 2005,
operating expenses increased approximately $10.3 million, or 23.0%, to
approximately $55.0 million, from $44.7 million in the prior year's comparable
period. This increase is generally attributable to the substantial growth of the
revenues during the 2005 period and the selling, general and administrative
expenses necessary to support such growth. Payroll costs, for additional sales
personnel, increased commissions and related taxes increased by approximately
$4.5 million in the first nine months of 2005 from the comparable 2004 period
and bonuses, primarily to a related party, HB Automotive, Inc., increased by
approximately $800,000 in the 2005 first nine months from the prior year's first
nine months. Together, such payroll and bonus costs represent approximately half
of the operating expenses increase. Additionally, during the comparable
nine-month period in 2004, we recorded net gains of $365,000 and $237,000,
respectively, from a reversal of a reserve for closing costs on one dealership
and on the sale of another. These gains reduced operating expenses in the 2004
period. Because of economies of scale, cost-cutting strategies in effect and the
fixed costs inherent in our operations, our operating costs did not keep pace
with the percentage growth of our revenues.

         Interest expense. Net interest expense had a net increase of
approximately $984,000 in the first nine months of 2005 compared with the same
2004 period. Interest related to our floor plan financing was approximately $2.4
million in the 2005 period compared with approximately $1.4 million in the
comparable 2004 period. On average, we maintained a significantly higher
inventory level in 2005, necessary to support the sales growth and interest
rates increased. The approximate $20,000 decrease in other interest is
attributable to repayments of long-term debt.

         Income tax expense. Income taxes are provided based on our annualized
estimated effective tax rate, which reflects the expected utilization of net
operating loss carryovers in the year ending December 31, 2005.


RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2005 AND THREE MONTHS
ENDED SEPTEMBER 30, 2004

         Revenues. Revenues for the three-month period ended September 30, 2005
increased to approximately $130.5 million, which is $26.4 million, or 25.4%,
more than the prior comparable period's revenues of $104.1 million. The primary
reason for the increase in revenues was the increase in units of both new and
used vehicles sold. New vehicle unit sales increased by 385 units, or 25.7%, in
the current quarter compared with the 2004 third quarter. Although the average
sales price per new vehicle sold declined by $930, because of the volume
increase, aggregate new vehicle sales revenue grew by $9.0 million (21.5%) to
$50.9 million in the third quarter of 2005 from $41.9 million in the third
quarter of 2004. Used vehicle sales revenues also increased substantially
quarter to quarter. The number of used vehicles sold increased by 783 (20.2%)
units, retail and wholesale, from 3,870 in 2004 to 4,653 in 2005. This volume
expansion combined with an average used vehicle unit sales price increase of
$912, resulted in a total used vehicle sales revenue growth to $73.4 million in
the 2005 third quarter from $57.5 million in the 2004 comparable period, an
increase of $15.9 million, or 27.7%. We believe that during the first three
quarters of 2005, there was a consumer trend toward new vehicle purchases that
will continue as long as manufacturers remain committed to giving new vehicle
purchasers substantial incentives to do so. Also, our ability to sell a wide
variety of quality used vehicles at all price points, plus our ability to
arrange financing for most customers, has enabled us to attract and retain used
vehicle customers and contribute to our growth this period.

         Cost of sales. Our cost of sales increase of $21.0 million, or 23.8%,
to $109.1 million in the third quarter of 2005 from $88.1 million for the three
months ended September 30, 2004 is consistent with our greater sales volume,
combined with the change in sales mix, whereby we are selling a




                                       18





greater percentage of the more expensive new vehicles than the lower cost used
vehicles, resulting in a higher cost of sales.

         Gross profit. Our total gross profit of $21.4 million for the three
months ended September 30, 2005, is an increase of $5.4 million, or 33.8%, from
gross profit of $16.0 million in the prior year's comparable quarter. The
increase in gross profit was primarily attributable to the increase in volume of
new and used vehicles sold in the period, with average gross profit per new
vehicle sold increasing by $353 and average gross profit for each used vehicle
sold increasing by $224. Gross profits as a percentage of sales increased to
16.4% in 2005 from 15.4% in 2004, increasing by approximately 0.4% for used
vehicles and increasing approximately 1.6% for new vehicles.

         Operating expenses. In the three months ended September 30, 2005,
operating expenses increased approximately $4.6 million, or 30.5%, to
approximately $19.7 million, from $15.1 million in the prior year's comparable
quarter. This increase is generally attributable to the substantial growth of
the revenues during the 2005 period and the selling, general and administrative
expenses necessary to support such growth. Payroll costs, for additional sales
personnel, increased commissions and related taxes increased by approximately
$2.3 million in the third quarter of 2005 from the comparable 2004 period and
bonuses, primarily to a related party, HB Automotive, Inc., increased by
approximately $150,000 in the 2005 third quarter from the 2004 third quarter.
Together, such payroll and bonus costs represent almost 50% of the operating
expenses increase. Because of economies of scale, cost-cutting strategies in
effect and the fixed costs inherent in our operations, our operating costs did
not keep pace with the percentage growth of our revenues. Interest related to
our floor plan financing, included in operating expenses, was approximately
$900,000 in the 2005 period compared with approximately $600,000 in the
comparable 2004 period. On average, we maintained a significantly higher
inventory level in 2005, that was necessary to support the sales growth and
interest rates increases.

         Interest expense, net. Net interest expense had a net increase of
approximately $351,000 to approximately $1,091,000 in the third quarter of 2005
from approximately $740,000 recorded in the comparable prior period. Interest
related to our floor plan financing, included in operating expenses, was
approximately $912,000 in the 2005 period compared with approximately $555,000
in the comparable 2004 period. On average, we maintained a significantly higher
inventory level in 2005, that was necessary to support the sales growth and
interest rates increases. The decrease in other interest of approximately $6,000
to $179,000 in the third quarter of 2005 from $185,000 recorded in the
comparable prior period is attributable to repayments of long-term debt.

         Income tax expense. Income taxes are provided based on our annualized
estimated effective tax rate, which reflects the expected utilization of net
operating loss carryovers in the year ending December 31, 2005.

LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 2005

At September 30, 2005, our total assets were $92.6 million, an increase of
approximately $6.6 million from total assets of $86.0 million at December 31,
2004. This aggregate increase is primarily related to the increases in our net
accounts receivable of $3.1 million, inventories of $3.1 million and cash of
almost $900,000, as partially offset by an aggregate decrease in due from
related parties of approximately $400,000.

For the nine months ended September 30, 2005, we had a net increase in cash and
cash equivalents of $896,005. The primary reason for this increase was the net
cash provided by our financing activities




                                       19




of $2,461,830. This increase is the net effect of a net increase of floor plan
notes payable to trade creditors of $2,764,104 less payments of long-term debt
of $302,274.

The net cash used by our operating activities of $1,193,775 was comprised,
primarily, of a net increase in assets of $5,436,946 (attributable, primarily,
to the increases in accounts receivable of $3,228,919 and inventories of
$2,687,444, attributable to our large increase in sales volume, net of a
decrease in due from related parties of $409,250, less:

      1.  Our net income of $3,487,634, plus net non-cash charges of $108,053
          (primarily depreciation and amortization of $344,551 and additions to
          allowance for doubtful accounts of $114,405, as partially offset by
          reductions of inventory reserves of $405,022), aggregating $3,595,687
          and

      2.  A net increase in liabilities of $647,484 (primarily attributable
          to increases in accrued expenses of $1,362,914 and customer deposits
          and other liabilities of $393,518, as partially offset by a decrease
          in accounts payable of $806,263 and floor plan notes payable to trade
          creditors of $302,685). This increase in liabilities is primarily the
          result of our higher levels of inventory and operating expenses
          combined with our greater cash availability for payments to creditors
          in the first nine months of 2005.

Our net cash use of $372,050 from our investing activities is primarily
attributable to purchases of property and equipment.

We had working capital of approximately $3.9 million and $1.9 million at
September 30, 2005 and December 31, 2004, respectively. We require cash to fund
our working capital needs and capital expenditures, as well as to meet existing
commitments. These cash requirements include payments on long-term debt of $1.8
million for the last three months of 2005, $1.1 million for 2006, $563,000 for
2007 and $4.1 million, thereafter, and lease payments of $298,000 for the last
three months of 2005, $1.1 million for 2006, $852,000 for 2007 and $1.1 million,
thereafter. In addition, pursuant to an employment agreement with our President,
Chief Executive Officer and Acting Chief Financial Officer, Bruce Bendell, that
expired on June 30, 2005, but which was automatically extended to June 30, 2006,
pursuant to its terms, we are obligated to pay him a minimum of $500,000 per
year. Additionally, our Board of Directors has approved the payments to Mr.
Bendell, which is expected to approximate $450,000, annually, for the
continuation of his credit enhancement to us through the provision of his
personal guarantee on our floor plan financing. All of the foregoing obligations
are funded, principally, from cash flows from operations and borrowings under
floor plan financings.

We believe that the cash generated from existing operations, together with cash
on hand, available credit from our current lenders, including banks and floor
plan lenders, will be sufficient to finance our debt and lease obligations,
other commitments, current operations and internal growth for at least the next
twenty-four months.




                                       20




FORWARD-LOOKING STATEMENTS

When used in the Quarterly Report on Form 10-Q, 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 of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act") regarding events, conditions and financial
trends that may affect our future plans of operations, business strategy,
results of operations and financial condition. We wish to ensure that such
statements are accompanied by meaningful cautionary statements pursuant to the
safe harbor established in the Private Securities Litigation Reform Act of 1995.
Prospective investors are cautioned that any forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties and
that actual results may differ materially from those included within the
forward-looking statements as a result of various factors including our ability
to consummate, and the terms of, acquisitions, if any. Such forward-looking
statements should, therefore, be considered in light of various important
factors, including those set forth herein and others set forth from time to time
in our reports and registration statements filed with the Commission. We
disclaim any intent or obligation to update such forward-looking statements.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign Currency Risk

Although we sell some vehicles in certain foreign countries, principally,
Ukraine, Belarus and Kazakhstan, substantially all our revenues come from sales
of vehicles in the Unites 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
operations, we believe that there is not a material risk exposure.

Interest Rate Risk

Our interest rate expense is sensitive to changes in the general level of U.S.
interest rates because the interest rates charged vary with the prime rate or
LIBOR. Our interest income is also 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. Due to the nature of our investments
and operations, we believe that there is not a material risk exposure.


ITEM 4.           CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation under the supervision and with the participation of
our Chief Executive Officer, who is also our Acting Chief Financial Officer, of
the design and effectiveness of our disclosure controls and procedures, as
defined in the Exchange Act Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the
period covered by this report (the "Evaluation Date). Based on this evaluation
of our disclosure controls and procedures, we have concluded that, as of the
Evaluation Date, our disclosure controls and procedures were not effective in
timely alerting us




                                       21




to material information required to be included in our periodic SEC reports. We
have insufficient accounting personnel who can analyze, record and resolve
complex transactions and accounting matters, including certain inventory
reconciliations, on a timely basis and we have recognized some weaknesses in
financial reporting procedures. However, we are aware of no errors, which have
occurred during the period covered by this report.

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

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

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

Changes in Internal Controls

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

















                                       22




PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

During the quarter, there were no significant developments in our legal
proceedings. For a detailed discussion of our legal proceedings, please refer to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2004.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

None.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.


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

None


ITEM 5.  OTHER INFORMATION

None.


ITEM 6.  EXHIBITS

(a)      Exhibits.

31.1     Chief Executive Officer's and Acting Chief Financial Officer's
         Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1     Chief Executive Officer's and Acting Chief Financial Officer's
         Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

























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                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                   THE MAJOR AUTOMOTIVE COMPANIES, INC.


Date: January 27, 2006             /s/ Bruce Bendell
                                   ------------------
                                   Bruce Bendell
                                   Chairman of the Board and Chief Executive
                                      Officer and Acting Chief Financial Officer






























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