SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

|X|        ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
           ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1996

|_|        TRANSITION  REPORT  UNDER  SECTION  13 OR  15(d)  OF  THE  SECURITIES
           EXCHANGE  ACT OF 1934  FOR THE  TRANSITION  PERIOD  FROM  _______  TO
           _________

                           Commission File No. 0-23538
                                              ---------

                       MOTORCAR PARTS & ACCESSORIES, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

              NEW YORK                                           11-2153962
- -------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

2727 MARICOPA STREET, TORRANCE, CALIFORNIA                         90503
- ------------------------------------------                        --------
(Address of principal executive offices)                          Zip Code

Issuer's telephone number:  (310) 212-7910
                           ----------------

Securities registered under Section 12(b) of the Act:  None

Securities  registered  under Section 12(g) of the Act:  Common Stock,  $.01 par
value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.

                                Yes   [X]  No  [_]

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will 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-KSB or any  amendment to
this Form 10-KSB. [ ]

Issuer's revenues for its most recent fiscal year:  $44,913,000.

The aggregate market value, calculated on the basis of the average bid and asked
prices of such stock on the National Association of Securities Dealers Automated
Quotation  System,  of the voting stock held by non-affiliates of the Registrant
at June 25, 1996 was approximately $53,854,000.

There were 4,879,500 shares of Common Stock outstanding at June 25, 1996.

                       DOCUMENTS INCORPORATED BY REFERENCE


    Part III of the Registrant's Proxy Statement relating to its 1996 Annual
           Meeting of Shareholders is incorporated by reference herein




<PAGE>



                                     PART I


ITEM 1.    DESCRIPTION OF BUSINESS.

GENERAL

           The  Company  is  a  leading   remanufacturer   and   distributor  of
replacement  alternators  and starters for imported cars and light trucks in the
United States.  The Company's  alternators and starters are  remanufactured  for
vehicles imported from Japan, Germany, Sweden, England, France, Italy and Korea.
The  imported  vehicles  for which the Company  remanufactures  alternators  and
starters  also include (i) "world  cars," which are produced by General  Motors,
Chrysler and Ford and originally  equipped with  components  produced by foreign
manufacturers,  and (ii)  "transplants,"  which are  manufactured  in the United
States by Toyota,  Nissan,  Honda,  Mazda and others. The Company also assembles
and  distributes  ignition  wire sets for imported  and domestic  cars and light
trucks.

           The Company's  products are sold throughout the United States to many
of the nation's largest chains of retail automotive  stores,  including Northern
Automotive,  AutoZone,  The Pep Boys,  Hi-Lo  Automotive,  Trak  Automotive  and
O'Reilly  Automotive.  The  Company  also  sells its  alternators  and  starters
throughout  Canada  as a  supplier  to that  country's  largest  chain of retail
automotive stores, Canadian Tire. During the last several years, the Company has
concentrated on sales to retail automotive chains, which the Company believes is
the fastest growing segment of the automotive after-market industry. As a result
of these efforts,  the Company commenced  shipments to AutoZone and The Pep Boys
in  fiscal  1995  and  to  Canadian  Tire  in  fiscal  1996.  For  fiscal  1996,
approximately 72% of the  Company's  sales  were to  retail  automotive  chains
comprised of approximately 3,700 stores,  with the balance of sales primarily
to large warehouse distributors, such as Parts, Inc. and Hahn Automotive.

           In fiscal 1996, Delphi selected the Company to supply  remanufactured
alternators and starters for imported vehicles for distribution  through Service
Parts  Operations  (SPO). In September 1995, the Company  commenced  shipment of
products under this new arrangement. The units supplied by the Company under its
arrangement  with Delphi will be sold under General  Motors'  private label,  AC
Delco.

THE AUTOMOTIVE AFTER-MARKET INDUSTRY

           The Company's market, the import automotive after-market industry for
alternators   and   starters,   which  is  comprised   almost   exclusively   of
remanufacturers and rebuilders, has experienced significant growth during recent
years.  The  Company  expects  this  growth to  continue  as a result of several
trends. These trends include the proliferation of imported cars and light trucks
(including world cars and transplants) in use, the growth in the number of miles
driven each year and the growth in the number of imported  vehicles at the prime
repair age of four years and older.


                                                    
                                       -2-


<PAGE>


           Two distinct  groups of end-users buy replacement  automotive  parts:
(i) individual consumers, who purchase parts to perform "do-it-yourself" repairs
on  their  own  vehicles;  and  (ii)  professional  installers,   which  include
automotive repair shops and the service departments of automobile  dealers.  The
individual  consumer market is typically  supplied through retailers and through
the retail arms of warehouse  distributors.  Automotive  repair shops  generally
purchase parts through local  independent parts wholesalers and through national
warehouse  distributors.  Automobile dealer service departments generally obtain
parts through the distribution  systems of automobile  manufacturers.  In recent
years,  chains of retail  stores in the  automotive  after-market  industry have
become an increasingly  important  channel for the distribution of the Company's
products. In addition, the Company also believes that significant  consolidation
among  distributors  of automotive  replacement  parts has resulted in fewer and
larger distributors.

           Remanufacturing  of  operational  replacement  parts is a significant
component  of the  automotive  aftermarket  industry.  Sales by chains of retail
automotive stores and by automotive  wholesalers of  remanufactured  alternators
and starters  are  believed by the Company to comprise the vast  majority of the
Company's  market.  Only a portion  of that  market is  supplied  by the sale of
similar new  replacement  parts.  Remanufacturing,  which involves the re-use of
parts  which  might  otherwise  be  discarded,  creates  a supply  of parts at a
significantly  lower cost to the user than  newly-manufactured  parts, and makes
available  automotive  parts which are no longer being  manufactured.  By making
readily  available parts for automotive  general use,  remanufacturing  benefits
automotive  repair shops by relieving  them of the need to rebuild worn parts on
an individual  basis and conserves  materials  which would  otherwise be used to
manufacture new replacement  parts.  Most  importantly,  however,  the Company's
remanufactured parts are sold at significantly lower prices than competitive new
replacement  parts.  These features also enable retail  customers  themselves to
engage in cost-saving repairs.

COMPANY PRODUCTS

           The  Company's  primary  products  are   remanufactured   replacement
alternators  and starters for imported cars and light  trucks.  The Company also
assembles and distributes ignition wire sets for the automotive after-market for
use in a wide variety of makes and models of foreign  automobiles.  Alternators,
starters and ignition wire sets are essential components in all makes and models
of automobiles.  These products constitute non-elective replacement parts, which
are  required  for a vehicle to operate.  Approximately  13% of   the  Company's
products  are sold under its brand  name,  including  the use of its  registered
trademark  "MPA," and the remainder are sold for resale under  customer  private
labels.  Customers that sell the Company's  products under private label include
Northern Automotive, The Pep Boys, AutoZone, Parts, Inc. and Delphi.

           The Company's alternators and starters are produced to meet or exceed
automobile manufacturer  specifications depending upon the make and model of the
automobile.  The Company  remanufactures  a broad  assortment  of  starters  and
alternators  in order to accommodate  the numerous and  increasing  varieties of
these products  currently in use. The Company currently  provides  approximately
750 different alternators and 525 different starters.  The Company's alternators
and
                                                    
                                       -3-


<PAGE>


starters are  provided  for  virtually  all  Japanese  manufacturers,  including
Toyota,  Honda,  Nissan, Mazda and Mitsubishi,  certain European  manufacturers,
including Mercedes Benz, BMW, Volvo and Volkswagen, manufacturers of world cars,
including  Chrysler,  General  Motors and Ford,  and  foreign  manufacturers  of
transplant cars.

CUSTOMERS

           GENERAL

           The Company's products are marketed  throughout the United States and
Canada.  The Company's  customers  consist of many of the United States' largest
chains of retail automotive stores and automotive  warehouse  distributors.  The
Company also sells its products to Canada's  largest chain of retail  automotive
stores, Canadian Tire. 

           A significant percentage of the Company's sales has been concentrated
among a  relatively  small  number  of  customers.  The  Company's four  largest
customers  accounted for approximately 21%, 11%, 20% and 18%,  respectively,  of
net sales during fiscal 1996. The Company's  three largest  customers  accounted
for  approximately  27%, 14% and 12%,  respectively,  of the Company's net sales
during fiscal 1995.  There can be no assurance that this  concentration of sales
among  customers  will not  continue  in the future.  The loss of a  significant
customer  or a  substantial  decrease  in sales to such a customer  would have a
material  adverse  effect on the  Company's  sales  and  operating  results.  In
addition,  customers  may demand price  concessions  from the Company that could
adversely  affect profit margins.  The Company's  arrangements  with most of its
customers  are based on the receipt of  purchase  orders and  otherwise  are not
subject to long-term  written  contracts and  generally  may be terminated  upon
short notice.

OPERATIONS OF THE COMPANY

           CORES

           In  its   remanufacturing   operations,   the  Company  obtains  used
alternators  and starters,  commonly  known as "cores," which are sorted by make
and model and stored until needed.  When needed for  remanufacturing,  the cores
are  completely  disassembled  into  component  parts.  Components  which can be
incorporated into the remanufactured product are thoroughly cleaned,  tested and
refinished.  All  components  known to be  subject  to  major  wear,  and  those
components  determined  not to be reusable or  repairable,  are  replaced by new
components.  The unit is then  reassembled  on an assembly  line into a finished
product.  Inspection  and  testing  are  conducted  at  various  stages  of  the
remanufacturing  process,  and each finished  product is inspected and tested on
equipment   designed  to  simulate   performance  under  operating   conditions.
Components  of cores  which are not used by the  Company in its  remanufacturing
process are sold as scrap.

           The majority of the cores  remanufactured by the Company are obtained
from customers as trade-ins,  which are credited against future  purchases.  The
Company's customers encourage

                                                    
                                       -4-


<PAGE>


consumers to exchange  their used units at the time of purchase  through the use
of credits.  To a lesser extent,  the Company also  purchases  cores in the open
market from core  brokers,  who are dealers  specializing  in buying and selling
cores.  Although  the  Company  believes  that the open market does not and will
continue  not to  represent  a primary  source of cores,  this  market  offers a
reliable  source for maintaining  stock balance.  Other materials and components
used in  remanufacturing  are also purchased in the open market.  The ability to
obtain cores of the types and quantities required by the Company is essential to
the Company's ability to meet demand and expand production.

           The  price  of  a  finished  product  generally  is  comprised  of  a
separately  invoiced  amount for the core included in the product ("core value")
and an  amount  for  remanufacturing.  Although,  upon  receipt  of a core  as a
trade-in,  credit  generally  is given to the customer for the full current core
value of the unit  traded in. The  Company  believes  it may be  informative  to
indicate the effects of presenting  core trade-ins as a purchase of materials as
opposed to a reduction in sales. The Company limits trade-ins to cores for units
included in its sales catalogs and in condition able to be  remanufactured,  and
credit for cores is allowed  only  against  purchases  by a customer  of similar
remanufactured  products  within a specified  time period.  A  customer's  total
allowable  credit for core trade-ins is further  limited by the dollar volume of
the customer's purchases of similar products within such time period.

           The Company's  reported sales reflect the deduction of the core value
of cores returned for credit as well as other customary industry  allowances and
trade-ins.  Consequently,  variations in the rate of core trade-ins affect sales
and cash receipts, and, in periods of relatively heavy core trade-ins, sales may
show  smaller  increases  (or greater  decreases)  than unit sales.  Core values
fluctuate  on  the  basis  of  several   economic   factors,   including  market
availability and demand and core prices then being paid by other remanufacturers
and core brokers.

           PRODUCTION PROCESS

           The initial step in the Company's remanufacturing process begins with
the  receipt  in boxed  quantities  of cores  from  various  sources,  including
trade-ins  from  customers  and  purchases  in the open  market.  The  cores are
assessed and evaluated for  inventory  control  purposes and then sorted by part
number.  Each core is then completely  disassembled  into all of its fundamental
components.  The  components  are cleaned in a process that  employs  customized
equipment,  detergents and other chemicals. The cleaning process is accomplished
in accordance with the required specifications of the particular units.

           After the  cleaning  process is  complete,  the  components  are then
inspected and tested as prescribed by the  Company's  rigorous  quality  control
program. This program,  which is implemented throughout the operational process,
is  known as  statistical  process  control.  Upon  passage  of all  tests,  the
components  are placed on an automatic  conveyor for assembly  into the required
units.  The  assembly  process  is  monitored  by  designated   quality  control
personnel.  Each fully assembled unit is then subjected to additional testing to
ensure performance and quality.  Finished products are then either stored in the
Company's warehouse facility or packaged for immediate delivery. In addition, to
maximize efficiency,  the Company stores in its warehousing facilities component
parts ready for

                                                    
                                       -5-


<PAGE>


assembly. The Company's management  information systems,  including hardware and
software,   facilitate  the  remanufacturing  process  from  cores  to  finished
products. In general, this process takes approximately four days.

           The Company currently  conducts  business with an affiliated  entity,
MVR Products Pte Limited  ("MVR"),  which is 70%-owned by Mel and Richard  Marks
and 30%-owned by Vincent Quek, a resident of Singapore,  who is not an affiliate
of the  Company.  MVR  operates  a  shipping  warehouse  and  testing  facility,
maintains  office space and  remanufacturing  capability  in Singapore  and does
business  with Unijoh Sdn,  Bhd  ("Unijoh"),  which is an  affiliated  Malaysian
entity.  Unijoh is  70%-owned  by Mel and Richard  Marks and is 30%-owned by Mr.
Quek. Unijoh conducts  remanufacturing  operations similar to those conducted by
the Company at its remanufacturing  facility. All of the products remanufactured
by  Unijoh  are   processed   for  the  Company  on  an   independent   contract
remanufacturing basis. The Company provides Unijoh with raw materials, which are
included  in  the  Company's   inventory.   Although  Unijoh's   remanufacturing
operations  are  not  part  of  the  Company's   efforts  to  achieve  ISO  9001
certification, these operations are conducted with quality control standards and
other internal controls similar to those currently  implemented at the Company's
remanufacturing   facility.  The  facilities  of  MVR  and  Unijoh  are  located
approximately  one hour drive apart. As of March 31, 1996, the inventory located
at MVR's and Unijoh's  facilities  represented  approximately 3.2% of all of the
Company's  inventory.  The  Company  believes  that  its  relationship  with its
operating  affiliates is important  because of the lower labor costs experienced
by these affiliates in the same remanufacturing process.

           PRODUCT TRADE-INS

           The Company has a trade-in policy that it believes is typical for the
remanufactured  automotive  replacement parts industry. A manufacturer typically
provides  a  product  warranty  that is  honored  whether  or not the  purchaser
continues to do business with the  manufacturer.  As the Company believes is the
practice in its industry, however, the Company accepts product trade-ins only if
the purchaser  makes future  purchases  from the Company within a specified time
period.  Product  trade-ins to the Company result only in credits against future
purchases.  If a customer  ceases doing  business with the Company,  the Company
recognizes  no further  obligations  to that  customer  with  respect to product
trade-ins  and no additional  product  returns would be accepted by the Company.
The  customer  would  return any  returnable  products  to a new  remanufacturer
maintaining  the same  policy,  which  remanufacturer  would  accept the product
trade-ins  and grant  appropriate  credits  regardless of whether the units were
originally purchased from that new remanufacturer.

           As a result of the product trade-in policy in the Company's industry,
the Company  accounts for product  trade-ins on a current  basis.  No reserve is
made for future  product  trade-ins  since  there is no on-going  obligation  to
accept  such  trade-ins  in the  absence of  continuing  sales to the  returning
customer. The Company believes that its return rate has been consistent with the
return rates generally experienced in its industry. In addition,  the obligation
to accept  trade-ins is only  recognized as a credit against future sales in the
form of a reduction in the purchase price for those sales. The Company's product
trade-in policy encompasses all product trade-ins, including cores,

                                                    
                                       -6-


<PAGE>


true  warranty  trade-ins,  alleged  warranty  trade-ins  and any other  product
adjustments.  The amount of the credit given in connection  with a returned unit
is equal to the sum of the unit price and the core price.

COMPETITION

           The  Company's  segment  of  the  automotive  after-market  industry,
composed of  remanufacturers  and  rebuilders  of  alternators  and starters for
imported cars and light trucks, is highly competitive. The Company's competitors
include  several  other  relatively  large sources of  remanufactured  units and
numerous smaller, regional rebuilders. Certain of the Company's competitors sell
a wide variety of other  automotive  parts,  thereby  establishing  broader name
recognition  in the entire  automotive  after-market,  including  the  Company's
market.  In addition,  certain of the  Company's  competitors  are  divisions or
subsidiaries   of  entities  also  engaged  in  other   businesses   which  have
substantially greater financial resources than those of the Company. The Company
also   competes   with  several   large   regional   remanufacturers   and  with
remanufacturers which are franchised by certain original equipment manufacturers
to  remanufacture  their  products for regional  distribution.  Alternators  and
starters  produced by  regional  and other small  rebuilders  typically  are not
processed and finished to the same extent as, and do not compete  directly with,
the Company's products. The Company also competes with numerous rebuilders which
serve  comparatively  local areas.

           The  Company's  products  have not been patented nor does the Company
believe that its products are  patentable.  The Company will continue to attempt
to protect its proprietary  processes and other  information by relying on trade
secret laws and  non-disclosure and  confidentiality  agreements with certain of
its employees and other persons who have access to its proprietary processes and
other information.


                                                    
                                       -7-


<PAGE>


GOVERNMENTAL REGULATION

           The Company's operations are subject to federal, state and local laws
and regulations  governing,  among other things,  emissions to air, discharge to
waters and the  generation,  handling,  storage,  transportation,  treatment and
disposal  of waste and other  materials.  The Company is not subject to any such
laws and regulations which are specific to the automotive after-market industry.
The Company believes that its business,  operations and facilities have been and
are being  operated in  compliance  in all  material  respects  with  applicable
environmental and health and safety laws and regulations,  many of which provide
for substantial  fines and criminal  sanctions for violations.  The operation of
automotive parts remanufacturing plants, however,  entails risks in these areas,
and there can be no assurance  that the Company will not incur material costs or
liabilities. In addition, potentially significant expenditures could be required
in order to comply  with  evolving  environmental  and health  and safety  laws,
regulations or  requirements  that may be adopted or imposed in the future.  The
Company believes, although there can be no assurance, that the overall impact of
compliance with regulations and legislation  protecting the environment will not
have  a  material  effect  on  its  future  financial  position  or  results  of
operations.

EMPLOYEES

            The  Company  has  approximately  540 full time  employees.  Of  the
Company's employees,  18 are considered  administrative  personnel and three are
sales  personnel.  None of the Company's  employees is a party to any collective
bargaining  agreement.  The Company has not  experienced  any work stoppages and
considers its employee relations to be satisfactory.


I
TEM 2.    DESCRIPTION OF PROPERTIES.

           The Company maintains facilities in Torrance,  California,  Woodbury,
New York and Nashville,  Tennessee. The Torrance facility contains approximately
125,000 square feet and  accommodates the Company's  corporate  headquarters and
remanufacturing,  warehousing and other office  requirements.  The Company moved
into this facility  during  September 1993. The five-year lease for the facility
provides for a monthly  rental of $36,900 and  terminates  on December 31, 1998.
This facility was designed and equipped according to specifications generated by
the Company in order to accommodate the Company's  current and projected  needs.
The  facility  is   anticipated  to  be  sufficient  to  satisfy  the  Company's
foreseeable production requirements.  In order to permit increased production at
its remanufacturing  facility,  in October 1995 the Company leased an additional
79,708  square  feet of  warehouse  space  nearby.  The lease for this  facility
provides for a base  monthly  rental of $19,000 and  terminates  on December 31,
1998. The Company also maintains an East Coast  administrative  and sales office
in Woodbury,  New York.  This site contains  approximately  1,500 square feet of
office space. The Company believes that, in the event that the Woodbury lease is
not  renewed,  adequate  alternative  space is  available  in the  same  area at
comparable  rates.  On May 1, 1995,  the  Company  opened a  31,000-square  foot
warehouse  and  distribution  facility in  Nashville,  Tennessee  to service the
Company's  growing East Coast and Southern  market.  The lease for this facility
expires

                                                    
                                       -8-


<PAGE>


on October 31, 1998 and  provides for a monthly  rental of $9,331.  In addition,
the Company has minor office facilities at its affiliate's location in Malaysia.


ITEM 3.    LEGAL PROCEEDINGS.

           There are no pending material legal  proceedings to which the Company
or any of its  properties is subject nor, to the  knowledge of the Company,  are
any legal proceedings threatened.


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

           None.



                                                    
                                       -9-


<PAGE>



                                     PART II



ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

           The Company's  Common  Stock,  par value $0.01 per share (the "Common
Stock"),  commenced trading on March 23, 1994 on the over-the-counter market and
is quoted on the National Association of Securities Dealers' Automated Quotation
("NASDAQ") National Market under the symbol MPAA. The following table sets forth
the high and low bid prices for the Common  Stock  during each quarter of fiscal
1995 and  fiscal  1996 as  reported  by  NASDAQ.  The  prices  reported  reflect
inter-dealer  quotations,  may  not  represent  actual  transactions  and do not
include retail mark-ups, mark-downs or commissions.


                                  FISCAL 1996               FISCAL 1995
                                  -----------               -----------
                              HIGH         LOW         HIGH            LOW
                              ----         ---         ----            ---

First Quarter               11             8 1/2       9 1/8            7
Second Quarter              15            10 3/8       8 1/2            7 1/2
Third Quarter               15 7/8        12 3/4       9 3/8            7
Fourth Quarter              15 7/8        11 3/8      10 5/8            7 1/8
                                                          

           As of  June 25, 1996,  there  were  4,879,500  shares of Common Stock
outstanding held by 35 holders of record.

           The Company has not  declared or paid  dividends  on the Common Stock
during the last two fiscal years.

           The declaration of dividends in the future will be at the election of
the Board of Directors and will depend upon the earnings,  capital  requirements
and financial position of the Company,  general economic  conditions,  state law
requirements and other relevant factors.  In addition,  the Company's  agreement
with its bank lender  prohibits  payment of  dividends  without the bank's prior
consent, except dividends payable in Common Stock.



                                                    
                                      -10-


<PAGE>




ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

           The following  discussion and analysis  should be read in conjunction
with the financial statements and notes thereto appearing elsewhere herein.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                         YEAR ENDED MARCH 31,
                                                         --------------------
                                               1996             1995             1994
                                               ----             ----             ----
<S>                                            <C>               <C>            <C>   
Net sales                                      100.0%            100.0%         100.0%
Cost of goods sold                              70.2              69.8           65.0
                                            --------          --------       --------
Gross profit (1)                                29.8              30.2           35.0
Selling expenses                                 4.4               5.3           10.3
General and administrative expenses             10.2              13.1           12.6
Moving expenses                                  0.0               0.0            1.2
                                            --------          --------       --------
Operating income                                15.2              11.8           10.9
Interest expense - net                           1.9               1.9            2.2
                                            --------          --------       --------
Income before income taxes                      13.3               9.9            8.7
Provision for income taxes
   (pro forma for fiscal 1994)                   5.2               4.2            3.5
                                            --------          --------       --------
Net income                                       8.1%              5.7%           5.2%
                                            ========          ========       ========
</TABLE>



           In  its   remanufacturing   operations,   the  Company  obtains  used
alternators  and  starters,  commonly  known as "cores,"  from various  sources,
principally  the  Company's  existing  customers,  as  trade-ins.  Net sales are
reduced to reflect deductions for cores returned for credit and other deductions
for  trade-ins and  allowances,  and cost of goods sold is reduced by the credit
given to customers  for the cores  returned.  Such  trade-ins  are recorded when
cores are received  from  customers.  Credits for cores are allowed only against
purchases of similar remanufactured products and are generally used within sixty
days of issuance by the customer.  Due to this trade-in policy, the Company does
not reserve for  trade-ins.  In addition,  since it is unlikely  that a customer
will not utilize its trade-in  credits,  the credit is recorded when the core is
returned as opposed to when the customer  purchases  new  products.  The Company
believes  that this policy is  consistent  throughout  the  remanufacturing  and
rebuilding  industry.  Product  and  core  trade-ins  reducing  net  sales  were
approximately  $28.9  million,  $17.0 million and $13.1 million for fiscal 1996,
1995 and 1994,  respectively.  Core  trade-ins  reducing cost of goods sold were
approximately  $19.4  million,  $11.0  million and $8.4 million for fiscal 1996,
1995 and 1994, respectively.

- ---------------------

           (1) The  Company  believes  it may be  informative  to  indicate  the
effects of presenting  core trade-ins as a purchase of materials as opposed to a
reduction  in  sales   (i.e. present  the  information  in a manner  similar  to
traditional manufacturers) and portray gross profit percentage as the following:


                                                YEAR ENDED MARCH 31,
                                                --------------------
                                         1996          1995         1994
                                         ----          ----         ----

Net sales                               100.0%        100.0%        100.0%
Cost of goods sold                        79.2         78.2          75.2
                                        ------        -----        ------
Gross profit                              20.8%        21.8%         24.8%
                                        ======        ======       ======

                                     - 11 -


<PAGE>

FISCAL 1996 COMPARED TO FISCAL 1995

           Net  sales  for  fiscal  1996  increased  $16,656,000  or 58.9%  from
$28,257,000 to  $44,913,000.  The increase in net sales is attributable to sales
to new customers,  the general  growth of business with existing  customers and,
indirectly,  to, the Company believes, the continued aging of the import vehicle
fleet.   During  fiscal  1996,  the  Company  began  shipping  products  to  two
significant new customers, Delphi Energy & Engine Management Systems, a division
of  General  Motors,  and  Canadian  Tire.  The  number of units  shipped to all
customers  was  approximately  1,074,000  during  fiscal 1996 as  compared  with
approximately   689,000  during  fiscal  1995,   representing   an  increase  of
approximately 55.9%.

           Cost of goods sold over the periods  increased  $11,808,000  or 59.9%
from  $19,712,000 to $31,520,000.  The increases are  attributable to additional
costs  during the recent year in  connection  with  increased  production.  As a
percentage of net sales these expenses  increased to 70.2% for the recent fiscal
year from 69.8% for the prior  fiscal year.  This  relatively  small  percentage
increase is primarily  attributable to increased direct production costs,  which
were  partially  offset by benefits  the  Company  experienced  from  leveraging
indirect  production  costs over  increased  net sales.  In February  1996,  the
Company began  experiencing  pricing pressures on certain of its alternators and
starters,  which may affect gross profit to a limited extent in the future.  The
Company also anticipates  lowering its manufacturing  costs to help offset price
decreases in response to these pricing pressures.

           Selling  expenses over the periods  increased  $486,000 or 32.4% from
$1,498,000  to  $1,984,000.  This  increase  was the  result of an  increase  of
approximately  $433,000 in advertising and other  allowances to customers during
fiscal 1996. The balance of the increase was primarily attributable to increased
salaries of the  Company's  sales force.  Advertising  allowances  accounted for
57.5% of the  Company's  total  selling  expenses for fiscal 1996 as compared to
47.3% for fiscal 1995. Despite these increases, selling expenses as a percentage
of net sales decreased to 4.4% from 5.3% over the periods reflecting  leveraging
of these expenses over increased net sales.

           General  and  administrative  expenses  over  the  periods  increased
$873,000 or 23.6% from  $3,704,000  to  $4,577,000.  Approximately  69.2% of the
increase was due to costs incurred under

                                                    
                                      -12-


<PAGE>


the Company's new incentive  bonus plan which was implemented in September 1995.
The  additional  increase  is  primarily  attributable  to  increased  insurance
coverage, computer expenses and professional fees. As a percentage of net sales,
general  and  administrative  expenses  decreased  from  13.1% to 10.2% over the
periods reflecting leveraging of these expenses over increased net sales.

           Interest  expense net of interest  income of $219,000 for fiscal 1996
was  $833,000,  an increase  of 54.3% from  $540,000  in fiscal  1995.  Interest
expense is comprised  principally of interest on the Company's  revolving credit
facility.  The significantly  increased interest expense over the prior year was
due to the Company's increased borrowing under this facility. Interest income is
derived from short-term investments principally from the Company's second public
offering in November 1995.

FISCAL 1995 COMPARED TO FISCAL 1994

           Net  sales  over the  periods  increased  $7,682,000  or  37.3%  from
$20,575,000  to  $28,257,000.  The  increase in net sales is due to the addition
during fiscal 1995 of two automotive  retail chain  customers,  The Pep Boys and
AutoZone,  as well as increased sales to existing  customers.  In addition,  the
segment of the automotive  after-market  to which the Company sells its products
continued to grow during  fiscal 1995.  The Company  believes that this industry
growth reflects the increased number of imported cars in the prime repair age, a
trend that the Company believes will continue for the foreseeable future.  Units
shipped were approximately  456,000 during fiscal 1994 and approximately 689,000
during fiscal 1995, representing an increase of approximately 51.1%.

           Cost of goods sold over the  periods  increased  $6,339,000  or 47.4%
from  $13,373,000 to $19,712,000.  As a percentage of net sales,  these expenses
increased  to 69.8% for the recent  fiscal year from 65.0% for the prior  fiscal
year.  The increase in cost of goods as a percentage of net sales sold primarily
is  attributable  to the  Company's  decision at the beginning of fiscal 1995 to
lower sales prices on most of its products.  Although the Company's decision, in
light of competitive pressures, led to higher cost of goods sold as a percentage
of net sales,  the Company believes that the decision led to additional sales to
existing  accounts and the addition of new  customers.  During fiscal 1995,  the
Company increased its monthly unit production by approximately  25,000 units per
month from 27,000 to 52,000  units.  Direct and indirect  labor costs  increased
56.1% from $2,194,000 in fiscal 1994 to $3,424,000 in fiscal 1995.  Despite this
increase, the Company believes that its direct labor costs per unit decreased in
fiscal 1995 as a result of the increased volume of production. This reduction in
direct  labor  costs per unit  helped to offset  the lower  prices for which the
Company sold its  alternators and starters.  The Company  attributes 1.3% of the
total 4.8%  increase  over the periods in cost of goods sold as a percentage  of
net sales to a change in advertising  arrangements with certain of its customers
in fiscal 1995, which had the effect of lowering net sales in fiscal 1995 with a
concurrent reduction in selling expenses.

           Selling  expenses over the periods  decreased  $619,000 or 29.2% from
$2,117,000 to  $1,498,000.  As a result of the Company's  change in  advertising
arrangements with certain of its customers,  advertising allowances decreased by
approximately $400,000. Advertising allowances

                                                    
                                      -13-


<PAGE>


accounted for 47.3% of the Company's  total selling  expenses for fiscal 1995 as
compared with 52.4% for fiscal 1994.  During fiscal 1994,  the Company  incurred
approximately  $90,000 of  expenses in  connection  with the  production  of its
bi-annual product catalog. The remainder of selling expenses in both periods was
commissions  to outside sales agents,  as well as salaries and related  expenses
for the Company's sales personnel.

           General  and  administrative  expenses  over  the  periods  increased
$1,111,000 or 42.8% from  $2,593,000 to  $3,704,000.  In response to present and
anticipated  future  growth and the  Company's  new public  status,  the Company
incurred  increased  salary expense as a result of hiring a new Chief  Financial
Officer and various other  administrative  personnel.  In addition,  general and
administrative  expenses  increased  as a  result  of  the  depreciation  of new
administrative  computer  equipment  added during  fiscal 1995,  directors'  and
officers' insurance premiums and professional fees incurred commencing in fiscal
1995 relating to the Company's public status, as well as other expenses incurred
in connection with present and anticipated  future growth.  The remainder of the
Company's general and administrative  expenses remained  relatively  constant in
total dollar amount from fiscal 1994 to fiscal 1995.

           Interest  expense (net of interest income of $73,000 for fiscal 1995)
increased  19.2% or $87,000  over the  periods.  Interest  expense is  comprised
principally of interest on the Company's  revolving  credit  facility.  Interest
expense increased as a result of both higher interest rates as well as increased
borrowings under the credit facility. Over the periods, the Company's borrowings
increased  from $4.3 million to $9.0  million and the  effective  interest  rate
increased  from 6.5% to 9.0%,  which  resulted from general  increases in market
interest  rates.  The other  component of interest  expense is interest  paid on
capital leases, which was $65,000 in fiscal 1995 and $39,000 in fiscal 1994.

           During fiscal 1995,  the provision for income taxes was $1,197,000 as
compared with  $728,000,  on a pro forma basis,  during fiscal 1994. The Company
elected, effective January 1, 1994, to change its status from an "S" corporation
to a "C" corporation.

           During fiscal 1994, the Company  incurred a  non-recurring  charge of
approximately  $256,000  consisting  primarily of the  abandonment  of leasehold
improvements  and moving  expenses  in  connection  with the  relocation  of its
remanufacturing and warehouse operations.

LIQUIDITY AND CAPITAL RESOURCES

           The Company's  operations have been financed principally from the net
proceeds  of the  Company's  initial  public  offering  in March  1994,  the net
proceeds of the Company's  second public  offering in November 1995,  borrowings
under a revolving  credit facility and cash flows from  operations.  As of March
31, 1996 the Company's working capital was $44,254,000,  including $8,500,000 of
cash and cash equivalents.


                                                    
                                      -14-


<PAGE>


           Net cash used in operating  activities  during fiscal 1996 and fiscal
1995 was $15,344,000 and $6,721,000,  respectively.  The increase in fiscal 1996
was due primarily to an increase in inventory of  $16,434,000.  This increase is
due in large part to the  Company's  increased  sales  volume,  anticipation  of
future growth,  as well as additional  SKUs offered by the Company.  As of March
31, 1996, the current portion of capitalized lease obligations was $554,000.

           Net cash used in investing activities during fiscal 1996 and 1995 was
$10,770,000 and $991,000, respectively.  During fiscal 1996 the Company invested
an additional  $10,113,000 in short-term  investments and purchased  $657,000 of
property,  plant and  equipment.  During fiscal 1995,  the Company  purchased an
additional  $616,000 in short-term  investments and $375,000 of property,  plant
and  equipment.  In fiscal 1996 the short-term  investments  were purchased with
proceeds from the Company's 1996 public offering.

           Net cash provided by financing  activities was  $25,667,000 in fiscal
1996 and  $4,525,000  in fiscal 1995.  The increase in fiscal 1996 was primarily
attributable  to the proceeds  from the second  public  offering  and, to a much
lesser  extent,  the exercise of warrants and options.  Proceeds from the second
public offering and the exercise of options and warrants totaled  $20,369,000 in
fiscal 1996. The balance of cash provided by financing activities in fiscal 1996
was from an increase in the Company's  revolving line of credit. The increase in
fiscal 1995 was due primarily to an increase in the Company's  revolving line of
credit.

           In September  1995,  the Company  amended its credit  agreement  with
Wells  Fargo Bank,  National  Association  (the  "Bank").  The credit  agreement
provides for a revolving  credit facility in an aggregate  principal  amount not
exceeding   $15,000,000,   which  credit  facility  is  secured  by  a  lien  on
substantially  all of the  assets of the  Company.  The credit  facility,  which
expires on June 1, 1997,  provides  for an interest  rate on  borrowings  at the
lower of the  Bank's  prime rate and LIBOR  plus  1.75%.  Under the terms of the
credit  facility and included in the maximum  amount  thereunder,  the Bank will
issue letters of credit and banker's  acceptances for the account of the Company
in an  aggregate  amount  not  exceeding  $2,500,000.  At  June  19,  1996,  the
outstanding balance on the credit facility was approximately $12,300,000.

           The  Company's   accounts   receivable  as  of  March  31,  1996  was
$17,264,000.  This  represents  an increase of $6,589,000 or 61.7% over accounts
receivable  on March 31, 1995.  This is in line with sales  increasing in fiscal
1996 by 58.9% over  fiscal  1995.  During the year,  the Company  increased  its
normal aging of its receivables with some of its customers.  In addition,  there
are times when the Company extends payment terms with certain customers in order
to help them  finance an increase in their  product  line  variety.  The Company
insures  collection of certain of its accounts  receivable  through an insurance
policy with an  independent  credit  insurance  company at an annual  premium of
approximately  $70,000.  The Company's policy generally has been to issue credit
to new customers  only after the customers have been included under the coverage
of its accounts receivable insurance policy.


                                                    
                                      -15-


<PAGE>


           The Company's  inventory as of March 31, 1996 was $28,551,000,  which
represents an increase of  $16,434,000  or 135.6% over inventory as of March 31,
1995. The increase  reflects the Company's  growth in sales through the addition
in fiscal  1996 of  Delphi  and other new  customers,  increased  business  from
existing customers and the need to have sufficient  inventory to support shorter
lead times for deliveries to customers.  Also, the Company continues to increase
the number of SKUs sold  requiring  the Company to carry raw  materials for this
wider variety of parts.  The Company also increased its finished goods inventory
(by  approximately  $1,400,000  as of March  31,  1996) in  connection  with the
opening of its Nashville warehouse facility in November 1995.


I
TEM 7.    FINANCIAL STATEMENTS.

           The  information  required by this item is set forth in the Financial
Statements, commencing on page F-1 included herein.


ITEM 8.    CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

           Not applicable.



                                                    
                                      -16-


<PAGE>



                                    PART III



ITEM 9.    DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS
           AND CONTROL  PERSONS; COMPLIANCE WITH
           SECTION 16(a) OF THE EXCHANGE ACT.

           The  information  required by this item is  incorporated by reference
herein in the "Election of Directors"  section of the Company's  Proxy Statement
to be filed pursuant to Regulation 14A.


ITEM 10.   EXECUTIVE COMPENSATION.

           The  information  required by this item is  incorporated by reference
herein in the "Executive  Compensation" section of the Company's Proxy Statement
to be filed pursuant to Regulation 14A.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN
           BENEFICIAL OWNERS AND MANAGEMENT.

           The  information  required by this item is  incorporated by reference
herein in the "Security  Ownership of Management" section of the Company's Proxy
Statement to be filed pursuant to Regulation 14A.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

           The  information  required by this item is  incorporated by reference
herein in the "Certain Transactions" section of the Company's Proxy Statement to
be filed pursuant to Regulation 14A.

                                                    
                                      -17-


<PAGE>



ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

           a.         EXHIBITS:


Number       Description Of Exhibit                      Method Of Filing
- ------       ----------------------                      ----------------

3.1        Certificate of Incorporation of the      Incorporated by reference to
           Company                                  Exhibit 3.1 to the Company's
                                                    Registration Statement on
                                                    Form SB-2 (No. 33-74528)
                                                    declared effective on March
                                                    22, 1994 (the "1994 Regist-
                                                    ration Statement").

3.2        Amendment to Certificate of              Incorporated by reference to
           Incorporation of the Company             Exhibit 3.2 to the Company's
                                                    Registration Statement on
                                                    Form S-1 (No. 33-97498)
                                                    declared effective on
                                                    November 14, 1995 (the
                                                    "1995 Registration
                                                    Statement").

3.3        By-Laws of the Company.                  Incorporated by reference to
                                                    Exhibit 3.2 to the 1994
                                                    Registration Statement.

4.1        Specimen Certificate of the              Incorporated by reference to
           Company's Common Stock.                  Exhibit 4.1 to the 1994
                                                    Registration Statement.

4.2        Form of Underwriter's Common Stock       Incorporated by reference to
           Purchase Warrant.                        Exhibit 4.2 to the 1994
                                                    Registration Statement.

4.3        1994 Stock Option Plan.                  Incorporated by reference to
                                                    Exhibit 4.3 to the 1994
                                                    Registration Statement.

4.4        Form of Incentive Stock Option           Incorporated by reference to
           Agreement.                               Exhibit 4.4 to the 1994
                                                    Registration Statement.

                                                    
                                      -18-


<PAGE>


Number       Description Of Exhibit                      Method Of Filing
- ------       ----------------------                      ----------------

4.5        1994 Non-Employee Director Stock         Incorporated by reference to
           Option Plan                              Exhibit 4.5 to the Company's
                                                    Annual Report on Form 10-KSB
                                                    for  the  fiscal  year ended
                                                    March 31, 1995.

4.6        Executive and Key Employee Incentive     Incorporated by reference to
           Bonus Plan                               Exhibit  4.6  to  the  1995 
                                                    Registration  Statement. 

10.1       Credit Agreement,  dated as of April     Incorporated by reference to
           15,  1994 by and between the Company     Exhibit  10.1  to  the  Com-
           and Wells Fargo Bank, N.A.               pany's Current Report on
                                                    Form 8-K filed May 19, 1994.

10.2       Fourth Amendment to Credit               Incorporated by reference to
           Agreement, dated as of July 7, 1995      Exhibit 10.2 to the 1995
           by and between the Company and Wells     Registration  Statement. 
           Fargo Bank, N.A.


10.3       Sixth Amendment to Credit  Agreement     Incorporated by reference to
           dated as of  September  20,  1995 by     Exhibit 10.3 to the 1995
           and  between  the  Company and Wells     Registration  Statement.
           Fargo Bank, N.A.

10.4       Lease  Agreement,   dated  March  9,     Incorporated by reference to
           1993, by and between the Company and     Exhibit 10.3 to the 1994
           Maricopa Enterprises, Ltd., relating     Registration Statement. 
           to the Company's facility located in
           Torrance, California.

10.5       Lease  Agreement,  dated  October 7,     Incorporated by reference to
           1993,   relating  to  the  Company's     Exhibit 10.4 to the
           offices  located  in  Woodbury,  New     1994 Registration Statement.
           York,  by and among the  Company and
           Jay Davis, as receiver.


                                                    
                                      -19-


<PAGE>


Number       Description Of Exhibit                      Method Of Filing
- ------       ----------------------                      ----------------

10.6       Amended  and   Restated   Employment     Incorporated by reference to
           Agreement,  dated as of September 1,     Exhibit 10.7 to the 1995 
           1995, by and between the Company and     Registration Statement.
           Mel Marks.

10.7       Amended  and   Restated   Employment     Incorporated by reference to
           Agreement,  dated as of September 1,     Exhibit 10.8 to the 1995
           1995, by and between the Company and     Registration Statement.
           Richard Marks.

10.8       Employment  Agreement,  dated  as of     Incorporated by reference to
           February 1, 1994, by and between the     Exhibit  10.7 to the  1994
           Company and Steven Kratz.                Registration Statement. 

10.9       Employment  Agreement,  dated  as of     Incorporated by reference to
           March 1, 1994,  by and  between  the     Exhibit 10.12 to the 1994
           Company and Peter Bromberg.              Registration  Statement. 

10.10      Amendment   No.   1  to   Employment     Incorporated by reference to
           Agreement,  dated as of September 1,     Exhibit 10.12 to the 1995
           1995,  by and between the  Company       Registration Statement. 
           and Peter Bromberg.

10.11      Employment  Agreement  dated  as  of     Incorporated by reference to
           September  1, 1995,  by and  between     Exhibit 10.13 to the 1995  
           the Company and Eli Markowitz.           Registration  Statement.  

10.12      Form of Consulting  Agreement  dated     Incorporated by reference to
           as of  September  1,  1995,  by  and     Exhibit 10.14 to the 1995
           between   the   Company  and  Selwyn     Registration Statement.
           Joffe.

10.13      Agency  Agreement,   dated  May  12,     Incorporated by reference to
           1990, by and between the Company and     Exhibit 10.8 to the 1994
           Kinoshita Company Limited.               Registration  Statement. 

10.14      Agreement,  dated as of  February 2,     Incorporated by reference to
           1990, by and between the Company and     Exhibit 10.11 to the 1994 
           Northern Automotive Corporation.         Registration Statement.

                                                    
                                      -20-


<PAGE>


Number       Description Of Exhibit                      Method Of Filing
- ------       ----------------------                      ----------------

10.15      Lease  Agreement,  dated  March  28,     Incorporated by reference to
           1995, by and between the Company and     Exhibit  10.11  to  the Com-
           Equitable Life Assurance  Society of     pany's Annual Report on Form
           the United  States,  relating to the     10-KSB for the fiscal year
           Company's    facility   located   in     ended March 31, 1995.
           Nashville, Tennessee.


10.16      Lease Agreement, dated September 19,     Incorporated by reference to
           1995,   by   and   between    Golkar     Exhibit 10.18 to the 1995 
           Enterprises,  Ltd.  and the  Company     Registration Statement.
           relating to the  Company's  facility
           located in Nashville, Tennessee.


23.1       Consent  of  Richard  A.   Eisner  &     Filed herewith
           Company, LLP

27.1       Financial Data Schedule                  Filed herewith


           b.         REPORTS ON FORM 8-K:

           No reports on Form 8-K were  filed by the  Company  during the fiscal
quarter ended March 31, 1996.



                                                    
                                      -21-


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.



                                  - I N D E X -


                                                                           PAGE
                                                                          NUMBER

REPORT OF INDEPENDENT AUDITORS                                              F-2


BALANCE SHEETS AS AT MARCH 31, 1996
AND MARCH 31, 1995                                                          F-3


STATEMENTS OF OPERATIONS FOR EACH OF
THE YEARS IN THE THREE-YEAR PERIOD
ENDED MARCH 31, 1996                                                        F-4


STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY FOR EACH OF THE YEARS IN THE
THREE-YEAR PERIOD ENDED MARCH 31, 1996                                      F-5


STATEMENTS OF CASH FLOWS FOR EACH OF
THE YEARS IN THE THREE-YEAR PERIOD
ENDED MARCH 31, 1996                                                        F-6


NOTES TO FINANCIAL STATEMENTS                                               F-7

                                                    
                                       F-1


<PAGE>



                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Motorcar Parts & Accessories, Inc.
Torrance, California

           We have audited the  accompanying  balance sheets of Motorcar Parts &
Accessories,  Inc.  as at March  31,  1996 and March  31,  1995 and the  related
statements of  operations,  changes in  shareholders'  equity and cash flows for
each of the three years in the period  ended  March 31,  1996.  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  generally  accepted
auditing  standards.  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 financial  statements  enumerated  above present
fairly,  in all material  respects,  the financial  position of Motorcar Parts &
Accessories,  Inc.  at March 31,  1996 and March 31, 1995 and the results of its
operations,  and its cash flows for each of the three years in the period  ended
March 31, 1996, in conformity with generally accepted accounting principles.

/s/ Richard A. Eisner & Company, LLP

New York, New York
May 17, 1996


                                                    
                                       F-2


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                                 BALANCE SHEETS


<TABLE>
<CAPTION>

                                   A S S E T S                            MARCH 31,
                                   -----------                    -------------------------
                                     (Note E)                         1996           1995
                                                                  -----------   -----------
<S>                                                               <C>           <C>        
Current assets:
   Cash and cash equivalents (Note A[1])  .....................   $   164,000   $   611,000
   Short-term investments (Notes A[2] and B)  .................     8,336,000       616,000
   Accounts receivable - net of allowance
     for doubtful accounts (Notes A[3] and J) .................    17,264,000    10,675,000
   Inventory (Notes A[4] and C) ...............................    28,551,000    12,117,000
   Prepaid expenses and other current assets ..................       637,000       337,000
   Deferred income tax asset (Notes A[5]
     and K) ...................................................       226,000        45,000
                                                                  -----------   -----------
          Total current assets ................................    55,178,000    24,401,000

Long-term investments (Notes A[2] and B)  .....................     2,393,000
Plant and equipment - net (Notes A[6] and D)  .................     2,469,000     1,323,000
Other assets ..................................................       149,000        99,000
                                                                  -----------   -----------

          T O T A L ...........................................   $60,189,000   $25,823,000
                                                                  ===========   ===========

                              L I A B I L I T I E S
                              ---------------------

Current liabilities:
   Current portion of capital lease
     obligations (Note E) .....................................   $   554,000   $   183,000
   Accounts payable and accrued expenses ......................     8,855,000     5,549,000
   Income taxes payable (Notes A[5] and K)  ...................     1,331,000       546,000
   Due to affiliate (Note G)  .................................       184,000        27,000
                                                                  -----------   -----------
          Total current liabilities ...........................    10,924,000     6,305,000

Long-term debt (Note F) .......................................    14,541,000     8,989,000
Capitalized lease obligations - less current
   portion (Note E) ...........................................       594,000       513,000
Deferred income tax liability (Notes A[5]
   and K) .....................................................        99,000
                                                                                -----------
          T o t a l ...........................................    26,158,000    15,807,000
                                                                  -----------   -----------

Commitments and other matters
    (Notes H, I and J)

                              SHAREHOLDERS' EQUITY
                              --------------------
                                    (Note L)

Preferred stock; par value $.01 per share,
   5,000,000 shares authorized; none issued
Common stock; par value $.01 per share,
   10,000,000 shares authorized; 
   4,819,750  and 3,207,500 shares issued and
   outstanding ................................................        48,000        32,000
Additional paid-in capital ....................................    28,431,000     8,078,000
Retained earnings .............................................     5,552,000     1,906,000
                                                                  -----------   -----------
          Total shareholders' equity ..........................    34,031,000    10,016,000
                                                                  -----------   -----------

          T O T A L ...........................................   $60,189,000   $25,823,000
                                                                  ===========   ===========

</TABLE>


                 The accompanying notes to financial statements
                          are an integral part hereof.

                                                    
                                       F-3


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                           YEAR ENDED MARCH 31,
                               --------------------------------------------
                                   1996            1995            1994
                               ------------    ------------    ------------
<S>                            <C>             <C>             <C>         
Income:
   Net sales (Note A[7]) ...   $ 44,913,000    $ 28,257,000    $ 20,575,000
                               ------------    ------------    ------------


Operating expenses:
   Cost of goods sold ......     31,520,000      19,712,000      13,373,000
   Selling expenses ........      1,984,000       1,498,000       2,117,000
   General and
     administrative expenses      4,577,000       3,704,000       2,593,000
   Moving expenses including
     abandonment of leases .                                        256,000
                               ------------    ------------    ------------
          Total operating
            expenses .......     38,081,000      24,914,000      18,339,000
                               ------------    ------------    ------------

Operating income ...........      6,832,000       3,343,000       2,236,000

Interest expense (net of
  interest income of
  $219,000 and $73,000 for
  1996 and 1995) ...........       (833,000)       (540,000)       (453,000)
                               ------------    ------------    ------------

Income before income taxes .      5,999,000       2,803,000       1,783,000

Provision for income taxes
   (Notes A[5] and K)  .....      2,353,000       1,197,000         251,000
                               ------------    ------------    ------------

Net income - historical ....   $  3,646,000    $  1,606,000       1,532,000
                               ============    ============  


Pro forma:

   Pro forma additional
     income taxes
     (Notes A[5] and K)  ...                                        477,000
                                                               ------------

   Pro forma net income ....                                   $  1,055,000
                                                               ============



Weighted average common
   shares outstanding
   (Note A[8]) .............      3,939,000       3,295,000       2,018,000
                               ============    ============    ============


Net income per common share
  (pro forma for 1994) .....   $        .93    $        .49    $        .52
                               ============    ============    ============
</TABLE>



                 The accompanying notes to financial statements
                          are an integral part hereof.

                                                    
                                       F-4


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                    (Note L)


<TABLE>
<CAPTION>
                                                              Common Stock
                                                     --------------------------
                                                                                   Additional
                                                      Number of                      Paid-in       Retained
                                                       Shares          Amount        Capital        Earnings       Total
                                                     -----------    -----------    -----------   -----------   -----------
<S>                                                    <C>          <C>            <C>           <C>           <C>        
Balance - March 31, 1993 .........................     2,000,000    $    20,000    $   803,000   $ 1,451,000   $ 2,274,000


Net income .......................................                                                 1,532,000     1,532,000


Distribution to shareholders .....................                                                (1,165,000)   (1,165,000)


Transfer of undistributed S corporation retained
   earnings to additional paid-in capital                                            1,518,000    (1,518,000)        - 0 -
   (Note A[5]) ......................................


Proceeds from public offering (net of costs of
   $1,476,000) ...................................     1,207,500         12,000      5,757,000                   5,769,000
                                                     -----------    -----------    -----------   -----------   -----------


Balance - March 31, 1994 .........................     3,207,500         32,000      8,078,000       300,000     8,410,000


Net income .......................................         - 0 -          - 0 -          - 0 -     1,606,000     1,606,000
                                                     -----------    -----------    -----------   -----------   -----------


Balance - March 31, 1995 .........................     3,207,500         32,000      8,078,000     1,906,000    10,016,000


Proceeds from exercise of warrants and options ...       112,250          1,000        867,000                     868,000


Proceeds from public offering (net of costs of
   $1,874,000) ...................................     1,500,000         15,000     19,486,000                  19,501,000


Net income .......................................         - 0 -          - 0 -          - 0 -     3,646,000     3,646,000
                                                     -----------    -----------    -----------   -----------   -----------



BALANCE - MARCH 31, 1996 .........................     4,819,750   $    48,000   $28,431,000   $ 5,552,000   $34,031,000
                                                     ===========   ===========   ===========   ===========   ===========
                                                    
                                       

</TABLE>


               The accompanying notes to financial statements
                          are an integral part hereof.

                                                    
                                       F-5


<PAGE>

                       MOTORCAR PARTS & ACCESSORIES, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            YEAR ENDED MARCH 31,
                                                                                 --------------------------------------
                                                                                  1996            1995            1994
                                                                                 ------          ------           -----
<S>                                                                         <C>             <C>             <C>         
Cash flows from operating activities:
   Net income ...........................................................   $  3,646,000    $  1,606,000    $  1,532,000
   Adjustments to reconcile net income to net cash (used in) operating
     activities:
       Loss on abandonment and disposal of assets .......................                                        159,000
       Depreciation and amortization ....................................        429,000         306,000         160,000
       (Increase) decrease in:
         Accounts receivable ............................................     (6,589,000)     (6,409,000)       (566,000)
         Inventory ......................................................    (16,434,000)     (4,886,000)     (2,625,000)
         Prepaid expenses and other assets ..............................       (300,000)       (115,000)        (91,000)
         Other assets ...................................................        (50,000)         29,000         (15,000)
         Deferred income taxes ..........................................        (82,000)         20,000         (65,000)
       Increase (decrease) in:
         Accounts payable and accrued expenses ..........................      3,094,000       2,486,000          69,000
         Income taxes payable ...........................................        785,000         290,000         256,000
         Due to affiliate ...............................................        157,000         (48,000)
                                                                                            ------------    ------------

             Net cash (used in) operating activities ....................    (15,344,000)     (6,721,000)     (1,186,000)
                                                                            ------------    ------------    ------------


Cash flows from investing activities:
   Purchase of property, plant and equipment ............................       (657,000)       (375,000)       (293,000)
   Investments ..........................................................    (10,113,000)       (616,000)
                                                                                            ------------    ------------

             Net cash (used in) investing activities ....................    (10,770,000)       (991,000)       (293,000)
                                                                            ------------    ------------    ------------


Cash flows from financing activities:
   Net increase in line of credit .......................................      5,552,000       4,683,000         951,000
   Payments of long-term debt ...........................................       (254,000)                       (278,000)
   Payments on capital lease obligation .................................                       (158,000)        (91,000)
   Distributions to shareholders ........................................                                     (1,165,000)
   Proceeds from public offerings .......................................     19,501,000                       5,769,000
   Proceeds from exercise of warrants and options .......................        868,000
                                                                            ------------    ------------    ------------

             Net cash provided by financing activities ..................     25,667,000       4,525,000       5,186,000
                                                                            ------------    ------------    ------------


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....................       (447,000)     (3,187,000)      3,707,000


Cash and cash equivalents - beginning of year ...........................        611,000       3,798,000          91,000
                                                                            ------------    ------------    ------------


CASH AND CASH EQUIVALENTS - END OF YEAR .................................   $    164,000    $    611,000    $  3,798,000
                                                                            ============    ============    ============

Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
     Interest ...........................................................   $  1,035,000    $    572,000    $    447,000
     Income taxes .......................................................      1,590,000         862,000          67,000
   Noncash investing and financing activities:
     Property acquired under capital lease ..............................        707,000          93,000         834,000
     Property acquired included in accounts payable and accrued
       expenses subsequently financed through a capitalizable lease .....        212,000
</TABLE>

               The accompanying notes to financial statements
                          are an integral part hereof.

                                       F-6


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.


                          NOTES TO FINANCIAL STATEMENTS

(NOTE A) - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------------------

           Motorcar Parts & Accessories,  Inc. (the  "Company"),  remanufactures
and distributes  alternators  and starters and assembles and  distributes  spark
plug wire sets for the automotive  after-market industry (replacement parts sold
for use on vehicles  after  initial  purchase).  The Company's  alternators  and
starters are produced  principally for use in imported cars. The spark plug wire
sets are produced for use in imported as well as domestic cars. These automotive
parts are sold to automotive retail chains and warehouse distributors throughout
the United States.

           [1]  CASH EQUIVALENTS:
                -----------------

           The Company considers all highly liquid short-term investments with a
maturity of three months or less to be cash equivalents.

           [2]  INVESTMENTS:
                ------------

           The Company's  marketable  securities are classified as available for
sale  and  reported  at  fair  value  which  approximates  amortized  cost.  Any
unrealized   gains  or  losses  are  classified  as  a  separate   component  of
shareholders' equity.

           [3]  ACCOUNTS RECEIVABLE - ALLOWANCE:
                --------------------------------

           The Company protects itself from losses due to uncollectible accounts
receivable  through the purchase of credit  insurance except for receivables due
from a limited number of accounts due from leading  automotive  parts retailers,
which exceed the  insurance  coverage and certain small  balances.  Beginning in
fiscal year 1996 an allowance for estimated uncollectible accounts receivable is
provided.

           [4]  INVENTORY:
                ----------

           Inventory  is  stated  at the  lower of cost or  market,  cost  being
determined by the average cost method.



(continued)


                                                    
                                       F-7


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

           [5]  INCOME TAXES:
                -------------

           Prior to the  Company's  initial  public  offering,  the  Company had
elected to be treated as an S  corporation  pursuant  to Section  1362(a) of the
Internal Revenue Code for federal and state income tax purposes.  As a result of
this  election,  the income of the Company was generally  taxed  directly to the
individual  shareholders,  and,  when  withdrawn,  could be done so without  any
further tax consequences.  Except for certain states which require a minimum tax
payment for S corporations, the historical financial statements do not include a
provision for income taxes for the period prior to the

(continued)


                                                    
                                       F-8


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE A) - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------------------
           (continued)

           [5]  INCOME TAXES:  (continued)
                -------------

termination  of the S election  on January 1, 1994.  A pro forma  provision  for
income taxes has been  reflected  which  represents  taxes which would have been
provided had the business  operated as a C corporation for the entire year ended
March 31, 1994 (Note K).

           Effective  on  January  1,  1994,  provisions  for  taxes  have  been
calculated as a C  corporation.  The Company has adopted  Statement of Financial
Accounting  Standards No. 109 ("SFAS 109"),  "Accounting for Income Taxes" which
requires the use of the  liability  method of accounting  for income taxes.  The
liability method measures  deferred income taxes by applying  enacted  statutory
rates in effect at the  balance  sheet date to the  differences  between the tax
bases of assets and  liabilities  and their  reported  amounts in the  financial
statements.  The resulting  asset or liability is adjusted to reflect changes in
the tax laws as they occur.

           Upon termination of the S corporation election, the retained earnings
balance as of the date of termination, approximately $1,518,000, was transferred
to additional paid-in capital.

           [6]  DEPRECIATION AND AMORTIZATION:
                ------------------------------

           Property and equipment are  depreciated on the  straight-line  method
over their estimated useful lives.  Leasehold  improvements are amortized by the
straight-line method over the shorter of their estimated useful life or the term
of the lease.

           [7]  REVENUE RECOGNITION:
                --------------------

           The Company  recognizes sales when products are shipped.  The Company
obtains used alternator and starter units, commonly known as cores,  principally
from its  customers  as  trade-ins.  Cores are an  essential  material  need for
remanufacturing  operations.  Net sales are  reduced to reflect  deductions  for
cores returned for credit and other deductions for trade-ins and allowances, and
cost of goods sold is reduced by the cost of the cores returned.  Such trade-ins
are recorded upon receipt of cores from customers. Credits for cores and

(continued)


                                                    
                                       F-9


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

product trade-ins are allowed only against  purchases of similar  remanufactured
products and are generally used within sixty days of issuance by the customer.

(continued)


                                                    
                                      F-10


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE A) - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------------------
           (continued)

           [7]  REVENUE RECOGNITION:  (continued)
                --------------------             

Due to  this  existing  trade-in  policy,  the  Company  does  not  reserve  for
trade-ins. In addition,  since it is remote that a customer will not utilize its
trade-in credits, the credit is recorded when the core is returned as opposed to
when the customer purchases new products.  This policy is consistent  throughout
the remanufacturing and rebuilding industry.

           The effect of this policy is as follows:

                                         March 31,
                        -------------------------------------------
                            1996            1995           1994
                        -------------  -------------  -------------

Sales net of product
   trade-in. . . . . .  $ 64,358,000   $ 39,235,000   $ 29,018,000
Core - trade-in. . . .   (19,445,000)   (10,978,000)    (8,443,000)
                        -------------  -------------  -------------

Sales as reported. . .  $ 44,913,000   $ 28,257,000   $ 20,575,000
                        =============  =============  ============

Cost of sales - gross.  $ 50,965,000   $ 30,690,000   $ 21,816,000

Core - trade-in. . . .   (19,445,000)   (10,978,000)    (8,443,000)
                        -------------  -------------  -------------

Cost of sales as
   reported. . . . . .  $ 31,520,000   $ 19,712,000   $ 13,373,000
                        =============  =============  ============


           Included as a reduction of sales are product trade-ins of $9,468,000,
$6,037,000,  and $4,608,000  for the years ended March 31, 1996,  March 31, 1995
and March 31,  1994,  respectively.  Product  trade-in  represents  the value of
credits issued in excess of core inventory values.

           [8]  EARNINGS PER SHARE:
                -------------------

           For March 31, 1996 and March 31, 1995  earnings per share is computed
using the weighted average number of shares  outstanding during each year, which
include the effect of common stock equivalents consisting of stock options.

           For March 31, 1994,  pro forma net income per share is computed using
the weighted average number of shares outstanding

(continued)


                                                    
                                      F-11


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

during the year.  Common stock  equivalents  consisting of stock options are not
reflected as the effect is not material.

(continued)


                                                    
                                      F-12


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE A) - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------------------
           (continued)

           [9]  USE OF ESTIMATES:
                -----------------

           The preparation of financial  statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

    [10]  CHANGE IN ACCOUNTING PRINCIPLE AND RECENTLY ISSUED
          --------------------------------------------------
             ACCOUNTING PRONOUNCEMENTS:
             --------------------------

           In 1995, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"), and
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 121 requires, among other things, that entities
identify  events or changes in  circumstances  which  indicate that the carrying
amount  of an asset  may not be  recoverable.  SFAS 123  requires,  among  other
things,  that  companies  establish a fair value based method of  accounting  or
disclosure  for  stock-based  compensation  plans.  The  Company  believes  that
adoption  of SFAS  121 and SFAS 123  will  not  have a  material  impact  on its
financial  statements.  The Company  expects to continue to account for employee
stock based compensation in accordance with Accounting  Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees",  using intrinsic values with
appropriate  disclosures using the fair value based method.  The Company has not
elected to adopt SFAS 123 early.

    [11]  FINANCIAL INSTRUMENTS:
          ----------------------

           The  carrying  amounts  of  accounts  receivable,  accounts  payable,
accrued  expenses,  capitalized lease obligations and long-term debt approximate
their fair value.

           Estimated fair value of these  financial  instruments,  some of which
are for short durations, have been determined using available

(continued)


                                                    
                                      F-13


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

market  information.  In  evaluating  the fair value  information,  considerable
judgment is required to interpret the market data used to develop the estimates.
The use of different market  assumptions and/or different  valuation  techniques
may have a material effect on the estimated fair value amounts. Accordingly, the
estimates of fair value  presented  herein may not be  indicative of the amounts
that could be realized in a current market exchange.


(continued)


                                                    
                                      F-14


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE B) - INVESTMENTS:

           The fair value of investments at March 31, were as follows:

                                                1996        1995
                                                ----        ----
          U.S. Treasury bills due in
             one year or less . . . . . .   $ 2,272,000   $616,000
          Municipal bonds due in one
             year or less . . . . . . . .     4,492,000     - 0 -
          U.S. Treasury notes due in
             one year or less . . . . . .     1,572,000     - 0 -
                                            ------------  -------

                                              8,336,000    616,000

          Municipal bonds due within two
              years . . . . . . . . . .  .    2,393,000     - 0 -
                                            ------------  -------

                   T O T A L. . . . . . .   $10,729,000   $616,000
                                            ============  ========


(NOTE C) - INVENTORY:

           Inventory is comprised of the following:

                                                   MARCH 31,
                                               ------------------
                                               1996          1995
                                               ----          ----

          Raw materials . . . . . . . . .  $17,568,000   $ 8,299,000

          Work-in-process . . . . . . . .    3,466,000     1,397,000

          Finished goods. . . . . . . . .    7,517,000     2,421,000
                                           ------------  -----------

                    T o t a l . . . . . .  $28,551,000   $12,117,000
                                           ============  ===========


(continued)


                                                    
                                      F-15


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE D) - PLANT AND EQUIPMENT:
- -------------------------------

           Plant and equipment, at cost, are summarized as follows:

                                                   MARCH 31,
                                               -----------------
                                               1996         1995
                                               ----         ----

          Machinery and equipment . . . .  $ 2,311,000   $  892,000
          Office equipment and fixtures .      891,000      785,000
          Leasehold improvements. . . . .      365,000      315,000
                                           ------------  ----------

                                             3,567,000    1,992,000
          Less accumulated depreciation
             and amortization (including
             assets held under capital
             lease) . . . . . . . . . . .   (1,098,000)    (669,000)
                                           ------------  -----------

                    T o t a l . . . . . .  $ 2,469,000   $1,323,000
                                           ============  ==========


(NOTE E) - OBLIGATIONS UNDER CAPITAL LEASES:
- --------------------------------------------

           The Company has various  capital  leases for  machinery  and computer
equipment. Assets aggregating approximately $1,652,000 have been capitalized.

           Future minimum lease  payments at March 31, 1996 for the  capitalized
leases are as follows:

                     1997 . . . . . . . . . . . . . . . . .  $  647,000
                     1998 . . . . . . . . . . . . . . . . .     532,000
                     1999 . . . . . . . . . . . . . . . . .      95,000
                     2000 . . . . . . . . . . . . . . . . .       4,000
                                                             ----------

                                                              1,278,000

                     Amount representing imputed interest .     130,000

                     Present value of future minimum
                        lease payments. . . . . . . . . . .   1,148,000

                     Less current maturities. . . . . . . .     554,000
                                                             ----------
                     Long-term obligation at March 31, 1996  $  594,000
                                                             ==========


(continued)


                                                    
                                      F-16


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE F) - LONG-TERM DEBT:
- --------------------------

           In September  1995, the Company  amended its revolving line of credit
agreement.  The  agreement  provides  for a  credit  facility  in  an  aggregate
principal  amount  not  exceeding  $15,000,000  and  is  secured  by a  lien  on
substantially all of the assets of the Company. The agreement expires on June 1,
1997 and provides for  interest on  borrowings  at the lower of the bank's prime
rate or LIBOR plus 1.75%.  The  agreement  allows the Company to obtain from the
bank letters of credit,  and  banker's  acceptances  in an aggregate  amount not
exceeding  $2,500,000  and  requires the Company to maintain  certain  financial
ratios.  As of March 31,  1996  balances  due under this  agreement  amounted to
$14,541,000.

           The Company  previously  had a $10,000,000  revolving  line of credit
agreement  with the same bank.  Balances  due under this  agreement  amounted to
$8,989,000 as of March 31, 1995.


(NOTE G) - RELATED PARTIES:
- ---------------------------


           The  Company  conducts  business  with MVR  Products  Co.  PTE,  Ltd.
("MVR").  MVR operates a shipping  warehouse which conducts business with Unijoh
Sdn, Bhd ("Unijoh").  Unijoh operates a remanufacturing  facility similar to the
Company. MVR's warehouse is located in Singapore and Unijoh's factory is located
in Malaysia. Two  shareholders/officers/directors of the Company own 70% of both
MVR and Unijoh, with the remaining 30% owned by an unrelated third party. All of
the cores  processed  by Unijoh  are  produced  for the  Company  on a  contract
remanufacturing  basis.  The cores and other raw materials used in production by
Unijoh are supplied by the Company and are included in the Company's  inventory.
Inventory  owned by the  Company  and held by MVR and  Unijoh was  $920,000  and
$1,002,000  as at March 31, 1996 and March 31, 1995,  respectively.  The Company
incurred costs of approximately  $1,432,000,  $1,349,000 and $1,814,000 from the
affiliates  for the years  ended  March 31,  1996,  March 31, 1995 and March 31,
1994,  respectively.  The amount due to affiliate as at March 31, 1996 and March
31, 1995 was due to MVR.




(continued)


                                                    
                                      F-17


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE H) - EMPLOYMENT AGREEMENT AND BONUS PLAN:
- -----------------------------------------------

           The Company has employment  agreements  with five officers,  expiring
from  September 30, 1996 through  September  30, 2000,  which provide for annual
base  salaries  aggregating  $865,000.  In addition,  three of the officers were
granted options  pursuant to the Company's Stock Option Plan (Note L[2]) for the
purchase of 225,000 shares of common stock (90,000 and 135,000 granted in fiscal
year 1996 and 1995,  respectively).  At March 31, 1996,  10,000 of these options
were exercised.

(continued)


                                                    
                                      F-18


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE H) - EMPLOYMENT AGREEMENT AND BONUS PLAN:  (continued)
- -----------------------------------------------  -----------

           The  Company  has  established  a  bonus  plan  for  the  benefit  of
executives and certain key employees. The bonus is calculated as a percentage of
the base salary ranging from 18% to 50%. The bonus  percentage  varies according
to  the  percentage   increase  in  earnings   before  income  taxes  and  other
predetermined parameters.


(NOTE I) - COMMITMENTS:
- -----------------------

           The Company  leases  offices and  warehouse  facilities  in New York,
California  and Tennessee  under  operating  leases  expiring  through 1998. The
aggregate  rentals under these leases and leases which have been  terminated was
$609,000,  $435,000 and  $380,000 for the years ended March 31, 1996,  March 31,
1995 and March 31, 1994, respectively. Certain leases contain escalation clauses
for real estate taxes and operating expenses.

           The  Company  also  leases  office   equipment  and  machinery  under
noncancellable operating leases having remaining terms in excess of one year.

           At March 31, 1996, the future minimum rental payments under the above
operating leases are as follows:

                                                 Real
                                    Total       Estate     Machinery
                                    -----       ------     ---------
          1997. . . . . . . . .  $  967,000   $  801,000   $166,000
          1998. . . . . . . . .     946,000      819,000    127,000
          1999. . . . . . . . .     686,000      604,000     82,000
          2000. . . . . . . . .      33,000                  33,000
          2001. . . . . . . . .       5,000                   5,000
                                 -----------  -----------  --------

                    T o t a l .  $2,637,000   $2,224,000   $413,000
                                 ===========  ===========  ========




(continued)


                                                    
                                      F-19


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE J) - MAJOR CUSTOMERS:
- ---------------------------

           The  Company's  six largest  customers  accounted  for the  following
percentage of net sales:
                                                     Year Ended
                                                      March 31,
                                           --------------------------------
                CUSTOMER                   1996          1995          1994
                --------                   ----          ----          ----

                A.........................  21%             27%          30%
                B.........................  11              14
                C.........................  20              12
                D.........................  18
                E.........................                               10
                F.........................                               10

           Customer A accounted  for  approximately  25% and 50% of the accounts
receivable  at March 31,  1996 and March  31,  1995.  In  addition,  Customer  C
accounted for approximately 35% of the accounts receivable at March 31, 1996.


(NOTE K) - INCOME TAXES:
- ------------------------

           The provision for income taxes consists of the following:


<TABLE>
<CAPTION>

                                                         Year Ended March 31,
                                          -----------------------------------------
                                                1996          1995          1994
                                          -----------------------------------------
<S>                                        <C>            <C>           <C>        
Current:
      Federal ..........................   $ 1,913,000    $   900,000   $   207,000
      State ............................       522,000        277,000       109,000
Deferred tax benefit applicable
      to temporary differences
      upon becoming a C
      corporation (Note A[5]) ..........                                    (65,000)
Deferred tax ...........................       (82,000)        20,000
                                           -----------    -----------   -----------
Provision for income taxes -
           historical ..................     2,353,000      1,197,000       251,000
              Pro forma income taxes ...                                    477,000
                                           -----------    -----------   -----------
                        T o t a l.......   $ 2,353,000    $ 1,197,000   $   728,000
                                           ===========    ===========   ===========
</TABLE>



(continued)


                                                    
                                      F-20


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE K) - INCOME TAXES:  (continued)
- ------------------------  -----------

           The difference between the tax provision and the amount that would be
computed by applying  the  statutory  federal  income tax rate to income  before
taxes is attributable to the following:

                                                 YEAR ENDED MARCH 31,
                                          ------------------------------
                                          1996         1995         1994
                                          ----         ----         ----
                                                                 (Pro Forma)

Income tax provision at 34%  . . . .  $2,040,000   $  953,000    $606,000

State and local taxes, net of
   federal benefit . . . . . . . . .     345,000      183,000     122,000

Permanent differences  . . . . . . .      18,000       11,000

     Other . . . . . . . . . . . . .     (50,000)      50,000
                                      -----------  ----------   --------

                         T o t a l . . . .  $2,353,000   $1,197,000   $ 728,000
                                            ==========   ==========   ========

           Deferred  income tax asset of $226,000  and $45,000 at March 31, 1996
and March 31, 1995,  respectively,  is comprised of temporary differences in tax
and financial  reporting  resulting  primarily  from  capitalization  of certain
inventory costs for tax purposes. Deferred tax liability of $99,000 at March 31,
1996 is comprised of differences  resulting from using accelerated  depreciation
rates for tax purposes.


(NOTE L) - SHAREHOLDERS' EQUITY:
- --------------------------------

           [1]  CAPITAL STOCK:
                -------------

           In January 1994,  the Company  effected a 36,803.403 to 1 stock split
of  the  outstanding   common  stock   resulting  in  2,000,000   common  shares
outstanding.   The  stock  split  has  been  reflected   retroactively   in  the
accompanying financial statements for all periods presented.

           In  November  1995,  the  Company  effected a public  offering of its
securities. The Company issued 1,500,000 shares for $14.25 a share, yielding net
proceeds  of  approximately   $19,501,000  after  underwriting  commissions  and
expenses totalling  approximately  $1,874,000.  Also, two principal shareholders
sold an aggregate of 344,500 shares in connection with this offering.



(continued)


                                                    
                                      F-21


<PAGE>


                       MOTORCAR PARTS & ACCESSORIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

(NOTE L) - SHAREHOLDERS' EQUITY:  (continued)
- --------------------------------  

           [2]  STOCK OPTION PLAN:
                ------------------

           In December 1993, the shareholders  approved a Stock Option Plan (the
"Plan") which  provides for the granting of options to purchase  450,000  common
shares to employees  and  directors.  Options  granted may be either  "incentive
stock options"  within the meaning of Section 422A of the Internal  Revenue Code
or  nonqualified  options.  The Plan is  administered by the Board of Directors,
which determines the terms of options  exercised,  including the exercise price,
the  number of shares  subject to the  option  and the terms and  conditions  of
exercise.

           In August of 1995, the shareholders  approved a Nonemployee  Director
Stock Option Plan which provides for the granting of options to purchase  15,000
common shares to directors. The Plan is administered by the Board of Directors.

                     The following table summarizes the activity under these
Plans:

                                               Exercise
                                                 Price     Exercisable
                                               ---------   -----------

Options outstanding. . .  4/1/94    85,000      $6.00         27,000
                                                             =======
Granted. . . . . . . . .           165,000   $8.00-$8.125
                                   --------

Options outstanding. . .  3/31/95  250,000   $6.00-$8.125    173,000
                                                             =======
Exercised. . . . . . . .           (23,000)  $6.00-$8.125
Forfeited. . . . . . . .            (1,000)     $8.125
Granted. . . . . . . . .           109,000   $9.00-$13.125
                                   --------

Options outstanding. . .  3/31/96  335,000   $6.00-$13.125   278,000
                                   ========                  =======

           [3]       WARRANTS:
                     ---------

           In connection with the Company's  initial public offering the Company
issued to the  underwriter  105,000  warrants  to  purchase  common  stock at an
exercise price of $7.20.  In connection with a public offering in November 1995,
90,000 warrants were exercised.


                                                    
                                      F-22


<PAGE>



 
                                  SIGNATURES

           In  accordance  with  Section 13 or 15(d) of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

Date:      June 26, 1996

                                             MOTORCAR PARTS & ACCESSORIES, INC.


                                             By:  /S/ MEL MARKS
                                                  ---------------------------
                                                    Mel Marks,
                                                    Chairman of the Board and
                                                    Chief Executive Officer

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.



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

/S/   MEL MARKS                    Chairman of the Board,          June 26, 1996
- ---------------------------        Chief Executive Officer
       Mel Marks                   and Director (principal
                                   executive officer)

/S/   RICHARD MARKS                President, Chief Operating      June 28, 1996
- ---------------------------        Officer and Director
       Richard Marks       



/S/   MURRAY ROSENZWEIG            Director                        June 25, 1996
- --------------------------- 
       Murray Rosenzweig



/S/   MEL MOSKOWITZ                Director                        June 26, 1996
- --------------------------- 
       Mel Moskowitz



/S/   SELWYN JOFFE                 Director                        June 26, 1996
- ---------------------------
       Selwyn Joffe



/S/   PETER BROMBERG               Chief Financial Officer         June 26, 1996
- ---------------------------        (principal  financial officer
       Peter Bromberg              and principal accounting officer)



<PAGE>



                                 EXHIBIT INDEX
                                 -------------

Exhibit                       
Number             Description                                       Page Number
- ------             -----------                                       -----------

23.1               Consent of Richard A. Eisner & Company, LLP            

27.1               Financial Data Schedule


<PAGE>


                                                     COMMISSION FILE NO. 0-23538


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549






                                    EXHIBITS

                                       to

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1996



                       MOTORCAR PARTS & ACCESSORIES, INC.






                        CONSENT OF INDEPENDENT AUDITORS


           We  hereby  consent  to  the   incorporation   by  reference  in  the
Registration  Statement  pertaining  to the 1994 stock  option  plan of Motorcar
Parts & Accessories,  Inc. on Form S-8 of our report dated May 17, 1996 which is
included in the annual report on Form 10-KSB for the year ended March 31, 1996.



/s/ Richard A. Eisner & Company, LLP 

New York, New York
June 27, 1996
                                                    





<TABLE> <S> <C>


<ARTICLE>                     5
<CIK>                         0000918251
<NAME>                        MOTORCAR PARTS & ACCESSORIES, INC.
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                   MAR-31-1996
<PERIOD-END>                        MAR-31-1996
<CASH>                                         164,000
<SECURITIES>                                         0
<RECEIVABLES>                               17,264,000
<ALLOWANCES>                                   100,000
<INVENTORY>                                 28,551,000
<CURRENT-ASSETS>                            55,178,000
<PP&E>                                       2,469,000
<DEPRECIATION>                               1,098,000
<TOTAL-ASSETS>                              60,189,000
<CURRENT-LIABILITIES>                       10,924,000
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        48,000
<OTHER-SE>                                  33,983,000
<TOTAL-LIABILITY-AND-EQUITY>                60,189,000
<SALES>                                     44,913,000
<TOTAL-REVENUES>                            44,913,000
<CGS>                                       31,520,000
<TOTAL-COSTS>                               38,081,000
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             833,000
<INCOME-PRETAX>                              5,999,000
<INCOME-TAX>                                 2,353,000
<INCOME-CONTINUING>                          3,646,000
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                 3,646,000
<EPS-PRIMARY>                                     0.93
<EPS-DILUTED>                                     0.93
        


</TABLE>