SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended November 30, 1997

                                       OR

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

             For the transition period from __________ to __________

                         Commission File Number 0-27944


                          PRIDE AUTOMOTIVE GROUP, INC.
             (Exact name of registrant as specified in its charter)

Delaware                           98-0157860
(State or other jurisdiction of    (I.R.S. Employer Identification No.)
Incorporation or organization)

    Pride House, Watford Metro Centre, Tolpits Lane, Watford, Hertfordshire,
                                WD1 8SB England
                    (Address of principal executive offices)

                                 (800) 698-6590
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
          Title of each class Name of each exchange on which registered

                                      NONE

                 Securities registered pursuant to Section 12(g)
                                  of the Act:
                          Common Stock, $.001 par value
                                (Title of Class)

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such  shorter  period that  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 [ ].

     The  aggregate  market  value of the  voting  stock on  February  24,  1998
(consisting of Common Stock,  $.001 par value per share) held by  non-affiliates
was approximately  $4,455,546.80 based upon the average bid and asked prices for
such  Common  Stock on said date  ($3.34) as  reported  by a market  maker.  The
issuer's  and  its  subsidiaries  had  on  a  consolidated  basis,  revenues  of
$17,459,275  for its fiscal year ended  November 30, 1997. On February 24, 1998,
there were 2,822,500 shares of Registrant's Common Stock outstanding.




<PAGE>
                                     PART I


ITEM 1.           DESCRIPTION OF BUSINESS

History

     Pride Automotive  Group,  Inc., a Delaware  corporation (the "Company") was
formed by Pride, Inc. ("Pride"),  in March 1995 for the purpose of acquiring all
of the outstanding shares of common stock of Pride Management Services, Plc., an
English corporation ("PMS"), which has been accounted for as a "Reorganization."
Prior to the Reorganization, PMS was a wholly owned subsidiary of Pride.

     Pride was incorporated as L.H.M.  Corp. in the State of Delaware on May 10,
1988, as a "blank check" company for the purpose of seeking  potential  business
ventures through acquisition or merger. In April 1990, L.H.M. Corp. entered into
an Agreement and Plan of  Reorganization  with  International  Sportsfest,  Inc.
("ISI"),  a company  formed to engage in and  establish  sports  expositions  in
sports  products  such as clothing and sports  related  equipment.  At such time
L.H.M.  Corp.  changed  its  name to ISI.  ISI  never  engaged  in any  business
operations.  In November  1992,  ISI  effected a 1 for 200 reverse  split of its
issued and outstanding shares of Common Stock. In January 1994, ISI entered into
an Agreement and Plan of  Reorganization  with Pride Management  Services,  Plc.
("PMS"), an English corporation, whereby PMS became a wholly owned subsidiary of
ISI and ISI changed its name to Pride, Inc.

     Pride  also owns 100% of the  capital  stock of Watford  Investments  (Pty)
Limited ("WI"), a South African company,  which was formed in March 1995. WI was
formed for the  purpose of  obtaining  a 24%  interest  in  Masonic  Motors,  an
automobile  dealership in South Africa,  which WI subsequently sold in September
1995.  WI is an import and  export  company,  which had  minimal  revenues  from
operations in fiscal 1996 and no revenues from operations in fiscal 1997.

     Pursuant to the terms and conditions of the  Reorganization  in March 1995,
between the Company,  PMS and Pride,  the Company issued 1,500,000 shares of its
Common Stock to Pride in exchange for all of the issued and  outstanding  shares
of PMS. In connection with the Reorganization and formation of the Company,  PMS
became a wholly owned  subsidiary of the Company  which,  prior to the Company's
initial  public  offering,  was  approximately  72.8%  owned by Pride.  PMS is a
holding  company  which has six wholly  owned  subsidiaries  which engage in the
Company's operations.  PMS's wholly-owned  subsidiaries  include;  Pride Vehicle
Contracts Limited, Baker Vehicle Contracts Limited, Pride Vehicle Contracts (UK)
Limited,  Pride  Leasing  Limited,  Pride Vehicle  Management  Limited and Pride
Vehicle Deliveries  Limited.  These companies operate as one unit, with the same
management and facilities. Unless the context otherwise requires, all references
to the  "Company" are to its wholly owned  subsidiary,  PMS and PMS's six wholly
owned subsidiaries. See "--Subsidiaries."


<PAGE>
Public Offering of Pride Automotive Group, Inc.

         In April 1996,  the Company  completed an  underwritten  initial public
offering of its  securities.  The securities were registered with the Securities
and Exchange  Commission  ("SEC")  pursuant to a registration  statement on Form
SB-2. The initial public offering was declared effective by the SEC on April 24,
1996.  In the offering,  the Company sold 592,500  shares of its common stock to
the public at a price of $5.00 per share and 2,300,000  redeemable  common stock
purchase  warrants at a price of $.10 per warrant.  The warrants are exercisable
at a price of $5.75 per share,  subject to adjustment,  beginning April 24, 1997
and expiring April 23, 2001. In connection  therewith,  the Company also granted
to the  underwriters of the offering,  Mason Hill & Co., Inc. and the Thornwater
Group, Inc., warrants to purchase an aggregate of 95,000 shares of the Company's
common stock at a purchase  price of $7.50 and 200,000  redeemable  common stock
purchase warrants at a price of $0.15 per warrant,  each warrant  exercisable to
purchase one share of common stock at a purchase price of $7.50 per share. Other
than with respect to the exercise  price,  the terms of the warrants  granted to
the underwriter are identical to those described above. The Company's securities
are currently  traded on the Nasdaq  SmallCap  Stock Market and the Boston Stock
Exchange, Inc.

         On January 12, 1998, the Company filed a registration statement on Form
SB-2 with the SEC, to register  1,000,000  shares of the Company's Common Stock.
In  connection  therewith,  the Company has entered into a letter of intent with
Mason Hill & Co., Inc., an NASD  broker-dealer,  to underwrite such securities a
firm commitment  basis. A condition to such  commitment  requires the Company to
grant to Mason Hill,  warrants to purchase an aggregate of 100,000 shares of the
Company's  common stock at 120% of the public  offering  price.  The Company has
applied to have the additional  securities  being  underwritten in that offering
listed on the Nasdaq SmallCap Stock Market,  Inc. and the Boston Stock Exchange.
Additionally,  the Company has agreed to register 170,000 shares of Common Stock
on such registration statement,  which shares were issued in connection with the
Company's December 1996 private placement (the "Private Placement Shares").  The
Private  Placement  Shares will not be  underwritten  by Mason Hill & Co.,  Inc.
There can be no  assurance  that the public  offering  described  herein will be
completed.

Business of Pride Management Services, Plc.

         The  Company  engages in the  business of leasing  new  automobiles  to
businesses, servicing such automobiles during the lease term and remarketing the
automobiles upon the expiration of the lease. The Company's business strategy is
to (i) provide  personal  and  attentive  service to its  clientele,  (ii) lease
primarily  to  high-quality  credit  applicants  in order to continue to build a
lease portfolio with low  delinquency  and credit loss rates,  (iii) finance its
lease portfolio with competitive  credit terms and (iv) manage its residual risk
relating to the  Company's  resale of  automobiles  after the  expiration of the
lease term. The leasing, financing and servicing of the vehicles is described as
a "contract hire."

         The Company purchases each automobile pursuant to the specifications of
its clients,  finances the purchase and pays for all the maintenance and repairs
on the vehicle  during the term of lease.  Typically,  the Company  pays off the
purchase price of the vehicles during the term of the lease and then resells the
automobile at the end of the lease term.

                                        2

<PAGE>
Acquisitions

         The Company has  expanded  its  operations  in the past  several  years
through  acquisition.  In May 1990, the Company  formed Baker Vehicle  Contracts
Limited ("Baker") to acquire certain assets, including the right to the name and
contracts  of  Baker  Hire  Limited,  an  English  company.  At the  time of its
acquisition, Baker was a division of W.H. Baker Limited, which company had filed
for bankruptcy protection. Baker's vehicle leasing is primarily in Wales and the
southwest  region of England.  In December  1990,  PMS was contracted to run the
business  of  County  Contract  Hire  Limited  ("County"),  which  at that  time
comprised  approximately  3,500 leased  vehicles.  In February 1992, the Company
purchased County from Berisford  International  Plc., an English public company,
pursuant  to a  stock  purchase  agreement,  whereby  PMS  acquired  all  of the
outstanding  shares  of  County  and  changed  County's  name to  Pride  Vehicle
Contracts (UK) Limited.  In October 1994, the Company acquired certain assets of
Master Vehicle Contracts Limited ("Master"), an English company, pursuant to the
terms of an asset purchase  agreement.  The assets purchased  included vehicles,
vehicle lease agreements and customer lists. At the time of the sale, Master was
in  receivership,  whereby  the  sale  was  entered  into by PMS  and the  court
appointed receivers.  In connection with this purchase, the Company acquired the
rights to use the name Master Vehicle Contracts Limited.

Industry Overview

         Companies have a variety of financing alternatives available to them in
acquiring the use of a new  automobile,  either through the purchase or lease of
such  vehicle.  In financing  the  purchase of a vehicle  there are various loan
alternatives  including,  fully amortizing,  balloon payment, no money down, low
down payment and business equity loans. In terms of leasing vehicles,  there are
various options including,  payment schedules,  term, maintenance and repurchase
rights. The primary benefit of leasing over purchasing is that leasing typically
provides a consumer with the  opportunity to acquire the use of a new automobile
at a lower monthly payment than financing the purchase of such vehicle,  usually
without a  significant  initial  cash  outlay,  and  enables  the  return of the
automobile without any further liability at the end of the lease term. Companies
which provide  employees with  automobile  transportation  typically  lease such
vehicles and expense the costs.

         The increase in new vehicle  prices in relation to annual median family
income  has been a  contributing  factor in the growth in the  leasing  and used
automobile markets. This has provided the Company with a further opportunity for
revenue growth through the resale of its vehicles after the term of the lease or
in the event there are defaults of the leases.

Business Objectives

         The  Company's  primary  goal  is  to  expand  its  leasing  and  fleet
management  operations,  increase  and obtain  better  terms with respect to the
financing  of the vehicles it leases and to increase  the  profitability  of its
vehicle remarketing  program.  The Company's strategy for continued growth is to
(i)  increase  lease  origination  by  (a)  increased  name   recognition,   (b)
acquisition of similar companies or their assets, (c) the development, expansion
and retention of existing  clients,  and (d) the expansion  into new  geographic
markets,  (ii) further develop and market its fleet management  services,  (iii)
increase and

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<PAGE>
improve  the terms of its  financing  arrangements,  (iv)  further  develop  and
increase the profitability of its used automobile  remarketing  operations,  and
(v) lease  primarily to high quality  credit  applicants in order to continue to
build a lease portfolio with low delinquency and credit loss rates.

Subsidiaries

     The following is a list of the PMS  subsidiaries,  their dates of formation
and their business operations:
<TABLE>
<CAPTION>

                                             Date of
         Name                                Formation        Business Operations

<S>                                          <C>              <C>
         Pride Vehicle Contracts
          Limited                            12/23/86         Conducts  all  administrative  functions  for  the  Company,
                                                              including  paying  salaries and all  operational  expenses of the
                                                              Company.

         Baker Vehicle  Contracts  Limited   02/22/89         Vehicle leasing,  primarily the business operations of Baker Hire 
                                                              Contracts Limited, acquired in May 1990, which operations are 
                                                              primarily in Wales and the south west region of England.

         Pride Vehicle Contracts             09/28/88         Vehicle leasing, acquired County Contract Hire Limited and Master
          (UK) Limited                                        Vehicle Contracts Limited in February 1992 and March 1994,
                                                              respectively.

         Pride Leasing Limited               02/22/89         Owned property and a building in Croydon, England, which was sold 
                                                              in November 1997.

         Pride Vehicle Management            02/14/90         Operates the Company's fleet management services.
               Limited

         Pride Vehicle  Deliveries           06/14/90         Provides vehicle  distribution and collection services for all the 
                                                              Limited Company's leasing operations.
</TABLE>
Leasing, Maintenance and Resale

           The  Company   purchases  each  vehicle   pursuant  to  its  client's
specifications;  finances its purchase and pays for all the  maintenance  on the
vehicle during the term of the lease.  The Company usually finances the purchase
of each  vehicle to  correspond  with the term of the lease,  such that upon the
completion  of the lease term the  automobiles  are fully paid. As of January 1,
1998, the Company had approximately 1,477 vehicles under lease.

         The term of the leases average generally between 24 and 48 months, with
the average lease being 36 months.  In addition to setting forth the lease term,
the amount of the rental payments and the mileage allowance, each lease requires
the lessee to pay all fees, taxes,  fines and other costs relating to the use of
the  vehicle.  Generally,  the lessee  pays the first and last two months  lease
payment in advance of the

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<PAGE>
lease term. The lessee is required to maintain  liability and casualty insurance
on each  vehicle at  specified  limits and to name the Company as an  additional
insured and loss payee.  The Company  will only  approve  policies  which have a
maximum deductible of $500.

         The Company's  sales policy  emphasizes  leasing to  financially  sound
clients and requires certain financial  disclosures prior to executing any lease
agreement. Customer accounts are targeted from profitable, growing, medium-sized
corporate companies. For the years ended November 30, 1996 and 1997, the Company
had two  unaffiliated  customers,  Westbury  Homes Plc. and Campbell  Distillers
Limited,  which companies  accounted for in the aggregate  approximately 15% and
7%,  respectively,  of the  Company's  total  revenues.  The Company also leases
vehicles to the following local government  agencies;  Swansea Council in Wales,
Brent Council in London and Mid Glarmorgan Council in Wales.

         Each lease applicant must provide  information  regarding,  among other
things, corporate history, length of time in business, ability to pay based both
on income level and certain debt to income  ratios  developed by the Company and
credit history,  including comparable borrowing experience.  Review of financial
statements,  audited where obtainable allows for the independent verification of
the  Company's  financial  position and past history.  The foregoing  procedures
provide the general basis for the Company's credit  decisions,  but the ultimate
determination   is  in  the  discretion  of  the  Company's   credit   analysts.
Accordingly, certain of the leases entered into by the Company may not meet each
of the Company's credit guidelines.

         The  Company  has  servicing  agreements  with  over  1,400  automotive
dealerships  and independent  service centers in its areas of operations.  Since
all of the leased vehicles are new, there are warranties  typically ranging from
12 to 36 months or 20,000 to 60,000  miles,  which  ever comes  first,  with the
average being 24 months or 40,000 miles. Also each lease has mileage  limitation
and  additional  fees for  overages.  Therefore,  the  Company  does  not  incur
significant  expenses for  repairs.  Maintenance  is regularly  performed on all
vehicles,  pursuant to negotiated pricing schedules.  No work is permitted to be
performed on any vehicle,  unless  performed by one of the Company's  contracted
service centers with the prior consent of the Company.

         The monthly  lease  payment  which the  Company  charges its clients is
determined  by a computer  program  which takes into account  estimated  service
costs, new vehicle pricing, manufacturer bonuses, rebates and options, potential
residual  value at lease  end as well as other  variable  information  including
interest rates and other current  anticipated  future  economic  variables.  The
client is responsible for maintaining its own insurance, of which the Company is
the beneficiary, in the event the vehicle is damaged.

         The Company  typically  attempts to match the  financing  term with the
lease  term,  whereby  at  the  end of the  lease  term  the  Company  owns  the
automobile.  The Company does not currently  perform  repairs or refurbishing on
the returned  vehicles,  rather,  the Company  attempts to resell such  vehicles
immediately  upon their  return in the same  condition  as they are returned in.
This enables the Company to increase its cash flow,  though the Company believes
it could obtain  higher  prices for the used vehicles in the event minor repairs
were  performed  prior to resale.  The  Company  manages  its  residual  risk by
focusing on the leasing of vehicle  models  which it believes  will have a broad
appeal in the used

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<PAGE>
automobile  market  at the  end of the  lease  term  and by  utilizing  multiple
remarketing channels including, but not limited to used car wholesalers and used
car retailers.  The Company upon pricing the lease of a new vehicle  reviews the
listed  wholesale price as listed in several pricing guides,  predominantly  the
Current Auction Prices ("CAP") book, which gives the current  wholesale price of
the model being leased.  The Company  currently  attempts to get at least 85% of
the CAP  listed  wholesale  price upon the resale of the  vehicle.  The  Company
believes that with increased working capital and cash flow from operations,  the
Company can make minor repairs and  refurbishings  on the automobiles  performed
and seek  higher  prices  on  resales  of up to 110% of the  wholesale  price on
popular  models.  The Company  sells its used vehicles  through used  automobile
wholesalers  and  retailers,   automobile  auctions,  unaffiliated  dealers  and
pursuant to sales to related parties of the lessees. In the event the market for
used automobiles  decreases the models or conditions of the vehicles returned to
the Company  decrease  their resale  value or vehicles are returned  pursuant to
defaults in the lease agreements, such events may adversely affect the Company's
cash  flow,  profitability  and  business  operations.  See  "--  Financing  and
Collections" and "-- Competition."

Fleet Management Services

         In 1994,  the  Company  opened  its fleet  management  division,  which
division manages the automobiles for certain of its corporate clients who choose
to  own  the  vehicle(s)  directly.  Customarily,  these  clients  purchase  the
automobiles through the Company in order to take advantage of the Company's bulk
purchase  discounts.  The  Company  maintains  these  vehicles on behalf of such
clients  pursuant to a monthly  management  fee,  usually $15 per automobile and
disposes of the vehicles thereafter on behalf of the client. The client pays all
costs  associated with the purchase,  maintenance and resale of the automobiles.
The Company  estimates that for the year ended November 30, 1997 less than 5% of
the Company's revenues were from fleet management services.

Suppliers

         The  Company  purchases  all of the  automobiles  that it leases to its
clients from  automotive  dealerships,  usually several at a time. For the years
ended November 30, 1996 and November 30, 1997,  General Motors and Ford were the
manufacturers  of  approximately  20% and  20%,  respectively  and 16% and  17%,
respectively,  of the vehicles  which it leased.  The Company does not depend on
any individual dealership for the purchase of any vehicle brand. The Company has
no written  agreements with any dealership it purchases vehicles from, though it
does receive yearly rebates from manufacturers  based on quantity of automobiles
purchased.  Management believes that the price it pays and the terms it receives
for the  automobiles it purchases are more favorable than it would receive if it
was purchasing  automobiles on an individual basis. The Company believes that it
will continue to be able to purchase automobiles at competitive prices and terms
into the future.

         A portion of the Company's  profit margin is based on rebates  received
directly  from the  automobile  manufacturers  on a yearly  basis.  The  Company
receives  a  rebate  on most  vehicles  purchased  based  upon the  quantity  of
automobiles  purchased from said  manufacturer each year. This rebate is usually
between $100 and $400 per vehicle.  However,  the Company has no assurances that
it will be able to  acquire  automobiles  at  favorable  prices in the future or
receive  such  rebates  in the  future.  No  assurance  can  be  given  that  an
uninterrupted and adequate supply of automobiles will be available to the

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<PAGE>
Company  in  the  future,  although,  the  Company  believes  that  there  are a
sufficient number of automobile dealerships, so that in the event any individual
or group of dealerships can no longer service the Company's  needs,  the Company
will be able to find other  dealerships at competitive  prices. In the event the
Company  cannot  obtain  the   automobiles  of  any  specific   manufacturer  or
automobiles  in general or is not able to purchase such  automobiles  on similar
terms as is presently  available to it, the Company may be materially  adversely
affected.

Financing and Collections

         The Company  provides new  automobiles to its clients  pursuant to each
individual  client's  specifications,  with  personal and  attentive  service to
include all of its clients  needs.  The  Company's  sales  representatives  have
extensive  experience in the  automobile  finance and leasing  industry and work
closely with the clients to meet their driving and financial needs.

         Since  November  1992,  when  entering into new lease  agreements,  the
Company purchases the automobile,  which usually requires a 10% down payment and
pays down the note on the purchase  including  principal and interest during the
term of the lease.  Prior to  November  1992,  the  Company  would  finance  the
purchase of automobiles  through  promissory notes which required the payment of
interest  during the term of the loan and the  repayment  of the  principal in a
balloon payment at loan maturity which is the same as the end of the lease term.
This financing strategy enabled the Company to increase its cash flow during the
term of the lease,  but the higher  financing fees and interest  expense reduced
the Company's profit on the resale of the vehicles.

         The  Company  has asset  funding  lines to  acquire  revenue  producing
vehicles  with  several  institutions  in  England  in the  aggregate  amount of
$23,667,500  of which the Company has borrowed  approximately  $18,342,778 as of
November  30,  1997.  The  increase  in the  Company's  asset  funding  line  is
attributable  to the equity raised in the Company's  initial public  offering in
April 1996. See "Management's Discussion and Analysis of Financial Condition and
Results of  Operations  -  Liquidity  and  Capital  Resources."  Under the lease
agreements,  the lessees generally have no right to terminate their leases prior
to the end of their scheduled term. In the event that any lease terminates prior
to the end of its scheduled term (whether by way of default,  the destruction or
theft of the  vehicle),  the lessee is liable to the  Company  for the amount by
which the  lessee's  default  termination  liability  under the lease  agreement
exceeds the realized  value of such vehicle,  which may be obtained  through the
proceeds of the sale of the vehicle (including a sale following repossession) or
the proceeds of any applicable insurance on the vehicle.  Under the terms of the
lease, the term "default termination  liability" includes;  (i) all payments due
under the lease  agreement up to the  termination  date,  inclusive of interest,
(ii) future rental payments due from termination date until the contracted lease
termination  date,  less  maintenance and a 5% discount and (iii) the difference
between  the  amount  received  pursuant  to the  sale  of the  vehicle  and the
estimated residual value, if such sale price is less than the estimated residual
value.  Under its  agreements  with the  lessee,  the  Company  pays the sale or
insurance  proceeds to its lender up to the amount of the then remaining balance
of the note payable  related to the vehicle.  Any shortfall is a credit loss and
is borne by the lessee, and any excess is retained by the Company.



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<PAGE>
         As of August  31,  1997,  the  Company's  line of credit  with its bank
expired.  In February  1998,  the Company  entered into a new agreement with the
bank. This new line of credit of $7,202,500, is payable on demand and is secured
by all assets of the Company other than building and revenue-producing  vehicles
which are  already  pledged  (see  Notes 6b and 7 to the Notes to the  Financial
Statements).  Interest  is payable  at rates  between 2% and 4% in excess of the
bank's base rate (7 1/2% at November 30, 1997).  This facility has to be reduced
by $837,500 by March 31, 1998 and a further  $921,250 by December 31, 1998.  The
agreement is due for review November 1998.

         The  Company  attempts  to enhance  the  performance  of its leases and
thereby  minimize its financial  risks by  maintaining  timely,  consistent  and
direct   customer   contact.   When  a  default  does  occur,   collections  and
repossessions are handled by the Company's collection  department.  Upon a lease
payment default and after the passage of three days, the Company mails a written
notice to the defaulting  customer and attempts to contact the customer directly
by phone. Once contact is established,  the collection department will work with
the customer  until the default is cured.  If contact is not made or the default
is not satisfactorily  cured, the Company will proceed to repossess the vehicle.
The Company will repossess the vehicle upon a determination that there is a risk
of not  recovering  the  vehicle.  In the event  repossession  is  required,  it
typically will take place within 20 days after the initial default.  Pursuant to
English  law, a company  can  repossess  a vehicle  for non payment in the event
payment is not received within two days of the due date, however,  the Company's
lease agreements provide for a seven day grace period. No notice is required and
no demand for payment need be made prior to  repossession.  The Company,  as the
vehicles owner,  has all key numbers with respect to the vehicles it leases.  In
the event the  Company  deems  repossession  necessary  it sends an  employee to
physically  drive the vehicle  away from the lessee.  Repossessed  vehicles  are
offered by the Company at public sale,  after the giving of notice,  and sold by
the Company in a commercially  reasonable manner. There were no repossessions of
vehicles in fiscal 1996. In 1997, there were eight repossessions, however six of
those repossessions were re-leased.  There have been none to date in 1998. There
were no  repossessions  in fiscal 1995. Only one vehicle was repossessed  during
fiscal 1994.

Competition

         The  Company's   business  is  highly   competitive,   with  relatively
insignificant  barriers to entry and with numerous firms  competing for the same
customers.  The Company is in direct competition with local (includes the county
of Hertfordshire and the surrounding  areas),  regional (includes London and the
surrounding areas) and national  (includes all of the United Kingdom,  inclusive
of England,  Wales, Scotland and Northern Ireland) automotive leasing companies,
many of which  have  greater  resources  and  more  extensive  distribution  and
marketing than the Company.  The largest leasing companies in direct competition
with the Company are Cowie  Interleasing,  a division  of Cowie,  Plc.,  and Lex
Vehicle  Leasing  Limited,  each of  which  claim  to have  presently  on  lease
approximately  65,000  vehicles.  As of January 1, 1998,  the  Company had 1,477
vehicles  under lease.  The Company also  competes in the  automobile  financing
industry with providers of other forms of financing.  Other competitors  include
finance companies affiliated with automobile manufacturers,  a variety of local,
regional and national finance  companies,  commercial banks,  savings and loans,
and other consumer  lenders such as industrial  thrifts and credit  unions.  The
automobile  leasing business is highly  competitive and the Company competes for
business on the basis of both pricing and service. The Company believes that the
main

                                        8

<PAGE>
concern of the lessee or buyer of a new  automobile is the amount of the monthly
payment  and  of any  down  payment.  Many  of the  Company's  competitors  have
significantly  greater financial,  technical and marketing  resources and market
share than the Company.  Automobile finance companies affiliated with automobile
manufacturers, from time to time offer aggressive leasing and financing programs
at below market pricing to promote the sale of certain vehicle  models.  Many of
the national  leasing  companies  have  extensive  advertising  campaigns  which
develop and reinforce brand recognition. In addition, many of such manufacturers
have agreements with vehicle  leasing  entities to jointly  advertise and market
their products and services.

         The  used  automobile  sales  business  is  highly  competitive,   with
competition coming from individuals, independent used automobile wholesalers and
dealerships  and used  automobile  lots operated by new  automobile  dealers and
rental car companies.

Marketing and Sales

         The sales policies of the Company have  emphasized  quality of business
rather than  volume,  both in its own new  business  contracts  and its acquired
contracts.  This  controlled  and  conservative  approach  to growth  allows the
Company to write  what it  considers  to be good  quality,  profitable  contract
hires.  Customer service and satisfaction is then emphasized as a high priority,
to ensure that the group's premium pricing policies can be maintained for repeat
business.

         Customer accounts are targeted from profitable,  growing,  medium-sized
corporate companies together with public sector referrals.  The Company's credit
underwriting  policies reflect this prudent  approach,  and ensure that the high
quality of the portfolio is maintained. The Company takes a balanced,  portfolio
approach to risk  management  with a variety of company sizes to balance  credit
risk against profit margin.

         The Company executes a finance company standard hire purchase agreement
for each lease and the  finance  company  takes a  registered  charge  (security
interest)  over the underlying  agreement  between the Company and its customer.
The security of the lender is further increased by the Company's down payment on
the vehicles and the monthly  payments of principal and interest during the term
of the  lease.  The  Company  has all  required  liens  and  security  interests
appropriately filed and recorded.

         As part of its  obligations,  the Company  performs all  administrative
functions in the  acquisition,  registration  and leasing of the  automobile and
controls  and pays for all  required  servicing  of its  vehicles.  The  Company
obtains  appropriate  vehicle  registrations  and titles for all lease vehicles,
tracks compliance with insurance requirements, negotiates and handles all claims
with  insurance  companies  and  remits  all  appropriate  sales  taxes on lease
payments to the taxing authority.



                                        9

<PAGE>
Government Regulations

         The Company is subject to regulation by the United  Kingdom  Department
of Trade and Industry  (the  "Department  of Trade").  The  Department  of Trade
establishes  general  rules and  regulations  with respect to the operation of a
business in the United Kingdom.  The Department of Trade has not established any
regulations  or licensing  requirements  specifically  regulating the leasing of
automobiles to companies.  There can be no assurances that such will be the case
in the future or that if  licensing or other form of  regulation  is required in
order to engage in the Company's business that the Company will be successful in
obtaining such licenses or in meeting the requirements of such regulations.  The
Department of Trade, in accordance with the credit  agreement act,  requires the
issuance of a license in order to lease vehicles to  individuals,  which license
the Company has obtained,  however,  the Company never has nor does it presently
intend to lease  vehicles to  individuals.  In  addition,  the Company must also
comply  with a wide  range  of other  state  and  local  rules  and  regulations
applicable to its business,  including  regulations  covering  labor  relations,
safety  standards,  affirmative  action and the  protection of the  environment.
Continued  compliance with the broad regulatory network of the United Kingdom is
essential and costly and the failure to comply with such regulations may have an
adverse effect on the Company's operations.

         In August 1995, the British  Government  passed a law allowing  leasing
companies to be reimbursed by the Government for the value added tax "VAT" which
is added to all consumer goods including  automobiles.  The VAT tax is currently
at 17.5%. Reimbursement of the VAT tax allowed the Company to charge lower lease
rates.

Employees

         As of January 1, 1998, the Company employed 20 full-time  persons,  six
are in management  (three of which are  officers),  eight  administrative,  four
sales representative and two drivers. None of the employees are represented by a
union, and the Company considers employee relations to be good.

Properties

         The Company  maintains 6,000 square feet of executive office space in a
modern,  free standing  building at Pride House,  Watford Metro Centre,  Tolpits
Lane Watford  Hertfordshire,  WD1 8SB England. The building was purchased by PMS
in  December  1992 at a cost  of  approximately  $895,000.  The  annual  cost of
servicing  the  building's  mortgage  and  taxes is  approximately  $80,000  and
$18,000,  respectively.  Pride  Leasing  Limited  owned a building  in  Croydon,
England,  which it purchased in 1991 at a cost of  approximately  $825,000.  The
Company sold this property in November 1997 for $400,000.



                                       10

<PAGE>
Pending Litigation

         The Company is not a party to any material pending litigation which, if
decided  adversely to the Company,  would have a significant  negative impact on
the business, income, assets or operation of the Company, and the Company is not
aware of any material threatened  litigation which might involve the Company. In
England,  the owner of the automobile is not  considered  liable for the acts of
the driver where there is a lease arrangement.

Acquisition of AC Car Group Limited

         In November  1996,  the Company,  through its  subsidiary  AC Car Group
Limited, acquired all of the assets of AC Cars Limited ("AC Cars") and Autokraft
Limited ("Autokraft"),  two companies incorporated under the laws of England and
Wales,   respectively.   AC  Cars  and  Autokraft   are   specialty   automobile
manufacturers that had been in administrative receivership since March 1996.

Business of AC Car Group Limited

         AC Car Group Limited was  incorporated in England and Wales on June 28,
1996, as  Paradehaven  Limited.  The name was changed to AC Car Group Limited on
August 30, 1996.

         AC Cars was formed in 1901 as  Autocar &  Accessories  Limited  and has
been  in  continuous   operations  ever  since.  AC  Cars  is  Britain's  oldest
independent manufacturer.  Today, AC Car Group Limited manufactures and sell two
automobiles, the Superblower (a continuation of the AC Cobra) and the AC Ace.

         The AC Cobra is a high-powered,  hand built sports car with an aluminum
body.  The automobile is  manufactured  today using the same  traditional  coach
building  methods and  original  Cobra  tooling  which were used on the original
manufactured  Cobras in the 1960s.  Historically,  in 1963 the AC Cobra caused a
sensation  by racing  along the MI motorway  (England's  first  motorway) at 196
miles per hour, and by 1964, the 427 AC Cobra was listed in the Guinness Book of
Records as the fastest production car in the world. The AC Cobra sells for about
(pound)69,000 ($115,644).

         In 1994,  the AC Ace prototype was first  displayed at the London Motor
show. In 1995, the AC Ace was shown to the North American  public at the Detroit
Motorshow. When the AC Ace comes into production, it will sell for approximately
(pound)75,000  ($125,700).  As of January 1, 1998, AC has produced approximately
fifty  pre-production  AC Aces. The Company expects the AC Ace should enter into
its final production stage in January 1998.

         In 1987,  Ford Motor  Company  became a partner with  Autokraft  and AC
Cars.  The AC Cobra is  equipped  with a Ford V8 engine.  Currently,  Ford Motor
Company owns the  trademark to the name Cobra.  However,  Autokraft  and AC Cars
used the name Cobra under a license  arrangement  with Ford Motor Company.  When
they were placed in administrative  receivership,  the license  arrangement with
Ford  Motor  Company  was  voided.  After the  Asset  Acquisition,  the  Company
negotiated a new licensing agreement with Ford Motor Company whereby the Company
has procured a three year license,

                                       11

<PAGE>
     commencing  December 7, 1996, to continue to use the name "Cobra" on its AC
Cobra  model.  Notwithstanding  the  foregoing,  the "Cobra"  has been  recently
updated and has been renamed the AC "Superblower."

Administrative Receivership

         AC Cars has  incurred  losses in recent years as a result of design and
development costs incurred in bringing the AC Ace into production. Although most
of the  development  work is now complete and  approximately  fifty AC Aces have
been  produced  to date as  pre-production  vehicles,  the  expenses AC Cars and
Autokraft  incurred  in  connection  with  the  development  of the  Ace  forced
Autokraft and AC Cars to seek  additional  capital  investments  so as to enable
them to both meet  current  production  needs  and  increase  future  production
levels.  Once  it  became  clear  to  Autokraft  and AC  Cars'  management  that
additional funds were unlikely to be forthcoming in time to allow the businesses
to meet their financial obligations, coupled with their bankers indications that
they no longer had  confidence  in the current  ownership,  the Directors of the
businesses   resolved  to  request  their  bankers  to  appoint   Administrative
Receivers. Administrative receivers were appointed on March 7, 1996.

Development Projects and Enhancements

         The Company, through AC, intends to continue to evaluate developing the
Cobra and the Ace's chassis to be compatible with other engines.

Marketing and Sales; License Arrangement

         AC Cars has used very little,  if any, print or other media advertising
with  respect to the AC Ace.  However,  both the Cobra and the Ace have been the
subject of numerous magazine articles in automotive publications,  and, as such,
have received extensive exposure.

         As discussed  above,  AC Cars and  Autokraft  were using the name Cobra
under a license  arrangement  with Ford Motor Company.  Although the arrangement
became void when the two companies were placed in receivership,  the Company has
entered into a new licensing arrangement with the Ford Motor Company whereby the
Company has procured a three year license to use the name  "Cobra,"  terminating
in December 1999.

         Whereas  the  Company  is  pleased  that it has been able to  procure a
licensing  arrangement  to  continue  to  use  the  name  "Cobra",  the  Company
anticipates that a significantly  larger portion of its future marketing efforts
will concentrate on the venerable history and prestige  associated with the name
"AC", which name the Company acquired outright as part of the Asset Acquisition.

         The  Company  believes  that the  principal  markets  for  sales of its
automobiles  are the United States,  Australia,  Germany and the United Kingdom.
The Company is in the process of negotiating  distribution agreements in some of
these  important  markets,  including  Australia and the United  Kingdom,  while
agreements and approvals in other key markets have already been received.


                                       12

<PAGE>
         The AC Cobra is Type  approved  for sale in  certain  countries  of the
European Economic Community ("EEC").

Trademarks

         Acquired  as part of the Asset  Acquisitions  was the rights to utilize
the "Ace" mark on sales of the Ace.  The right to use the Cobra name was subject
to a license  arrangement which was in place with Ford Motor Company,  the owner
of the trademark just prior to the appointment of Receivers. As discussed above,
the Company has entered  into a new license  agreement  with Ford Motor  Company
whereby the Company has procured a three year  license to use the name  "Cobra".
Former  management  of Autokraft  and AC Cars has advised the Company that it is
not aware of any actions  attempting  to invalidate or challenge its use of such
trademarks  and that it has not  received  any notice or claims of  infringement
regarding its trademarks.

Products Liability Insurance

         At present,  AC maintains product liability insurance through Lloyds of
London.  The limit of the indemnity is  (pound)2,000,000  ($3,520,000)  for each
instance.  Although  AC has  procured  this  insurance  policy,  there can be no
assurance that it will be able to maintain such  insurance,  that such insurance
will be sufficient to cover claims, if any, or that such insurance will continue
to be available at  commercially  reasonable  terms. If AC is unable to maintain
products liability insurance for the automobiles that it manufactures,  it would
adversely  affect  the  business  of  AC  and  could  potentially  cause  it  to
discontinue  operations.  However, there can be no assurance that such insurance
will be obtained, or that if obtained, that such insurance will be sufficient to
cover claims,  if any, or that such  insurance  will continue to be available at
commercially  reasonable  terms.  If  the  Company  or AC  are  required  to pay
uninsured claims, it would adversely affect the businesses of the Company and AC
and could cause a discontinuation of operations. The Company and AC do not carry
business interruption or key man insurance. See "Risk Factors."

Legal Proceedings

         AC is not a party to any material litigation. Autokraft and AC Cars are
involved in legal proceedings, all of which are related to their being placed in
administrative receivership. Although the Company acquired the assets of AC Cars
and  Autokraft  and does not believe that it will have any exposure to liability
claims for automobiles built by AC Cars and Autokraft, there can be no assurance
that the  Company is  correct in such  belief.  Any such claim  relating  to new
automobiles  built by AC or to automobiles  built by AC Cars and Autokraft could
have an adverse effect on the Company.



                                       13

<PAGE>
Properties

         AC currently  occupies  premises on a four acre site at the  Brooklands
Industrial Park in Surrey, England. The property comprises a factory,  workshop,
showroom and office space. In all, the facility  provides  approximately  90,000
square feet of  manufacturing  area and 20,000  square feet of executive  office
area. The Company had agreed to lease the premises  currently occupied by AC for
a period of one year  commencing  December 1, 1996.  The  Company's  lease costs
approximately  (pound)32,000  ($53,632)  per month.  AC exercised  its option to
purchase the premises for the purchase price of (pound)5,200,000 ($8,715,200) in
July 1997.  AC then sold the  property  for  (pound)5,600,000  ($9,385,600)  and
entered into a 15 year lease for 39,000  square feet of the property at the rate
of (pound)18,000 ($30,200) per month.

Employees

         At the  time of  their  acquisition,  Autokraft  and AC  Cars  together
employed a total of 83 persons.  The Company  retained  approximately 31 of such
employees upon  completion of the Asset  Acquisition and has hired 12 additional
employees to oversee the manufacturing and marketing of the automobiles.


ITEM 2.           DESCRIPTION OF PROPERTY

         The Company  maintains 6,000 square feet of executive office space in a
modern,  free standing  building at Pride House,  Watford Metro Centre,  Tolpits
Lane Watford  Hertfordshire,  WD1 8SB England. The building was purchased by PMS
in  December  1992 at a cost  of  approximately  $895,000.  The  annual  cost of
servicing  the  building's  mortgage  and  taxes is  approximately  $80,000  and
$18,000,  respectively.  Pride  Leasing  Limited  owned a building  in  Croydon,
England,  which it purchased in 1991 at a cost of  approximately  $825,000.  The
Company sold this property in November 1997 for $400,000.

         AC currently  occupies  premises on a four acre site at the  Brooklands
Industrial Park in Surrey, England. The property comprises a factory,  workshop,
showroom and office space. In all, the facility  provides  approximately  90,000
square feet of  manufacturing  area and 20,000  square feet of executive  office
area. The Company had agreed to lease the premises  currently occupied by AC for
a period of one year  commencing  December 1, 1996.  The  Company's  lease costs
approximately  (pound)32,000  ($53,632)  per month.  AC exercised  its option to
purchase the premises for the purchase price of (pound)5,200,000 ($8,715,200) in
July 1997. AC then sold the property for  $9,385,600  and entered into a 15 year
lease for 39,000 square feet of the property at the rate of $30,200 per month.

ITEM 3.           LEGAL PROCEEDINGS

         The Company is not a party to any material pending litigation which, if
decided  adversely to the Company,  would have a significant  negative impact on
the business, income, assets or operation of the Company, and the Company is not
aware of any material threatened  litigation which might involve the Company. In
England,  the owner of the automobile is not  considered  liable for the acts of
the driver where there is a lease arrangement.


                                       14

<PAGE>
         AC is not a party to any material litigation. Autokraft and AC Cars are
involved in legal proceedings, all of which are related to their being placed in
administrative receivership. Although the Company acquired the assets of AC Cars
and  Autokraft  and does not believe that it will have any exposure to liability
claims for automobiles built by AC Cars and Autokraft, there can be no assurance
that the  Company is  correct in such  belief.  Any such claim  relating  to new
automobiles  built by AC or to automobiles  built by AC Cars and Autokraft could
have an adverse effect on the Company.

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

         The  Company  did not  submit  any  matters  to a vote of its  security
holders during its fiscal year ended November 30, 1997.


                                       15

<PAGE>
                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The  Company's  Common Stock,  $.001 par value per share,  is currently
traded on the SmallCap  Market of the Nasdaq Stock Market.  The following  table
sets forth  representative  high and low closing prices by calendar  quarters as
reported by a market maker,  during the periods provided for herein.  Quotations
represent prices between dealers, do not include resale mark-ups,  mark-downs or
other fees or commissions, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>

                                    Common Stock              Public Warrants
    Calendar Quarter                     Prices                   Prices
         Ended                      Low     High              Low      High

1996
<S>                                 <C>     <C>               <C>      <C> 
4/24/96 to 5/31/96                  7 1/2   8 1/4             3        4 1/8
6/1/96  to 8/31/96                  8       8 1/8             2 7/8    4
9/1/96  to 11/30/96                 5       6 7/8             1 1/8    1 1/2
12/1/96  to 2/28/97                 1 3/4   4 11/16           5/16     1 1/2

1997
03/01/97 - 05/31/97                 2       2 1/2             5/16     5/8
06/01/97 - 08/31/97                 1 1/4   2 5/16   5/16     3/8
09/01/97 - 11/30/97                 2 1/4   3 1/2             13/32    13/32
12/01/97 - 02/24/98                 2 7/8   3 1/2             5/32     17/32

----------------
</TABLE>

     (1) The Company effected an initial public offering of its Common Stock and
Warrants on April 24, 1996.

         As of  February  24,  1998,  there  were 31  holders  of  record of the
Company's   Common  Stock,   although  the  Company   believes  that  there  are
approximately 1,000 additional  beneficial owners of shares of Common Stock held
in street name. As of February 24, 1998, the number of outstanding shares of the
Company's Common Stock was 2,822,500.

         As of  February  24,  1998,  there  were 10  holders  of the  Company's
Warrants,  although  the  Company  believes  that  there are  approximately  400
additional  beneficial owners of the Company's  Warrants held in street name. As
of February 9, 1998, the number of outstanding Warrants was 2,300,000.



                                       16

<PAGE>
     On February  17, 1998 the Company  received a letter from Nasdaq  informing
the  Company  that it did not comply  with  recently  amended  Nasdaq  continued
listing  criteria which required the Company to have minimum net tangible assets
of at least  $2,000,000,  two independent  directors and an audit  committee,  a
majority of which are  independent  directors.  The  Company  was granted  until
February 23, 1998 to comply with such requirements.

     On February 12, 1998, the Board of Directors of AC Automotive  Group,  Inc.
authorized  the  issuance  of  6,633,000  shares of its  common  stock to Erwood
Holdings,  Inc., a company affiliated with Alan Lubinsky,  the President,  Chief
Executive Officer and a Director of the Company and AC Automotive  Group,  Inc.,
for aggregate  consideration of $6,633. In addition,  on such date AC Automotive
Group, Inc. authorized the issuance of 176,520, 176,520 and 88,260 shares of its
common stock to Beth-Anne  Kinsley,  Victor and Marion  Durchhalter  and Bridget
Staff,  respectively,  for  consideration  of $177, $177 and $89,  respectively.
Beth-Anne  Kinsley,  Victor and Marion  Durchhalter  and Bridget  Staff were all
prior  shareholders of AC Automotive Group, Inc. and are all associated  persons
of Mason Hill & Co., Inc., the  broker/dealer  which effected the initial public
offering of the Company's  securities and the subsequent private offering of the
Company's  securities,  the  proceeds  from which (the  private  offering)  were
utilized by the Company to complete the AC asset acquisition.

     The  foregoing  issuance of shares  reduced the  ownership of AC Automotive
Group,  Inc.  by  the  Company  to  under  50%.  Accordingly,  future  financial
statements of the Company will be issued on an unconsolidated basis. Footnote 18
to the Company's  Financial  Statements  has been prepared to show the effect of
the share issuance described herein. See "Financial Statements."

     On February  25, 1998 Ivan  Averbuch  resigned as a Director of the Company
and on the same date the board of  directors  elected Ian  Satill,  to fill such
vacancy.

     On February  25,  1998,  the Board of  Directors  resolved to form an audit
committee  in  order  to  comply  with  current  Nasdaq   corporate   governance
requirements.  The Audit  Committee is  comprised of the three  directors of the
Company,  two of whom (Ian Satill and Alan  Edgar) are  believed by the Board of
Directors to be independent.

     Although  the  Company is of the belief that it is now in  compliance  with
Nasdaq  requirements  for a continued  listing of its  securities  on the Nasdaq
SmallCap  system,  there can be no assurance  that it is correct in such belief.
The  Company  expects to receive a ruling  from  Nasdaq  shortly on its  listing
compliance. See "Certain Transactions."

     The Company has paid no dividends and has no present plan to pay dividends.
Payment of future dividends will be determined from time to time by its board of
directors, based upon its future earnings, if any, financial condition,  capital
requirements  and other  factors.  The Company is not  presently  subject to any
contractual or similar  restriction on its present or future ability to pay such
dividends.



                                       17

<PAGE>
ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         The following is  management's  discussion  and analysis of significant
factors  which have  affected the Company's  financial  position and  operations
during the years ended November 30, 1997 and 1996.

         Pride  Automotive  Group,  Inc. (the "Company") was incorporated in the
State of  Delaware  in March 1995.  Pursuant  to the terms and  conditions  of a
reorganization  agreement  entered  into  in  March  1995,  the  Company  issued
1,500,000 shares of its Common Stock to Pride,  Inc. (an entity  incorporated in
the State of Delaware), in exchange for all the issued and outstanding shares of
PMS,  thereby making the Company a majority owned  subsidiary of Pride and PMS a
wholly-owned  subsidiary  of the  Company.  PMS is the  holding  company for six
wholly-owned subsidiaries, operating as one unit, located in the United Kingdom.
PMS and its  wholly-owned  subsidiaries  are  located in the United  Kingdom and
follow  generally  accepted  accounting  principles in the United  Kingdom.  For
purposes of the consolidated financial statements of the Company, the statements
have been  converted to the  generally  accepted  accounting  principles  in the
United States.

         Pride, the Company's  parent, is an entity reporting under the Exchange
Act,  and its reports  may be obtained  and  reviewed by either  contacting  the
Company or the Securities and Exchange  Commission.  Pride, Inc., on its own has
virtually no operations.  As such, its financial viability is represented by the
financial  statements of the Company.  Pride was incorporated as L.H.M. Corp. in
the  State of  Delaware  on May 10,  1988 as a "blank  check"  company,  for the
purpose of seeking potential business ventures through acquisition or merger. In
April 1990,  L.H.M.  Corp.  entered into an Agreement and Plan of Reorganization
with International  Sportsfest,  Inc. ("ISI"), a company formed to engage in and
establish  sports  expositions  in  sports  merchandise  such  as  clothing  and
equipment.  ISI never engaged in any business  operations.  In January 1994, ISI
entered  into an  Agreement  and Plan of  Reorganization  with PMS,  whereby PMS
became a wholly-owned  subsidiary of ISI and ISI changed its name to Pride, Inc.
Pride  also owns  100% of the  capital  stock of  Watford  Investments,  a South
African company with minimal operations. This Company was formed in March 1995.

         The six  wholly-owned  subsidiaries of PMS are Pride Vehicle  Contracts
Limited,  Baker Vehicle Contracts Limited, Pride Vehicle Contracts (UK) Limited,
Pride  Leasing  Limited,  Pride  Vehicle  Management  Limited and Pride  Vehicle
Deliveries  Limited,  which  comprise  the  majority  of the  operations  of the
Company.  Unless the context otherwise requires, all references to the "Company"
include its wholly-owned subsidiary,  PMS, and PMS's wholly-owned  subsidiaries.
These  companies  jointly  engage in the business of leasing new  automobiles to
businesses, servicing such automobiles during the lease term and remarketing the
automobiles  upon  the  expiration  of the  lease  term,  which  arrangement  is
described as a "contract  hire." The Company  purchases each vehicle pursuant to
its  clients'  specifications,  finances  its  purchase  and  pays  for  all the
maintenance on the vehicle during the lease term.


                                       18

<PAGE>
         The  Company  has  servicing  agreements  with  automobile  dealers and
service centers, which specify pricing schedules for maintenance and repair work
to be  performed,  all of  which  require  the  prior  consent  of the  Company.
Typically, the term of the loan corresponds with the term of the lease, whereby,
upon the completion of the lease term, the  automobiles are fully paid and owned
by the Company.  Upon the  expiration  of the lease,  the Company  remarkets the
automobiles through various distribution channels including, but not limited to,
used car wholesalers or used car retailers.  Each client's monthly lease payment
is determined by a computer program which takes into account  estimated  service
costs, new vehicle pricing, manufacturer bonuses, rebates and options, potential
residual  value at lease end, as well as other  variable  information  including
interest rates and other current and anticipated future economic variables.  The
monthly lease payments are usually sufficient to pay the financing and servicing
on the vehicles  during the lease term,  with the bulk of the  profits,  if any,
coming on the resale of the automobile.

         The Company's principal  operations are conducted by PMS which reflects
its  financial  statements  in  British  pounds.  As a result,  most  assets and
liabilities of the foreign  operations are  translated  into U.S.  dollars using
current  exchange  rates in effect at the balance  sheet date.  Fixed assets and
intangible  assets are  translated at  historical  exchange  rates.  Revenue and
expense accounts are translated using an average exchange rate during the period
except for those expenses related to assets and liabilities which are translated
at  historical   exchange  rates.   These  expenses  include   depreciation  and
amortization  which are  translated at the rates  existing at the time the asset
was acquired. Any resulting gains or losses due to the translation are reflected
as a separate item of stockholders' equity.

         On November 29, 1996,  the Company,  through its newly formed  majority
owned subsidiary,  AC Automotive Group, Inc. and its wholly-owned  subsidiary AC
Car Group Limited  (registered in the United  Kingdom),  acquired certain of the
assets of AC Cars  Limited  and  Autokraft  Limited.  These two  companies  were
engaged in the manufacture and sale of specialty automobiles. The purchase price
of  approximately  $6,000,000  was  financed by the sale of common  stock and by
loans. The acquisition  involved the purchase of plant and equipment,  the brand
name,  inventories and an aircraft and was recorded using the purchase method of
accounting (see also Note 18b - notes to financial statements).

Results of Operations - Years Ended November 30, 1997 and November 30, 1996:

Contract Hire/Fleet Management

         Revenues,  including  those from other  group  companies,  for the year
ended November 30, 1997 were approximately $17,294,000 compared to approximately
$12,884,000  for the year ended  November 30, 1996, an increase of $4,410,000 or
34%. The primary reason for this 34% increase was due to an increase in revenues
from  contract  hire,  sale of  vehicles  at lease  maturity  and the selling of
vehicles at low margins to take advantage of dealer bonuses.

         For the year ended November 30, 1997, 550 new vehicles were acquired as
against 385 in the year ended November 30, 1996.  The average  monthly rental of
new  contracts  written  was $541 per  vehicle as against an average of $569 per
vehicle for the previous  year.  The average  monthly rental is dependent on the
type of vehicle being rented and the terms of the contract.

                                       19

<PAGE>
         For the year ended  November 30, 1997, 153 vehicles were disposed of on
termination  of  contracts at an average  profit of $1,529 per vehicle.  For the
year ended  November 30, 1996,  157 vehicles were disposed of on  termination of
contracts  at an average  profit of $2,233 per vehicle.  The average  profit per
disposal is dependent  on the type of vehicle  sold and current  market value of
vehicles.

         As of November 30, 1997, 1,740 vehicles were under lease and management
compared to 1,409 vehicles as at November 30, 1996.

         Cost of sales  increased  in actual  dollars and as a percent of sales,
when comparing the years ended November 30, 1997 and 1996. These costs increased
by approximately $3,193,000 or 31%, which is less than the increase in revenues.
As a percent of sales, cost of sales for 1997 was 77.7% versus 79.5% for 1996.

         General and administrative  expenses increased from $1,802,000 for 1996
to  $1,858,000  for 1997,  an  increase  of $56,000 or 3%. As a percent of sales
these expenses  represented  11% of sales for 1997 and 14% for 1996.  Management
believes that they can continue to increase  revenues whilst keeping general and
administration costs under control.

         Interest expense increased from $860,000 in 1996 to $1,747,000 in 1997.
Management  attributes  this  increase  to the large  increase  in new  business
written and the associated increase in funding of vehicles,  providing financial
support to AC Cars (see  below)  and the costs  associated  with the  raising of
finances to fund the acquisition of AC Cars.

         The loss on sale of fixed assets  resulted  from the sale of a property
to the tenant who  exercised  their  option to  purchase.  The loss  amounted to
approximately $455,000.

         Income  (loss)  before taxes for the years ended  November 30, 1997 and
1996,  prior to amortization of goodwill for the period  ($632,000 and $635,000,
respectively) aggregated $256,000 and ($20,000), respectively.

AC Cars

         The Company,  on November 29, 1996,  through its newly formed 70% owned
subsidiary,  AC Automotive  Group,  Inc. and its wholly-owned  subsidiary AC Car
Group  Limited,  completed the  acquisition of certain assets of AC Cars Limited
and Autokraft  Limited.  These two companies are engaged in the  manufacture and
sale of sports  cars  among  which the famous AC Cobra  sells for  approximately
$100,000 each.

         The Company  acquired the business out of  administrative  receivership
and for most of the year  has  devoted  most of its  resources  to  resurrecting
operations.  This has involved  upgrading of  production  facilities,  improving
efficiency,  appointing  new  dealerships,  installing  systems and controls and
appointing new management where  necessary.  New dealerships have been appointed
in the United  Kingdom and a distributor  has been  appointed in Australia.  The
Company  has  embarked  on a  program  to bring the new AC Ace  Sports  car into
production in the last quarter of 1997.

                                       20

<PAGE>
         Revenues,  including  those from other  group  companies,  for the year
ended November 30, 1997, were approximately $1,633,000. Other income of $701,000
resulted mainly from the sale of the option to purchase the property occupied by
the operation.

         Cost  of  sales  amounted  to  approximately  $1,573,000  on the  above
revenues.

General and administration expenses amounted to approximately  $2,589,000.  Rent
and property taxes of approximately  $865,000 and salaries of $282,000 accounted
for 44% of the above costs.

         Depreciation  of plant,  machinery,  tooling,  equipment  and  fixtures
amounted to approximately $400,000.

         Interest amounted to approximately  $462,000 for the year. Interest was
incurred  on a bank line of credit of  $195,000,  on bank debt of $80,000 and on
acquisition debt of $187,000.

         The  Hurricane  aircraft  which was  acquired  as part of the assets at
acquisition, was disposed of at a loss of approximately $299,000.

         AC Cars is in a developmental  stage and certain specific expenses have
been  classified  as research  and  development  costs.  These  costs  relate to
research and development  incurred on the manufacture and distribution of the AC
Cobra and AC Ace and are separately  disclosed.  Management  believes it is more
prudent  to write  off these  costs  immediately  as they  occur.  Research  and
development costs amounted to approximately $983,000 for the current year.

         (Loss)  before  tax for the  year  ended  November  30,  1997 on the AC
business aggregated $4,111,000.

         In February 1998, subsequent to the end of the Company's current fiscal
year, AC  Automotive  issued  additional  shares to certain  individuals  and an
entity  affiliated  with the Company's  President for aggregate  cash of $6,776,
thereby diluting the Company's ownership in this subsidiary to 20%. See Note 18b
of Notes to the Financial Statements for additional information.

Consolidated

         For the year ended November 30, 1997,  the Company  reported a net loss
of  $4,455,400  or $1.59 per share.  For the year ended  November 30, 1996,  the
Company reported a net loss of $600,622 or $.25 per share.

Liquidity and Capital Resources

         Due to the nature of the Company's business, namely contract leasing of
motor  vehicles  which are fixed  long-term  assets,  the balance sheet has been
prepared on an unclassified  basis.  Accordingly,  there is no classification of
current  assets and  current  liabilities.  At November  30, 1997 and 1996,  the
Company's  balance sheet  reflected cash of $77,000 and $251,000,  respectively,
accounts receivable of

                                       21

<PAGE>
$2,002,000 and  $2,022,000,  respectively,  and total assets of $40,301,000  and
$33,690,000, respectively. The principal reason for the increase in total assets
is an increase in contract hire vehicles available for lease.

         In December 1995, the Company  completed a private  placement  offering
selling 20 units,  each unit  consisting of 25,000  shares of Common  Stock,  at
$6,000 per unit for aggregate gross proceeds of $120,000 ($.24 per share).

         In April 1996 the  Company  successfully  completed  an initial  public
offering  of its common  stock,  which  yielded  net  proceeds to the Company of
approximately $2,166,000.

         The  Company's  total  assets as of November  30, 1997 and 1996 include
intangible  assets of  approximately  $9,090,000 and  $9,722,000,  respectively.
These intangible assets consist of the unamortized portion of the costs over net
assets acquired in acquisitions,  which are being amortized over periods ranging
from 10 to 20 years. When adjusted for these intangible assets, the net tangible
book value of the Company at November  30, 1997 and 1996 would be  approximately
$1,680,000 (negative) $2,235,000, respectively.

         During  the  years  ended  November  30,  1997 and  1996,  the  Company
generated  cash  flows  from  operating  activities  aggregating   approximately
$1,572,000 and $489,000, respectively. Investing activities reflect uses of cash
for the years ended  November 30, 1997 and 1996 of $11,911,000  and  $8,759,000,
respectively. These uses of cash are the result of the purchases of fixed assets
(primarily  revenue  producing  vehicles) net of the proceeds  received from the
sale of vehicles at lease expiration dates and the acquisition described above.

         In  order  to  replenish  its  fleet  of  revenue  producing  vehicles,
annually, the Company is required to purchase from 300 to 400 new vehicles at an
average cost of approximately $25,000 each. At the time of purchase, the Company
typically  makes a cash deposit of  approximately  10% and finances the balance.
The Company has  funding  lines with  several  financing  institutions  for this
purpose  which  aggregate  approximately  $23,677,500  at November 30, 1997.  At
November 30, 1997, there was approximately  $18,342,000  outstanding under these
lines.  These lines are typically open for between 24 and 60 months depending on
the terms,  the most  important  term being the interest  rate.  Therefore,  the
principal amount of the Company's  current credit lines is constantly  changing.
Since the  Company's  funding  lines are asset based  (secured  by the  vehicles
purchased),  there is generally no difficulty obtaining funding lines,  however,
the Company is continuously seeking to find the best terms and rates.  Typically
financing  institutions authorize credit lines with a fixed interest rate, which
line is to be open for a certain  period of time.  During  the term of the line,
the  Company  may draw down on such line in order to  finance  the  purchase  of
vehicles  to lease.  When the time for  drawing  down on the line  expires,  the
Company  can no longer  draw down on such line to finance  additional  vehicles,
however, the amount drawn is repaid pursuant to the terms of such line.



                                       22

<PAGE>
         For the year ended  November 30, 1997,  the Company  provided cash from
financing activities  ($10,208,000)  primarily due to financing provided by bank
lines of credit  ($4,012,000)  plus the  increases  in financing of new vehicles
($19,492,000)  net of the  amounts  needed  to  reduce  hire  purchase  contract
financing  ($12,185,000).  For  fiscal  1996,  the  Company  provided  cash from
financing activities of approximately $9,240,000 primarily as a result of an IPO
($2,200,000) and the financing needed to acquire new vehicles  ($11,500,000) net
of the amounts utilized to pay hire purchase contract financing ($6,100,000).

         Other than the annual  acquisitions  of revenue  producing  vehicles as
mentioned  above,  there are no material  planned  capital  expenditures  at the
present time.

         The  Company  believes  that its cash  flow  from  operations,  and its
available funding lines for the acquisition of revenue  producing  vehicles will
be sufficient for at least the ensuing 12 month period.

         This report contains forward-looking statements and information that is
based on management's beliefs and assumptions,  as well as information currently
available to  management.  When used in this  document,  the words  "anticipate,
"estimate," "expect," "intend," and similar expressions are intended to identify
forward- looking statements. Although the Company believes that the expectations
reflected in such  forward-looking  statements  are  reasonable,  it can give no
assurance that such expectations  will prove to be correct.  Such statements are
subject to certain risks,  uncertainties and assumptions.  Should one or more of
these risks or uncertainties  materialize,  or should the underlying assumptions
prove  incorrect,  actual results may vary  materially  from those  anticipated,
estimated or expected.


                                       23

<PAGE>
ITEM 7.  FINANCIAL STATEMENTS

         See attached Financial Statements.


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

         There have been no  disagreements  between  registrant  and the firm of
Civvals,  Chartered  Accountants  and  Registered  Auditors  on  any  matter  of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure.




                                       24

<PAGE>



                                    PART III

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


Directors and Executive Officers.

         The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>

         Name                       Age                       Position with the Company

<S>                                 <C>                       <C>                                  
         Alan Lubinsky              39                        President, Secretary, and Chairman of
                                                              the Board of Directors

         Ivan Averbuch              42                        Chief Financial Officer and
                                                              Treasurer

         Allan Edgar                51                        Director

         Ian Satill                 39                        Director
</TABLE>

     Alan  Lubinsky Mr.  Lubinsky has been the  President  and a director of the
Company since its  inception in March 1995. Mr Lubinsky has been the  President,
Secretary and director of Pride,  Inc since January 14, 1994.  Mr.  Lubinsky has
been the  Chairman  and  Managing  Director of Pride  Management  Services,  Plc
("PMS")  since its  inception  in 1988.  Mr.  Lubinsky has been the Chairman and
Managing Director of AC Car Group Limited since July 1996. Mr. Lubinsky has been
the  President,  Chairman and director of AC Automotive  Group,  Inc.  since its
inception in 1996.  Mr.  Lubinsky has 19 years  experience  in the motor vehicle
industry in positions of executive management.

     Ivan  Averbuch  Mr.  Averbuch has been the Chief  Financial  Officer of the
Company since  December  1995.  Mr.  Averbuch was a director of the Company from
December 1995 until  February 1998.  Mr.  Averbuch has been the Chief  Financial
Officer of Pride,  Inc. since December 1995. Mr. Averbuch has been the Financial
Director of AC Car Group  Limited  since July 1996.  Mr.  Averbuch  has been the
Chief  Financial  Officer and Director of AC Automotive  Group,  Inc.  since its
inception  in 1996.  From  September  1987 to November  1995,  Mr.  Averbuch was
employed at Kessel Feinstein, a member firm of Grant Thorton  International,  an
accounting firm. In January 1989, Mr. Averbuch was promoted to audit manager and
appointed as a partner in October 1992.



                                       25

<PAGE>
     Allan Edgar Mr.  Edgar has been a director  of the Company  since May 1997.
Mr. Edgar has been a director of AC Automotive  Group,  Inc. since its inception
in 1996. Mr. Edgar has been the Marketing Director of Hyatt Hotels & Resorts for
Europe,  Africa  and the  Middle  East  since  1990.  Mr.  Edgar  has  extensive
experience in the automobile industry,  including positions at Hertz Rent-a-Car,
Volkswagen Interent, and Leyland Motor Corporation.

     Ian Satill Mr.  Satill has been a director  of the Company  since  February
1998.  From June 1996 until  present,  Mr.  Satill  has been the Group  Managing
Director of Rustlers Management.

     The directors of the Company are elected  annually by the  stockholders and
hold  office  until the next  annual  meeting of  stockholders,  or until  their
successors  are  elected  and  qualified.  The  executive  officers  are elected
annually  by the board of  directors,  serve at the  discretion  of the board of
directors  and hold office  until their  successors  are elected and  qualified.
Vacancies on the board of directors may be filled by the remaining directors.

     As permitted under Delaware  Corporation Law, the Company's  Certificate of
Incorporation  eliminates the personal liability of the directors to the Company
or any of its  stockholders  for damages for breaches of their fiduciary duty as
directors.  As a result of the inclusion of such provision,  stockholders may be
unable to recover  damages  against  directors  for actions  taken by them which
constitute  negligence  or gross  negligence  or that are in  violation of their
fiduciary duties.  The inclusion of this provision in the Company's  Certificate
of  Incorporation  may reduce the  likelihood of derivative  litigation  against
directors and other types of stockholder litigation.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to file reports
of securities  ownership and changes in such  ownership  with the Securities and
Exchange  Commission ("SEC").  Officers,  directors and greater than ten percent
beneficial  owners also are required by rules  promulgated by the SEC to furnish
the Company with copies of all Section 16(a) forms they file.  Based solely upon
a review of the copies of such forms  furnished to the Company,  the Company has
been informed that all officers, directors or greater than 10% shareholders have
stated  that they have filed such  reports as is  required  pursuant  to Section
16(a)  during the 1997 fiscal year,  except Alan  Lubinsky did not file a Form 4
with  respect to the  receipt of stock  options in May 1997.  Mr.  Lubinsky  has
stated that he intends on filing a Form 5 to rectify the situation. Neither Ivan
Averbuch  nor Allan  Edgar  filed a Form 4 with  respect to the receipt of stock
options in May 1997. Messrs.  Averbuch and Edgar have stated that they intend to
file Form 5's to rectify the situation. The Company has no basis to believe that
any other required filing by any of the above indicated individuals has not been
made.



                                       26

<PAGE>
ITEM 10. EXECUTIVE COMPENSATION


Executive Compensation

Summary of Cash and Certain Other Compensation

         The following  provides  certain  information  concerning  all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid by Pride Vehicle  Contracts  Limited  during the years ended
November 30,  1997,  1996 and 1995.  The Company did not incur any  compensation
expenses during such period.
<TABLE>
<CAPTION>

                                                 Summary Compensation Table

                                                     Annual Compensation

(a)                                 (b)               (c)              (d)                  (e)

Name and Principal                                                                          Other Annual
   Position  (1)                    Year              Salary($)         Bonus($)            Compensation($)(2)
-----------------------             ----              ---------         --------            ------------------

<S>                                 <C>               <C>                                    <C>     <C>   
Alan Lubinsky                       1997              $176,000           -                   $30,000 (3)(4)
  President, Secretary              1996              $160,000           -                   $30,000
  and Chairman of the Board         1995              $137,750           -                   $30,000
</TABLE>


     (1) All of the Company's administrative functions, including the payment of
salaries,  are performed by Pride Vehicle Contracts Limited, since the Company's
operations  run  basically as one  operation.  The Company  believes  that it is
easier and cost  effective  to  operate in this  manner.  The  Company  plans on
continuing this practice in the future.

     (2) Includes contributions to the Company's pension plan of $18,000 in each
of 1997, 1996 and 1995, respectively, and the cost of an automobile and expenses
of $12,000 annually.

     (3) Alan Lubinsky  entered into an employment  agreement with PAG in August
1995.  The  agreement  is for a term of three  years,  and pays Mr.  Lubinsky an
annual  salary of  $160,000  per annum with 10% yearly  escalations,  subject to
adjustment by PAG's board of directors.  Pursuant to the agreement, Mr. Lubinsky
received stock options under PAG's Senior Management  Incentive Plan to purchase
100,000 shares at $5.50 per share. These options vest at the rate of 33 1/3% per
annum commencing August 1996.

     (4) In May 1997,  Mr.  Lubinsky  received  stock options under PAG's Senior
Management  Incentive Plan to purchase  43,234 shares at $2.54 per share.  These
options vest at the rate of 33 1/3% per annum commencing May 1998.


                                       27

<PAGE>
Stock Options

     The following table sets forth certain information  concerning the grant of
stock options made during the year ended November 30, 1997,  under the Company's
1995 Senior Management Incentive Plan.
<TABLE>
<CAPTION>


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                               (Individual Grants)

====================================================================================================================================


                                                Individual Grants
------------------------------------------------------------------------------------------------------------------------------------
             (a)                           (b)                      (c)                     (d)                       (e)
                                                                 % of Total
                                     # of Securities           Options/SAR's
                                        underlying               Granted to
                                      Options/SAR's             Employees in          Exercise or Base
             Name                       Granted(1)              Fiscal Year             Price ($/SH)            Expiration Date
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>                            <C>                      <C>     
Alan Lubinsky (1)                                33,333     35.5%                          $5.50                    8/01/08
------------------------------------------------------------------------------------------------------------------------------------
Alan Lubinsky (2)                                43,234     46.1%                          $2.54                    5/29/02
------------------------------------------------------------------------------------------------------------------------------------
Ivan Averbuch (2)                                 8,647     9.2%                           $2.31                    5/29/10
------------------------------------------------------------------------------------------------------------------------------------
Allan Edgar (2)                                   8,647     9.2%                           $2.31                    5/29/10
====================================================================================================================================
</TABLE>

(1)  Alan Lubinsky entered into an employment agreement with PAG in August 1995.
     The agreement is for a term of three years, and pays Mr. Lubinsky an annual
     salary of  $160,000  per annum  with 10%  yearly  escalations,  subject  to
     adjustment  by PAG's board of  directors.  Pursuant to the  agreement,  Mr.
     Lubinsky  received  stock options under PAG's Senior  Management  Incentive
     Plan to purchase  100,000 shares at $5.50 per share.  These options vest at
     the rate of 33 1/3% per  annum  commencing  August  1996.  See  "Employment
     Agreements".

     Represents  incentive stock options granted under the Company's 1995 Senior
     Management Incentive Plan (the "Plan").  Options granted under the Plan are
     intended to qualify as incentive  stock options under the Internal  Revenue
     Code of 1986,  as  amended.  Under the terms of the  Plan,  options  may be
     granted to  officers,  key  employees,  directors  and  consultants  of the
     Company until  September 2005.  Options  granted to directors,  who are not
     officers or employees, or to consultants, do not qualify as incentive stock
     options.  The option  price per share may not be less than the fair  market
     value of the Company's  shares on the date the option is granted.  However,
     options  granted to persons  owning more than 10% of the  Company's  Common
     Stock  may not  have a term in  excess  of five  years  and may not have an
     option  price of less than 110% of the fair  market  value per share of the
     Company's  shares on the date the option is  granted.  See  "--1995  Senior
     Management Incentive Plan".

(2)  On May 30,  1997,  the Company  issued these  options to Messrs.  Lubinsky,
     Averbuch  and Edgar  pursuant  to the terms of the  Company's  1995  Senior
     Management  Incentive  Plan.  These options vest at the rate of 33 1/3% per
     annum commencing May 30, 1998.



                                       28

<PAGE>
     The following table contains  information  with respect to employees of the
Company concerning options held as of November 30, 1997
<TABLE>
<CAPTION>

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

================================================================================================================================
             (a)                         (b)                     (c)                     (d)                      (e)
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Value of
                                                                                      Number of             Unexercised In-
                                                                                     Unexercised               The-Money
                                                                                   Options/SAR's at          Options/SAR's
                                                                                      FY-End (#)             at FY-End($)
                                   Shares Acquired              Value                Exercisable/            Exercisable/
            Name                   on Exercise (#)           Realized($)            Unexercisable          Unexercisable(1)
--------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                     <C>               <C>                            <C>
Alan Lubinsky                             0                       0                 66,667/33,333                  0
================================================================================================================================
</TABLE>

     (1) As of February 24, 1998, the average of the prior day's closing bid and
ask price was $3.19.  Since the exercise price of the Options ($5.50) is greater
than the current average price, the Company believes the Options have no value.

Employment Agreements

     Alan  Lubinsky  entered into an  employment  agreement  with the Company in
August 1995. The agreement is for a term of three years,  and pays Mr.  Lubinsky
an annual salary of $160,000 per annum with 10% yearly  escalations,  subject to
adjustment  by the Company's  board of  directors.  Pursuant to the terms of his
employment  agreement,  Mr.  Lubinsky  will devote all his business  time to the
affairs of the  Company  and Pride.  Pursuant  to the  agreement,  Mr.  Lubinsky
received stock options under the Company's Senior  Management  Incentive Plan to
purchase 100,000 shares at $5.50 per share. These options vest at the rate of 33
1/3% per annum commencing August 1996. The agreement restricts Mr. Lubinsky from
competing with the Company for a period of one year after the termination of his
employment.

     Ivan  Averbuch  entered into an  employment  agreement  with the Company in
September  1995,  for a term of 24 months,  commencing  December  1,  1995.  The
agreement is  automatically  extendable for an additional 24 months,  subject to
cancellation  by either the Company or Mr.  Averbuch on 90 days written  notice.
Pursuant  to the terms of the  agreement,  Mr.  Averbuch is to receive an annual
salary of $55,000 per annum,  with an annual increase of 10% per annum,  subject
to review by the Company's board of directors.

Senior Management Incentive Plan

     In September  1995,  the board of directors  adopted the Senior  Management
Incentive Plan (the "Management Plan"), which was adopted by written stockholder
consent.  The Management  Plan provides for the issuance of up to 300,000 shares
of the Company's  Common Stock in connection  with the issuance of stock options
and other  stock  purchase  rights to  executive  officers,  key  employees  and
consultants.


                                       29

<PAGE>
     The adoption of the  Management  Plan was prompted by its desire to provide
the  board  with  sufficient   flexibility  regarding  the  forms  of  incentive
compensation which the Company will have at its disposal in rewarding  executive
officers,  key employees and consultants who render significant  services to the
Company  and its  subsidiaries.  The  board of  directors  intends  to offer key
personnel equity ownership in the Company through the grant of stock options and
other rights  pursuant to the  Management  Plan to enable the Company to attract
and retain qualified  personnel  without  unnecessarily  depleting the Company's
cash reserves. The Management Plan is designed to augment the Company's existing
compensation  programs  and is intended to enable the Company to offer to its as
well as its  subsidiaries  executives,  key employees and consultants a personal
interest in the Company's  growth and success through awards of either shares of
Common Stock or rights to acquire shares of Common Stock.

     The Management Plan is intended to attract and retain  executive  officers,
key  employees  and  consultants   whose  performance  is  expected  to  have  a
substantial  impact on the Company's and its  subsidiaries  long-term profit and
growth potential by encouraging and assisting those persons to acquire equity in
the Company.  It is contemplated that only those who perform services of special
importance to the Company will be eligible to  participate  under the Management
Plan.  A total of 300,000  shares of Common  Stock will be reserved for issuance
under  the  Management  Plan.  It is  anticipated  that  awards  made  under the
Management  Plan will be subject to  three-year  vesting  periods,  although the
vesting periods are subject to the discretion of the Administrator.

     Unless  otherwise  indicated,  the Management Plan is to be administered by
the board of directors or a committee of the board, if one is appointed for this
purpose (the board or such  committee,  as the case may be, shall be referred to
in the following  description as the  "Administrator").  Subject to the specific
provisions of the Management Plan, the Administrator will have the discretion to
determine the recipients of the awards,  the nature of the awards to be granted,
the dates such awards will be granted,  the terms and  conditions  of awards and
the  interpretation of the Management Plan, except that any award granted to any
employee of the  Company  who is also a director  of the  Company  shall also be
subject,  in the event the persons  serving as members of the  Administrator  of
such plan at the time such award is  proposed  to be granted do not  satisfy the
requirements regarding the participation of "disinterested persons" set forth in
Rule 16b-3 ("Rule 16b-3") promulgated under the Exchange Act, to the approval of
an  auxiliary  committee  consisting  of not less than two  individuals  who are
considered  "disinterested  persons" as defined under Rule 16b-3. As of the date
hereof,  the Company  has not yet  determined  who will serve on such  auxiliary
committee,  if one is required.  The Management  Plan  generally  provides that,
unless the  Administrator  determines  otherwise,  each option or right  granted
under a plan shall become  exercisable in full upon certain  "change of control"
events as described in the  Management  Plan. If any change is made in the stock
subject to the Management  Plan, or subject to any right or option granted under
the   Management   Plan   (through   merger,   consolidation,    reorganization,
recapitalization,  stock dividend,  dividend in property other than cash,  stock
split,  liquidating dividend,  combination of shares, exchange of shares, change
in corporate  structure or otherwise),  the Administrator  will make appropriate
adjustments to such plans and the classes,  number of shares and price per share
of stock subject to  outstanding  rights or options.  Generally,  the Management
Plan may be  amended  by  action  of the  board of  directors,  except  that any
amendment  which would increase the total number of shares subject to such plan,
extend the duration of such plan,  materially  increase the benefits accruing to
participants under such plan, or would change the category of persons who can be
eligible for awards under such plan must be

                                       30

<PAGE>
approved by affirmative vote of a majority of stockholders entitled to vote. The
Management Plan permits awards to be made thereunder until September 2005.

     Directors  who  are not  otherwise  employed  by the  Company  will  not be
eligible for  participation in the Management Plan. The Management Plan provides
for  four  types  of  awards:  stock  options,  incentive  stock  rights,  stock
appreciation rights (including limited stock appreciation rights) and restricted
stock purchase agreements, as described below.

     Stock  Options.  Options  granted under the  Management  Plan may be either
incentive  stock  options  ("ISOs")  or  options  which do not  qualify  as ISOs
("non-ISOs").  ISOs may be granted  at an option  price of not less than 100% of
the fair market value of the Common  Stock on the date of grant,  except that an
ISO granted to any person who owns capital stock  representing  more than 10% of
the total  combined  voting  power of all classes of Common Stock of the Company
("10% stockholder") must be granted at an exercise price of at least 110% of the
fair market  value of the Common  Stock on the date of the grant.  The  exercise
price of the  non-ISOs  may not be less than 85% of the fair market value of the
Common  Stock  on  the  date  of  grant.  Unless  the  Administrator  determines
otherwise,  no ISO or non-ISO may be exercisable  earlier than one year from the
date of grant.  ISOs may not be granted to persons who are not  employees of the
Company.  ISOs granted to persons other than 10% stockholders may be exercisable
for a period of up to ten  years  from the date of grant;  ISOs  granted  to 10%
stockholders  may be exercisable  for a period of up to five years from the date
of grant.  No  individual  may be granted  ISOs that become  exercisable  in any
calendar  year for Common  Stock having a fair market value at the time of grant
in excess of  $100,000.  Non-ISOs  may be  exercisable  for a period of up to 13
years from the date of grant. In connection with the Company's  entering into an
employment  agreement with its president,  Alan Lubinsky,  Mr. Lubinsky received
100,000 stock  options to purchase  shares of Common  Stock.  See  "Management -
Employment Agreement."

     In May 1997, Mr.  Lubinsky,  Mr. Averbuch and Mr. Edgar were issued 43,234,
8,647 and 8,647  options,  respectively,  to  purchase  shares of the  Company's
Common Stock pursuant to the Company's Senior Management Incentive Plan.

     In January  1998,  Mr.  Lubinsky,  Mr.  Averbuch  and Mr. Edgar were issued
29,137,  5,000  and  5,000  options,  respectively,  to  purchase  shares of the
Company's  Common Stock pursuant to the Company's  Senior  Management  Incentive
Plan.

     Payment for shares of Common  Stock  purchased  pursuant to the exercise of
stock  options  shall be paid in full in cash,  by  certified  check  or, at the
discretion of the Administrator, (i) by promissory note combined with cash, (ii)
by shares of Common Stock having a fair market value equal to the total exercise
price or (iii)  by a  combination  of (i) and (ii)  above.  The  provision  that
permits  the  delivery  of  already  owned  shares of stock as  payment  for the
exercise of an option may permit "pyramiding".  In general, pyramiding enables a
holder to start with as little as one share of common  stock  and,  by using the
shares of common stock  acquired in  successive,  simultaneous  exercises of the
option,  to  exercise  the  entire  option,  regardless  of the number of shares
covered  thereby,  with no additional cash or investment other than the original
share of Common Stock used to exercise the option.


                                       31

<PAGE>
     Upon termination of employment or consulting services,  an optionee will be
entitled to exercise the vested portion of an option for a period of up to three
months after the date of termination,  except that if the reason for termination
was a discharge  for cause,  the option  shall  expire  immediately,  and if the
reason for  termination  was for death or permanent  disability of the optionee,
the vested portion of the option shall remain exercisable for a period of twelve
months thereafter.

     Incentive  Stock Rights.  Incentive stock rights consist of incentive stock
units  equivalent  to one share of Common  Stock in  consideration  for services
performed for the Company.  Each  incentive  stock unit shall entitle the holder
thereof to receive,  without  payment of cash or property  to the  Company,  one
share of Common Stock in consideration for services performed for the Company or
any subsidiary by the employee,  subject to the lapse of the incentive  periods,
whereby the Company  shall  issue such number of shares upon the  completion  of
each specified  period.  If the employment or consulting  services of the holder
with the Company  terminate prior to the end of the incentive period relating to
the units awarded,  the rights shall thereupon be null and void,  except that if
termination  is caused by death or permanent  disability,  the holder or his/her
heirs,  as the case may be,  shall be entitled to receive a pro rata  portion of
the shares  represented  by the units,  based upon that portion of the incentive
period which shall have elapsed prior to the death or disability.

     Stock  Appreciation  Rights  (SARs).  SARs may be granted to  recipients of
options under the Management Plan. SARs may be granted  simultaneously  with, or
subsequent  to, the grant of a related option and may be exercised to the extent
that  the  related  option  is  exercisable,  except  that  no  general  SAR (as
hereinafter  defined) may be exercised within a period of six months of the date
of grant of such SAR and no SAR granted  with respect to an ISO may be exercised
unless the fair market value of the Common Stock on the date of exercise exceeds
the exercise  price of the ISO. A holder may be granted  general SARs  ("general
SARs") or limited SARs ("limited SARs"), or both. General SARs permit the holder
thereof to receive an amount (in cash,  shares of Common Stock or a  combination
of both) equal to the number of SARs  exercised  multiplied by the excess of the
fair market  value of the Common  Stock on the  exercise  date over the exercise
price of the related  option.  Limited SARs are similar to general SARs,  except
that, unless the Administrator determines otherwise,  they may be exercised only
during  a  prescribed  period  following  the  occurrence  of one or more of the
following  "Change of Control"  transactions:  (i) the  approval of the Board of
Directors of a consolidation or merger in which the Company is not the surviving
corporation,  the sale of all or substantially all the assets of the Company, or
the liquidation or dissolution of the Company; (ii) the commencement of a tender
or exchange offer for the Company's Common Stock (or securities convertible into
Common Stock) without the prior consent of the Board;  (iii) the  acquisition of
beneficial  ownership by any person or other  entity  (other than the Company or
any employee benefit plan sponsored by the Company) of securities of the Company
representing  25% or more  of the  voting  power  of the  Company's  outstanding
securities;  or (iv) if during any period of two years or less,  individuals who
at the beginning of such period  constitute the entire Board cease to constitute
a majority of the Board, unless the election, or the nomination for election, of
each new director is approved by at least a majority of the directors then still
in office.

     The exercise of any portion of either the related option or the tandem SARs
will cause a corresponding  reduction in the number of shares remaining  subject
to the option or the tandem SARs, thus maintaining a balance between outstanding
options and SARs.

                                       32

<PAGE>
     Restricted Stock Purchase Agreements.  Restricted stock purchase agreements
provide  for the sale by the  Company of shares of Common  Stock at prices to be
determined  by the Board,  which  shares  shall be subject  to  restrictions  on
disposition  for a stated  period  during  which  the  purchaser  must  continue
employment  with the Company in order to retain the shares.  Payment can be made
in  cash,  a  promissory  note or a  combination  of  both.  If  termination  of
employment  occurs for any reason  within six months after the date of purchase,
or for any  reason  other than death or by  retirement  with the  consent of the
Company after the six-month  period but prior to the time that the  restrictions
on disposition  lapse, the Company shall have the option to reacquire the shares
at the original purchase price.

     Restricted  shares awarded under the  Management  Plan will be subject to a
period of time designated by the Administrator (the "restricted  period") during
which the recipient  must continue to render  services to the Company before the
restricted  shares will become vested.  The  Administrator may also impose other
restrictions,  terms and conditions that must be fulfilled before the restricted
shares may vest.

     Upon the grant of restricted shares,  stock certificates  registered in the
name of the recipient will be issued and such shares will constitute  issued and
outstanding shares of Common Stock for all corporate  purposes.  The holder will
have the right to vote the  restricted  shares and to receive all  regular  cash
dividends (and such other distributions as the Administrator may designate),  if
any, which are paid or distributed  on the restricted  shares,  and generally to
exercise all other rights as a holder of Common  Stock,  except that,  until the
end of the  restricted  period:  (i) the  holder  will not be  entitled  to take
possession of the stock certificates representing the restricted shares and (ii)
the holder will not be entitled to sell,  transfer or  otherwise  dispose of the
restricted shares. A breach of any restrictions, terms or conditions established
by the  Administrator  with  respect  to any  restricted  shares  will  cause  a
forfeiture of such restricted shares.

     Upon expiration of the applicable restricted period and the satisfaction of
any other applicable  conditions,  all or part of the restricted  shares and any
dividends or other  distributions  not  distributed to the holder (the "retained
distributions")  thereon  will  become  vested.  Any  restricted  shares and any
retained  distributions  thereon  which do not so vest will be  forfeited to the
Company.  If prior  to the  expiration  of the  restricted  period  a holder  is
terminated  without  cause or  because  of a total  disability  (in each case as
defined in the Management Plan), or dies, then,  unless otherwise  determined by
the  Administrator at the time of the grant, the restricted period applicable to
each award of restricted shares will thereupon be deemed to have expired. Unless
the Administrator  determines  otherwise,  if a holder's  employment  terminates
prior to the expiration of the applicable restricted period for any reason other
than as set forth above,  all restricted  shares and any retained  distributions
thereon will be forfeited.

     Accelerating of the vesting of the restricted shares shall occur, under the
provisions of the Management  Plan, on the first day following the occurrence of
any of the following:  (a) the approval by the stockholders of the Company of an
"Approved Transaction"; (b) a "Control Purchase"; or (c) a "Board Change".



                                       33

<PAGE>
      An "Approved Transaction" is defined as (A) any consolidation or merger of
the Company in which the Company is not the continuing or surviving  corporation
or  pursuant  to which  shares of Common  Stock  would be  converted  into cash,
securities  or other  property  other than a merger of the  Company in which the
holders  of  Common  Stock  immediately  prior  to  the  merger  have  the  same
proportionate ownership of common stock of the surviving corporation immediately
after the merger,  or (B) any sale, lease,  exchange,  or other transfer (in one
transaction or a series of related  transactions) of all, or substantially  all,
of the assets of the  Company,  or (C) the  adoption of any plan or proposal for
the liquidation or dissolution of the Company.

     A "Control  Purchase" is defined as  circumstances  in which any person (as
such term is defined in Sections  13(d)(3) and  14(d)(2) of the  Exchange  Act),
corporation or other entity (other than the Company or any employee benefit plan
sponsored by the Company) (A) shall purchase any Common Stock of the Company (or
securities  convertible into the Company's Common Stock) for cash, securities or
any other  consideration  pursuant to a tender offer or exchange offer,  without
the prior consent of the Board of Directors, or (B) shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act),  directly
or indirectly,  of securities of the Company  representing  twenty-five  percent
(25%) or more of the combined voting power of the then outstanding securities of
the  Company   ordinarily   (and  apart  from  rights   accruing  under  special
circumstances) having the right to vote in the election of directors (calculated
as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire
the Company's securities).

     A "Board Change" is defined as circumstances in which, during any period of
two consecutive  years or less,  individuals who at the beginning of such period
constitute  the entire Board shall cease for any reason to constitute a majority
thereof  unless the election,  or the  nomination  for election by the Company's
stockholders, of each new director was approved by a vote of at least a majority
of the directors then still in office.



                                       34

<PAGE>
ITEM 11.          PRINCIPAL STOCKHOLDERS

     The following  table sets forth certain  information  at February 24, 1998,
with  respect to the  beneficial  ownership  of Common  Stock by (i) each person
known by the  Company  to be the owner of 5% or more of the  outstanding  Common
Stock;  (ii) by each  director;  (iii) and by all  officers  and  directors as a
group. Except as otherwise indicated below, each named beneficial owner has sole
voting and investment power with respect to the shares of Common Stock listed.
<TABLE>
<CAPTION>

                                                              Number of                        Percentage of
Name                                                          Shares                           Share Ownership

<S>                                                           <C>                              <C>  
Pride, Inc.                                                   1,500,000                        53.1%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England

Alan Lubinsky (1)                                              1,566,667                       54.2%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England

Ivan Averbuch                                                         -                         *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England

Allan Edgar                                                           -                         *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England



                                       35

<PAGE>
Ian Satill                                                            -                         *
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England

All officers and
Directors as a group
 (4 persons) (1)(2)(3)                                           1,566,667                        54.2%


</TABLE>

     (1) New World Finance,  Limited,  which is wholly owned by a trust of which
family members of Mr. Lubinsky are the beneficiaries,  owns approximately  52.6%
of the  outstanding  shares of Pride,  Inc. and may be considered the beneficial
owner of the shares of the  Company  owned by Pride,  Inc.  The trustee is Elfin
Trust  Company  Limited,  located on the Island of  Guernsey,  Channel  Islands.
Although Mr. Lubinsky disclaims  beneficial ownership of the shares owned by New
World  Finance,  Limited,  it may be  expected  that such  entity  will vote its
respective shares in favor of proposals espoused by Mr. Lubinsky. See "Executive
Compensation - Employment Agreement."

     (2) Includes  shares  issuable upon the exercise of options  granted to Mr.
Lubinsky (i) pursuant to the terms of his employment agreement.


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Pursuant to the terms of the acquisition of County in 1992, the Company
paid  $1  and  assumed  approximately  $11,500,000  of  net  liabilities.  These
liabilities  were  purchased by New World Finance  Limited within thirty days of
the  acquisition.  New World Finance Limited ("New World") is a company which is
wholly owned by New World Trust,  the  beneficiaries of which are members of Mr.
Lubinsky's family. This debt accrued interest at 6% and was repayable five years
from  the date of  issuance.  This  debt was  converted  in  March  1992  into a
convertible  note,  which was convertible  into shares of common stock of PMS at
$1.50 per share. In March 1992, New World converted approximately $5,250,0000 of
the note  into  3,500,000  shares of PMS.  In March  1993,  New World  converted
approximately  $3,750,000 of the note into  2,500,000  shares of PMS. In January
1994,  pursuant to the  reorganization  of Pride and PMS, Pride acquired all the
shares of PMS from New World,  and issued  shares of common  stock of Pride,  in
return. In September 1994, the right to convert the note into shares of PMS, was
converted into the right to purchase shares of common stock of Pride, at a price
to be determined by the board of directors of Pride, as of each conversion date.
In  addition,  New World  guaranteed  to PMS that the sale  proceeds of vehicles
acquired from County would be at least equal to the residual  value shown on the
books of County as of the date of the acquisition.  Mr. Lubinsky did not vote on
the conversion price of any of the following conversions. In September 1994, New
World converted $1,125,000 into 281,250 shares of common stock of Pride, Inc. In
October 1994, New World  converted  $400,000 into 114,285 shares of common stock
of Pride, Inc. In January 1995, New World converted $155,000 into 155,000 shares
of common stock of Pride, Inc.


                                       36

<PAGE>
         In August  1995,  the Company  determined,  with the  agreement  of New
World,  that the estimated  ultimate sales values of the vehicles were less than
expected and it was agreed that the note  ($562,292) be written off and canceled
against the New World guarantee.

         In March 1995,  Pride  formed the Company in the State of Delaware  and
reorganized  its corporate  structure by exchanging all of its shares of PMS for
1,500,000  shares of the  Company's  Common  Stock,  making  PMS a wholly  owned
subsidiary of the Company.

         In March 1995,  the Company issued 60,000 shares of its Common Stock to
Lampert & Lampert, counsel to the Company for fees and expenses of $500.

         In July 1995,  PMS entered  into a loan  agreement  with the  Company's
president,  whereby PMS borrowed approximately  $232,500. The loan is payable on
demand and accrues interest at the rate of 2.5% over the Midland Bank base rate.
The principal balance of such loan was $117,034, which was paid in April 1996.

         In December 1995, the Company consummated a private placement offering,
whereby the Company sold 20 units,  each unit comprised  25,000 shares of Common
Stock at a purchase price of $6,000 per unit.

         In April 1996,  the Company  consummated  an initial  public  offering,
whereby the Company sold 950,000  shares of its common stock at a purchase price
of $5.00 per share and 2,000,000  redeemable common stock purchase warrants at a
price of $0.10 per warrant. The warrants are exercisable at a price of $5.75 per
share,  subject to adjustment,  beginning  April 24, 1997 and expiring April 23,
2001. In connection  therewith,  the Company also granted to the  underwriter of
the offering a warrant to purchase  95,000 shares of the Company's  common stock
at a  purchase  price of $7.50 and  200,000  redeemable  common  stock  purchase
warrants at a purchase price of $0.15 per warrant,  each warrant  exercisable to
purchase one share of common stock at a purchase price of $7.50 per share. Other
than with respect to the exercise  price,  the terms of the warrants  granted to
the underwriter are identical to those described above. The Company's securities
are  currently  traded on the  Nasdaq  SmallCap  Stock  Exchange  and the Boston
Exchange.

         In November  1996,  the Company,  through its  subsidiary AC Automotive
Group, Inc., purchased all the assets of AC Cars Limited and Autokraft Limited.

         In December 1996, the Company consummated a private placement offering,
whereby the Company sold 18.5 units,  each unit  comprised  of a 10%  promissory
note in the  amount of 10,000  shares of  Common  Stock at a  purchase  price of
$100,000 per unit. In  connection  with such  offering,  AC sold an aggregate of
1,028,700   shares  to  three   affiliates  of  the  Underwriter  for  aggregate
consideration of $1,030.  Such persons  currently own an aggregate of 14% of the
capital stock of AC. In addition,  the Underwriter loaned the Company the sum of
$100,000, $71,000 of which remains outstanding.



                                       37

<PAGE>
     On February  17, 1998 the Company  received a letter from NASDAQ  informing
the  Company  that it did not comply  with  recently  amended  NASDAQ  continued
listing  criteria which required the Company to have minimum net tangible assets
of at least  $2,000,000,  two independent  directors and an audit  committee,  a
majority of which are  independent  directors.  The  Company  was granted  until
February 23, 1998 to comply with such requirements.

     On February 12, 1998, the Board of Directors of AC Automotive  Group,  Inc.
authorized  the  issuance  of  6,633,000  shares of its  common  stock to Erwood
Holdings,  Inc., a company affiliated with Alan Lubinsky,  the President,  Chief
Executive Officer and a Director of the Company and AC Automotive  Group,  Inc.,
for aggregate  consideration of $6,633. In addition,  on such date AC Automotive
Group, Inc. authorized the issuance of 176,520, 176,520 and 88,260 shares of its
common stock to Beth-Anne  Kinsley,  Victor and Marion  Durchhalter  and Bridget
Staff,  respectively,  for  consideration  of $177, $177 and $89,  respectively.
Beth-Anne  Kinsley,  Victor and Marion  Durchhalter  and Bridget  Staff were all
prior  shareholders of AC Automotive Group, Inc. and are all associated  persons
of Mason Hill & Co., Inc., the  broker/dealer  which effected the initial public
offering of the Company's  securities and the subsequent private offering of the
Company's  securities,  the  proceeds  from which (the  private  offering)  were
utilized by the Company to complete the AC asset acquisition.

     The  foregoing  issuance of shares  reduced the  ownership of AC Automotive
Group,  Inc.  by  the  Company  to  under  50%.  Accordingly,  future  financial
statements of the Company will be issued on an unconsolidated basis. Footnote 18
to the Company's  Financial  Statements  has been prepared to show the effect of
the share issuance described herein. See "Financial Statements."

     On February  25, 1998 Ivan  Averbuch  resigned as a Director of the Company
and on the same date the board of  directors  elected Ian  Satill,  to fill such
vacancy.

     On February  25,  1998,  the Board of  Directors  resolved to form an audit
committee  in  order  to  comply  with  current  Nasdaq   corporate   governance
requirements.  The Audit  Committee is  comprised of the three  directors of the
Company,  two of whom (Ian Satill and Allan  Edgar) are believed by the Board of
Directors to be independent.

     Although  the  Company is of the belief that it is now in  compliance  with
Nasdaq  requirements  for a continued  listing of its  securities  on the Nasdaq
SmallCap  system,  there can be no assurance  that it is correct in such belief.
The  Company  expects to receive a ruling  from  Nasdaq  shortly on its  listing
compliance.

     For a description of the Company's  employment  agreements,  see "Executive
Compensation - Employment Agreements."

     All future transactions between the Company and any officer, director or 5%
stockholder  will be on terms no less  favorable  than  could be  obtained  from
independent  third parties and will be approved by a majority of the independent
disinterested directors of the Company.



                                       38

<PAGE>
ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

     (a) The following financial  statements of the Company are included as Part
II, Item 8:
<TABLE>
<CAPTION>

<S>               <C>                                                                                       <C>
                  1)       Independent Auditors Reports                                                   F-1
                  2)       Balance Sheets                                                                 F-2
                  3)       Statements of Operations                                                       F-3
                  4)       Statement of Stockholders' Equity                                              F-4
                  5)       Statements of Cash Flows                                                       F-5
                  6)       Notes to Financial Statements                                                  F-6
</TABLE>

                  FINANCIAL STATEMENT SCHEDULES

     (b) During the 1996 fiscal year,  the Company  filed Reports on Form 8-K on
each of the following date:

         (i)      Form 8-K dated  September 5, 1996 with respect to the purchase
                  of a AC Cars Limited and Autokraft Limited.

     (c) The exhibits  designated  with an asterisk have  previously  been filed
with the Commission in connection  with Pride,  Inc.'s Report on Form 8-K, dated
January 13, 1994,  PAG's  Registration  Statement on Form SB-2 dated January 12,
1996 (33-296-NY) and PAG's Report on Form 8-K dated September 5, 1996,  pursuant
to 17 C.F.R. ss.230.411, are incorporated by reference herein.
<TABLE>
<CAPTION>


<S>                        <C>                                                                  
 2.1*             -        Agreement and Plan of Reorganization dated effective as of January
                           13, 1994.
 3.1*             -        Amendment to the Certificate of Incorporation of the Company dated January
                           15, 1994.
 3.2*             -        By-Laws of the Company.
10.2*             -        Employment Agreement with Alan Lubinsky.
10.3*             -        Employment Agreement with Ivan Averbuch.
10.5*             -        Loan Agreement between PMS and Alan Lubinsky.
10.6*             -        Form of Service Agreement.
10.7*             -        Asset purchase agreement between Pride Vehicle Contracts (UK)
                           Limited and Master Vehicle Contracts, Limited.
10.8*             -        Form of Hire Purchase Agreement.
10.9*             -        Mortgage on Pride House, Watford Metro Centre.
10.10*            -        Mortgage on Croydon, England property.
10.11*            -        Lease agreement with respect to the Croydon, England property.
10.12*            -        Form of Agreement to purchase all of the assets of AC Cars Limited and
                           Autokraft Limited.

                                       39

<PAGE>
24.1*             -        Letter from Mark H. Sternberg, with respect to the change in
                           accountants [incorporated by reference to Exhibit 7(a)(1) of the Amendment
                           to the Report on Form 8-K/A dated June 6, 1994].
24.2*             -        Letter from Lazar, Levine & Company, Certified Public Accountants,
                           with respect to the change in accountants [incorporated by reference to
                           Exhibit 4(a)(v) of the Report on Form 8-K dated November 14, 1994].


</TABLE>
                                       40

<PAGE>
                                   SIGNATURES


         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized, this 27th day of February, 1998.


                                                    PRIDE AUTOMOTIVE GROUP, INC.


                                                     /s/ Alan Lubinsky
                                                     ALAN LUBINSKY, President


         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.

<TABLE>
<CAPTION>



<S>                                 <C>                                                          <C>
/s/ Alan Lubinsky                   President, Secretary and Chairman                            2/27/98
ALAN LUBINSKY                       of the Board of Directors (Principal                         Date
                                    Executive Officer)


/s/ Ivan Averbuch                   Chief Financial Officer,                                      2/27/98
IVAN AVERBUCH                       Vice President and Treasurer                                  Date



/s/ Allan Edgar                     Director                                                      2/27/98
ALLAN EDGAR                                                                                       Date



/s/ Ian Satill                      Director                                                      2/27/98
IAN SATILL                                                                                        Date

</TABLE>

<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                                    Page Nos

<S>                                                                                                                   <C>
Independent Auditors' Report                                                                                      F - 2

Financial Statements:
    Consolidated Balance Sheets as of November 30, 1997 and 1996                                                  F - 3
    Consolidated Statements of Operations for the Years Ended November 30, 1997 and 1996                          F - 4

    Consolidated Statement of Changes in Shareholders' Equity for the Two Years in the
    Period Ended November 30, 1997                                                                                F - 5

    Consolidated Statements of Cash Flows for the Years Ended November 30, 1997 and 1996                          F - 6


Notes to Consolidated Financial Statements                                                                        F - 7
</TABLE>

                                      F - 1


<PAGE>
                          INDEPENDENT AUDITORS' REPORT


We have audited the accompanying consolidated balance sheets of Pride Automotive
Group,  Inc. and  subsidiaries  as of November 30, 1997 and 1996 and the related
consolidated statements of operations,  changes in shareholders' equity and cash
flows for each of the two years in the period ended  November  30,  1997.  These
consolidated  financial  statements are the  responsibility of the Corporation's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United Kingdom which are  substantially the same as those followed in the
United States.  Those  standards  require that we plan and perform the audits to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatements.  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 above mentioned  consolidated  financial statements present
fairly, in all material  respects,  the consolidated  financial  position of the
Corporation as of November 30, 1997 and 1996 and the results of their operations
for the two years in the period  ended  November  30,  1997 in  conformity  with
accounting principles generally accepted in the United States of America.

Our audits also include the  translation  of British  pounds into United  States
dollars for amounts included in the consolidated  financial  statements.  In our
opinion,  such  translation has been made in conformity with the basis stated in
Note 2(h) of the notes to the consolidated financial statements.













MARBEL ARCH HOUSE
66-68 SEYMOUR STREET
LONDON W1H 5AH                                             CIVVALS
UNITED KINGDOM            FEBRUARY 20, 1998                CHARTERED ACCOUNTANTS






                                      F - 2


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                              - ASSETS (Note 6a) -
<TABLE>
<CAPTION>

                                                                                                         November 30,
                                                                                                      1997            1996
                                                                                              ---------------- -----------

ASSETS:
<S>                                                                                             <C>               <C>          
  Cash and cash equivalents                                                                     $       77,354    $     250,699
  Accounts receivable - net (Notes 2c and 3)                                                         2,002,365        2,022,011
  Inventories (Note 2d)                                                                              1,248,360        1,022,655
  Property, revenue producing vehicles and equipment - net
    (Notes 2e, 4, 6b and 7)                                                                         27,882,350       20,671,854
  Intangible assets - net (Note 2f)                                                                  9,090,156        9,722,363
                                                                                                 -------------   --------------
TOTAL ASSETS                                                                                       $40,300,585      $33,689,582
                                                                                                   ===========      ===========

                    - LIABILITIES AND SHAREHOLDERS' EQUITY -

LIABILITIES:
  Bank line of credit (Note 6a)                                                                   $  6,976,699    $   2,964,465
  Accounts payable                                                                                   1,758,764          624,953
  Accrued liabilities and expenses (Note 5)                                                            865,977          490,915
  Bank debt (Note 6b)                                                                                  695,782        1,002,571
  Obligations under hire purchase contracts (Note 7)                                                18,341,778       11,034,951
  Other liabilities (Note 8)                                                                            52,707           33,560
  Acquisition debt payable (Note 9)                                                                  4,198,500        5,098,470
                                                                                                 -------------    -------------
TOTAL LIABILITIES                                                                                   32,890,207       21,249,885
                                                                                                  ------------     ------------

MINORITY INTEREST IN SUBSIDIARY (Note 16)                                                              -                482,486
                                                                                          --------------------   --------------

COMMITMENTS AND CONTINGENCIES (Notes 13 and 15)

SHAREHOLDERS' EQUITY (Notes 10 and 11):
  Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued
    or outstanding                                                                                     -                -
  Common stock, $.001 par value, 10,000,000 shares authorized 2,822,500
    and 2,652,500 shares issued and outstanding in 1997 and 1996, respectively                           2,823            2,653
  Additional paid-in capital                                                                        13,582,795       13,487,388
  Deferred financing costs (Note 10)                                                                  (141,500)         -
  Retained earnings (deficit)                                                                       (5,857,987)      (1,402,587)
  Foreign currency translation (Note 2h)                                                              (175,753)        (130,243)
                                                                                                --------------   --------------
TOTAL SHAREHOLDERS' EQUITY                                                                           7,410,378       11,957,211
                                                                                                 -------------     ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                         $40,300,585      $33,689,582
                                                                                                   ===========      ===========
</TABLE>


                 See notes to consolidated financial statements.

                                      F - 3


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                                       November 30,
                                                                                                      1997            1996
                                                                                              ---------------- -----------

REVENUES (Notes 2i and 13):
<S>                                                                                               <C>              <C>         
  Contract hire income                                                                            $  8,410,366     $  6,286,677
  Sale of vehicles                                                                                   7,090,027        5,839,080
  Fleet management and other income                                                                  1,076,650          758,261
  Service and spare parts revenue                                                                      180,990          -
  Other income (Note 15a)                                                                              701,242             -
                                                                                                ----------------------------
TOTAL REVENUE                                                                                       17,459,275       12,884,018
                                                                                                  ------------     ------------

COSTS AND EXPENSES:
  Cost of sales                                                                                     10,336,360        7,946,686
  Depreciation                                                                                       3,946,635        2,295,164
  General and administrative expenses                                                                3,540,130        1,802,111
  Amortization of goodwill                                                                             632,207          634,813
  Interest and other financing costs                                                                 2,209,150          860,242
  Research and development                                                                             982,580          -
  Loss on sale of fixed assets (Note 4)                                                                753,933             -
                                                                                                ----------------------------
                                                                                                    22,400,995       13,539,016

LOSS BEFORE MINORITY INTERESTS                                                                      (4,941,720)        (654,998)

  Minority interest in net loss of consolidated subsidiaries (Note 16)                                 486,320           54,376
                                                                                                --------------  ---------------

LOSS BEFORE PROVISION FOR INCOME TAXES                                                              (4,455,400)        (600,622)

  Provision for income taxes (Notes 2g and 12)                                                         -                   -
                                                                                          ----------------------------------

NET LOSS                                                                                          $ (4,455,400)   $    (600,622)
                                                                                                  ============    =============

LOSS PER COMMON AND DILUTIVE COMMON
  EQUIVALENT SHARE (NOTE 2j):
    Net loss before minority interests                                                                  $(1.76)           $(.27)
    Minority interest in net loss of subsidiaries                                                          .17              .02
                                                                                                     ---------           ------

NET LOSS PER SHARE                                                                                      $(1.59)           $(.25)
                                                                                                       =======            =====

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
  EQUIVALENT SHARES OUTSTANDING (Note 2j)                                                          2,801,075        2,405,760
                                                                                                   =========        =========
</TABLE>




                 See notes to consolidated financial statements.

                                      F - 4


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>



                                                        Additional     Deferred       Retained       Foreign        Total
                                           Common       Paid-in       Financing       Earnings      Currency      Shareholders'
                             Shares      Stock          Capital        Costs          (Deficit)    Translation       Equity
                          ----------- ------------ ---------------------------- ---------------    ------------------------
<S>                         <C>             <C>        <C>         <C>            <C>              <C>              <C>        
Balance at December 1,
1995                        1,560,000       $1,560     $11,741,922 $    -         $   (801,965)    $   609,349      $11,550,866

Private offering of
common stock (Note 10)        500,000          500         119,500      -              -               -                120,000

Shares and warrants sold
in initial public offering
(Note 10)                     592,500          593       2,165,336      -              -               -              2,165,929

Adjustment for minority
interest (Note 16)            -             -             (539,370)     -              -               -               (539,370)

Foreign currency
translation adjustment        -            -                  -                -       -              (739,592)        (739,592)

Net loss for the year ended
November 30, 1996             -            -                  -               -        (600,622)         -             (600,622)
                     ----------------  ----------------------------------------------------------- ------------------------------

Balance at
November 30, 1996           2,652,500        2,653      13,487,388     -            (1,402,587)       (130,243)      11,957,211

Private offering of
common stock (Note 10)        170,000          170          95,407     -               -               -                 95,577

Deferred financing
costs (Note 10)               -             -             -            (141,500)        -              -               (141,500)

Foreign currency
translation adjustment        -             -             -              -              -              (45,510)         (45,510)

Net loss for year ended
November 30, 1997             -              -                -                -      (4,455,400)         -          (4,455,400)
                       --------------  --------------------------------------------------------- ----------------  ------------

BALANCE AT
NOVEMBER 30, 1997           2,822,500       $2,823     $13,582,795    $(141,500)   $(5,857,987)      $(175,753)    $  7,410,378
                            =========       ======     ===========    =========    ===========       =========     ============
</TABLE>

                 See notes to consolidated financial statements.

                                      F - 5


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                        November 30,
                                                                                                      1997            1996
                                                                                              ---------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                              <C>              <C>           
  Net (loss)                                                                                     $  (4,455,400)   $    (600,622)
  Adjustments to reconcile net (loss) to net cash provided by operating activities:
     Minority interest in net loss of subsidiary                                                      (486,320)         (54,376)
     Depreciation and amortization                                                                   3,946,635        2,295,164
     Amortization of goodwill                                                                          632,207          634,813
     Deferred financing costs                                                                         (141,500)         -
     Loss (gain) on disposal of fixed assets                                                           753,933         (119,030)
     Provision for maintenance costs                                                                   -                (18,524)
  Changes in assets and liabilities:
     Decrease (increase) in accounts receivable                                                         19,646         (599,753)
     (Increase) in inventories                                                                        (225,705)         (93,794)
     Increase (decrease) in accounts payable, accrued expenses and bank overdraft                    1,528,020         (955,172)
                                                                                               ---------------    -------------
     Net cash provided from operating activities                                                     1,571,516          488,706
                                                                                               ---------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of fixed assets                                                                         (16,494,724)      (9,858,724)
  Acquisition of assets in new subsidiary                                                              -               (969,279)
  Proceeds from sale of fixed assets                                                                 4,583,660        2,068,601
                                                                                                --------------    -------------
  Net cash (utilized) by investing activities                                                      (11,911,064)      (8,759,402)
                                                                                                 -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Bank lines of credit                                                                               4,012,234        1,870,785
  Net proceeds from sale of stock                                                                       95,577        2,285,929
  Loans repaid to officers                                                                             -               (304,759)
  Payment of acquisition debt                                                                         (899,970)         -
  Principal payments of long term debt                                                                (306,789)         (67,921)
  Proceeds from hire purchase contract funding                                                      19,491,763       11,530,175
  Principal repayments of hire purchase contract funding                                           (12,184,936)      (6,073,790)
                                                                                                  ------------    -------------
  Net cash provided from financing activities                                                       10,207,879        9,240,419
                                                                                                 -------------    -------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                                (41,676)        (722,401)
                                                                                               ---------------   --------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                  (173,345)         247,322

  Cash and cash equivalents, beginning of year                                                         250,699            3,377
                                                                                                -------------- ----------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                          $       77,354    $     250,699
                                                                                                ==============    =============
</TABLE>

SUPPLEMENTAL INFORMATION:
  (i)    In November 1996, the Company acquired certain of the assets of AC Cars
         Limited   aggregating   $6,067,749   and  incurred   debt   obligations
         aggregating $5,098,470.

  (ii)   The loss on the  disposal  of fixed  assets  resulted  from the sale of
         certain  non-revenue  producing  assets  whereby the proceeds were less
         than the carrying value.

                 See notes to consolidated financial statements.

                                      F - 6


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996



NOTE 1 - DESCRIPTION OF COMPANY:

               Pride Automotive  Group, Inc. (the "Company") was incorporated in
               the State of Delaware  in March  1995.  Pursuant to the terms and
               conditions of a reorganization  in March 1995, the Company issued
               1,500,000  shares of its common  stock to Pride,  Inc. (an entity
               incorporated  in the  State  of  Delaware),  thereby  making  the
               Company a majority  owned  subsidiary  of Pride Inc., in exchange
               for all of the issued and outstanding shares held by Pride, Inc.,
               of Pride Management  Services Plc (PMS), a consolidated  group of
               operating  companies  located  in the  United  Kingdom  which are
               engaged in the leasing of motor  vehicles  primarily  on contract
               hire  to  local  authorities  and  selected  corporate  customers
               throughout the United Kingdom. This exchange of stock resulted in
               PMS  becoming  a wholly  owned  subsidiary  of the  Company.  The
               Company,  its subsidiary PMS and PMS's  subsidiaries are referred
               to as the "Company" unless the context otherwise requires.

               On  November  29,  1996,  the  Company,  through  a newly  formed
               majority  owned  subsidiary,  AC  Automotive  Group Inc.  and its
               wholly owned  subsidiary AC Car Group Limited  (registered in the
               United  Kingdom),  completed the acquisition of certain assets of
               AC Cars Limited and Autokraft  Limited.  These two companies were
               engaged in the manufacture and sale of specialty automobiles. The
               purchase price of approximately  $6,067,000 was financed with the
               proceeds of a private offering of the Company's common stock, and
               by loans.  The acquisition was recorded using the purchase method
               of accounting.

               The following unaudited pro-forma results of operations,  for the
               year ended November 30, 1996, assume the acquisition  occurred as
               of March 1, 1996 (amounts in millions except per share data). The
               pro-forma   financial   information,   which  is  only  available
               beginning  March 1, 1996,  is not  necessarily  indicative of the
               operating  results that would have  occurred had the  acquisition
               been  consummated as of March 1, 1996,  nor are they  necessarily
               indicative of future operating  results.  This is because AC Cars
               Limited and Autokraft Limited were in administrative receivership
               in the United Kingdom and this severely restricted the ability of
               the  companies  to  manufacture  and market their  products.  The
               Company  has made  the  United  States  Securities  and  Exchange
               Commission  aware of the fact that  financial  information is not
               available for prior periods.


                  Revenues                                                $14.2
                  Net loss                                                 (1.8)
                  Earnings per common share                               $(.75)


               See also Note 18b regarding Subsequent Events.

                                      F - 7


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

               PMS, the operating  group of  companies,  which is located in the
               United Kingdom,  follows generally accepted accounting principles
               in  the  United  Kingdom.  For  purposes  of  these  consolidated
               financial statements,  the Company has converted to the generally
               accepted accounting principles of the United States.

      (a)      Basis of Consolidation and Presentation:

               The consolidated financial statements include the accounts of the
               Company  (Pride  Automotive  Group,   Inc.),  its'  wholly  owned
               subsidiary  Pride  Management  Services Plc and its' wholly owned
               subsidiaries,  and its' majority  owned  subsidiary AC Automotive
               Group,  Inc.  and its'  wholly  owned  subsidiary.  All  material
               intercompany balances and transactions have been eliminated.

               Due to the  nature of the  majority  of the  Company's  business,
               contract  leasing of motor vehicles  (revenue  producing  assets)
               which are treated as non-current fixed assets,  the balance sheet
               is  reflected  on an  unclassified  basis.  Accordingly,  current
               assets and current  liabilities  are not reflected  separately on
               the face of the balance sheet.

               Certain  reclassifications  have been made to the 1996  financial
               statements to conform to the presentation used in 1997.

      (b)      Use of Estimates:

               In preparing  financial  statements in accordance  with generally
               accepted   accounting   principles,   management   makes  certain
               estimates  and  assumptions,  where  applicable,  that affect the
               reported  amounts of assets and  liabilities  and  disclosures of
               contingent  assets and  liabilities  at the date of the financial
               statements,  as well as the  reported  amounts  of  revenues  and
               expenses during the reporting period.  While actual results could
               differ  from those  estimates,  management  does not expect  such
               variances,  if any,  to have a material  effect on the  financial
               statements.

      (c)      Concentration of Credit Risk/Fair Value:

               Financial  instruments  that  potentially  subject the Company to
               concentrations  of  credit  risk in  accordance  with SFAS No 105
               consist principally of accounts receivable.  The Company believes
               however,  that risks  associated  with  accounts  receivable  are
               limited  due to its  large  customer  base and the  fact  that it
               leases vehicles to companies in many industries.

               The  carrying  amounts  of  cash  and  cash  equivalents,   trade
               receivables,  other assets, accounts payable and debt obligations
               approximate fair value.




                                      F - 8


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

      (d)      Inventories:

               Inventories  include vehicles which are no longer being leased to
               customers and which are temporarily being held for resale at cost
               less accumulated depreciation,  which approximates net realizable
               value.  The  inventories  of AC  Automotive  Group,  Inc. and its
               subsidiary  consist of finished goods, work in progress and spare
               parts of  specialty  automobiles  and are  stated at the lower of
               cost,   (first-in,   first-out  method)  or  market.   Market  is
               considered as net realizable value.

               As of November  30, 1997 and 1996  inventories  consisted  of the
following:
<TABLE>
<CAPTION>

                                                                                    1997              1996
                                                                               -------------     ---------

<S>                                                                              <C>               <C>        
                               Cars held for resale                              $   132,369       $   124,932
                               Finished goods                                         90,784            75,510
                               Work-in-progress                                      502,500           684,305
                               Spare parts                                           522,707           137,908
                                                                                ------------      ------------
                                                                                  $1,248,360        $1,022,655
</TABLE>

      (e)      Fixed Assets and Depreciation:

               Fixed assets are stated at cost less  depreciation.  Depreciation
               is  provided on all assets at rates  calculated  to write off the
               cost of each asset over its estimated useful life, as follows:

                               Building and improvements 50 years  straight-line
                               basis  Revenue   producing   vehicles  3-6  years
                               straight-line  basis  Furniture  and  fixtures  4
                               years  double   declining   basis  Machinery  and
                               equipment 4 years double declining basis Aircraft
                               4 years double declining basis

               Maintenance  and  repairs  are  charged to  operations  and major
               improvements  are  capitalized.  Upon  retirement,  sale of other
               disposal, the associated cost and accumulated depreciation of the
               asset are eliminated  from the accounts and any resulting gain or
               loss is included in operations.


                                      F - 9


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

      (f)      Intangible Assets:

               Intangible  assets  consist  primarily of goodwill which arose in
               connection with the  acquisition of certain  subsidiaries of PMS.
               Goodwill  is being  amortized  over a period of 10-20  years on a
               straight-line basis.  Accumulated amortization as of November 30,
               1997 and 1996 aggregated $3,622,833 and $2,990,626, respectively.

               In November 1996, the Company  acquired  certain of the assets of
               AC Cars Limited and Autokraft  Limited (see Note 1). The purchase
               price exceeded the tangible net assets acquired by $16,780.  This
               amount was assigned to the brand name and is being amortized over
               20 years on a straight-line basis.

               The Company  periodically  reviews the valuation and amortization
               of  goodwill  and  other   intangibles   to  determine   possible
               impairment  by  evaluating  events and  circumstances  that might
               indicate  an  inability  to recover  the  carrying  amount.  Such
               evaluation  is  based  on  analysis,   including   profitability,
               projections  and  cash  flows  that  incorporate  the  impact  on
               existing Company business.

      (g)      Income Taxes:

               The  Company  conducts  all of its  operating  activities  in the
               United Kingdom (UK). As such, they are subject to taxation in the
               UK based upon that  country's  tax  statutes.  Under UK  taxation
               rules,  provision  is made for  taxation  deferred as a result of
               material timing  differences  between the incidence of income and
               expenditures  for taxation  and  accounting  purposes,  using the
               liability  method,  only to the extent  that there is  reasonable
               probability  that a liability  or asset will  crystallize  in the
               near future.  See also Note 12 regarding SFAS No 109 - Accounting
               for Income Taxes.

      (h)      Foreign Currency Translation:

               The  Company's  principal  operations  are conducted by PMS which
               reflects its financial statements in British pounds. As a result,
               most  assets  and  liabilities  of  the  foreign  operations  are
               translated into US dollars using current exchange rates in effect
               at the balance sheet date. Fixed assets and intangible assets are
               translated  at  historical  exchange  rates.  Revenue and expense
               accounts are translated using an average exchange rate during the
               period   except  for  those   expenses   related  to  assets  and
               liabilities  which are translated at historical  exchange  rates.
               These include  depreciation and amortization which are translated
               at the rates  existing  at the time the asset was  acquired.  Any
               resulting gains or losses due to the  translations  are reflected
               as a separate item of shareholders' equity.


                                     F - 10


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

      (i)      Income Recognition:

               Contract  hire  income  of  leased   vehicles  is  recognized  as
               operating  leases over the period of the  contract in  accordance
               with  SFAS  No  13  -  Accounting  for  Leases  and  the  related
               amendments   and   interpretations.   Income  from  the  sale  of
               previously  leased  vehicles is  reflected at the time of sale of
               the vehicle.  Fleet management revenues and miscellaneous  income
               are  reflected  on the  accrual  basis  over  the  term  that the
               services are provided.

               The Company leases vehicles with terms generally ranging from two
               to four years. The following table shows the future minimum lease
               payments of existing leases to be received,  net of related costs
               (see also Note 7):
<TABLE>
<CAPTION>

<S>                            <C>                                               <C>        
                               November 30, 1998                                 $ 7,504,475
                               November 30, 1999                                   5,072,831
                               November 30, 2000                                   2,152,957
                               November 30, 2001                                     418,979
                                                                              --------------
               Total minimum lease payments receivable
               net of executory costs                                            $15,149,242
</TABLE>

      (j)      Earnings (Loss) Per Share:

               Earnings per share are computed  based upon the weighted  average
               shares and common equivalent shares outstanding.  The shares sold
               during the year ended  November  30,  1996 in a private  offering
               (see Note 10), have been treated as  outstanding  for all periods
               presented,  in accordance  with the  guidelines of the Securities
               and  Exchange  Commission.  Common  stock  equivalents  have been
               excluded  from  the  computation   since  the  results  would  be
               anti-dilutive.

               In February 1997, the Financial Accounting Standards Board issued
               Statement  No.  128 -  Earnings  Per Share  ("SFAS  128"),  which
               changes the method for calculating  earnings per share.  SFAS 128
               requires the  presentation of "basic" and "diluted"  earnings per
               share on the face of the income statement.  SFAS 128 is effective
               for financial  statements  for periods  ending after December 15,
               1997.  The  Company  will  adopt  SFAS  128 for the  year  ending
               November 30, 1998,  and  accordingly  restate prior  periods,  as
               early  adoption  is not  permitted.  SFAS 128 is not  expected to
               materially  differ from  primary or fully  diluted  earnings  per
               share as previously reported.

      (k)      Cash and Cash Equivalents:

               For  purposes  of the  statements  of  cash  flows,  the  Company
               considers all highly liquid investments with an original maturity
               of three months or less to be cash equivalents.



                                     F - 11


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

      (l)      Stock Based Compensation:

               SFAS No. 123 "Accounting for Stock Based Compensation", effective
               December 1996, requires the Company to either record compensation
               expense  or to provide  additional  disclosures  with  respect to
               stock  awards and stock  option  grants made after  December  31,
               1994. The accompanying Notes to Consolidated Financial Statements
               include the disclosures required by SFAS No. 123. No compensation
               expense is  recognized  pursuant to the  Company's  stock  option
               plans under SFAS No. 123 which is consistent with prior treatment
               under APB No. 25.

      (m)      New Accounting Pronouncements:

               SFAS 130 "Reporting  Comprehensive Income" is effective for years
               beginning   after   December  15,  1997  and  early  adoption  is
               permitted.  This  statement  prescribes  standards  for reporting
               comprehensive  income and its components.  The Company will adopt
               these standards effective for the year ending November 30, 1998.

               See also Earnings (Loss) Per Share.

      (n)      Impact of the Year 2000 Issue:

               The year 2000  issue is the  result of  computer  programs  being
               written  using  two  digits  rather  than four to  designate  the
               applicable  year.  Accordingly,  any  of the  Company's  computer
               programs  that utilize date  sensitive  software may  recognize a
               date using "00" as the year 1900 rather than the year 2000.  This
               could potentially  result in a system failure or  miscalculations
               causing disruptions of operations,  including among other things,
               a temporary inability to process transactions,  send invoices, or
               engage in other similar normal business activities.

               The  Company  had  already  planned  on  upgrading  its  computer
               software to increase  operational  efficiencies  and  information
               analysis.  In  conjunction  with this  upgrade,  the Company will
               ensure that the new systems properly utilize dates that go beyond
               December  31,  1999.  The  cost of this  upgrade  project,  as it
               relates  to the  Year  2000  issue,  is not  expected  to  have a
               material  effect on the  operations  of the  Company  and will be
               funded through operating cash flows.

NOTE   3   -   ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>

               Accounts receivable consist of the following:
                                                                                  1997                1996
<S>                                                                              <C>                <C>
               Trade receivables -  net of allowance for doubtful
                    accounts of $80,486 and $0, for 1997 and 1996,
                    respectively                                                 $   639,109        $1,192,949
               Lease maintenance receivables                                         943,261           330,902
               Value added tax                                                       138,555           102,114
               Due from related companies                                             83,219            95,125
               Other                                                                 198,221           300,921
                                                                                ------------      ------------
                                                                                  $2,002,365        $2,022,011
</TABLE>


                                     F - 12


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 4 - FIXED ASSETS AND DEPRECIATION:
<TABLE>
<CAPTION>

               Fixed assets consist of the following:

                                                                                  1997                1996
                                                                            ----------------   -----------

<S>                                                                            <C>                <C>         
               Buildings and improvements                                      $     820,160      $  1,719,415
               Revenue producing vehicles                                         27,612,291        17,282,095
               Furniture, fixtures, plant and equipment                            4,670,067         4,641,388
               Aircraft                                                              -                 927,751
                                                                        --------------------   ---------------
                                                                                  33,102,518        24,570,649
               Less:  accumulated depreciation (including
                      $4,263,115 and $3,388,495 of accumulated
                      depreciation on revenue producing vehicles,
                      for 1997 and 1996, respectively)                             5,220,168         3,898,795
                                                                               -------------     -------------
                                                                                 $27,882,350       $20,671,854
</TABLE>

               Depreciation  expense for the years ended  November  30, 1997 and
               1996 aggregated $3,946,635 and $2,295,164, respectively.

               One of the buildings  owned by Pride  Management was being leased
               to an unrelated party at an annual rent of approximately  $80,000
               per annum.  In November 1997,  the tenant  exercised an option to
               purchase the building for approximately $400,000.


NOTE   5   -   ACCRUED LIABILITIES AND EXPENSES:
<TABLE>
<CAPTION>

               Accrued liabilities and expenses consist of the following:

                                                                                     1997             1996
                                                                                 -----------       -------

<S>                                                                                 <C>               <C>     
               Taxes other than income taxes                                        $438,289          $418,082
               Miscellaneous accrued expenses                                        427,688            72,833
                                                                                   ---------        ----------
                                                                                    $865,977          $490,915
                                                                                    ========          ========
</TABLE>


                                     F - 13


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 6 - BANK LOANS/LINE OF CREDIT:

(a)            As of August 31, 1997, the Company's line of credit with its bank
               expired. In February 1998,  subsequent to the balance sheet date,
               the Company  entered into a new agreement with the bank. This new
               line of credit of $7,202,500, is payable on demand and is secured
               by  all  assets  of  the   Company   other  than   building   and
               revenue-producing  vehicles which are already  pledged (see Notes
               6b and 7).  Interest  is  payable  at rates  between 2% and 4% in
               excess of the bank's  base rate (7 1/2% at  November  30,  1997).
               This facility has to be reduced by $837,500 by March 31, 1998 and
               a further $921,250 by December 31, 1998. The agreement is due for
               review in November 1998.

      (b)      At November  30,  1997,  other bank loans  consisted  of $695,782
               payable  at a rate  of 3% in  excess  of  the  bank's  base  rate
               ($1,002,571  due to two  banks at rates of 3% and 5% in excess of
               the  banks'  base rate as of  November  30,  1996).  This loan is
               secured by the  freehold  property (building)  owned by Pride
               Management and its subsidiaries, and matures in 2017.

               The scheduled principal payments of this bank debt as of November
30, 1997 are as follows:

               For the Year Ended November 30,

                      1998                               $  84,058
                      1999                                  84,058
                      2000                                  84,058
                      2001                                  84,058
                      2002                                  84,058
                      Thereafter                           275,492
                                                          --------
                                                          $695,782

NOTE 7 - HIRE PURCHASE CONTRACTS/EQUIPMENT FINANCING:

               The Company has funding lines with several financing institutions
               in the United  Kingdom in the aggregate  amount of  approximately
               $23,667,500  as of November 30,  1997.  These  funding  lines are
               utilized to acquire revenue  producing  vehicles,  which vehicles
               collateralize the outstanding obligations.

               Assets (revenue producing  vehicles) obtained under hire purchase
               contracts are  capitalized as fixed assets and  depreciated  over
               their useful lives. The obligations under such agreements,  which
               mature at various  dates  within five years from  inception,  are
               reflected  separately on the balance sheet net of finance charges
               which are charged to the periods to which they apply. At November
               30,  1997,  obligations  under  hire  purchase  contracts  are as
               follows:

               For the Year Ended November 30,

                      1998                             $ 8,860,849
                      1999                               7,060,375
                      2000                               2,372,636
                      2001                                  47,918
                                                    --------------
                                                       $18,341,778

               The annual interest rates on these  obligations  range from 9% to
11%.

                                     F - 14


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 8 - OTHER LIABILITIES:

               At November  30,  1997 and 1996 other  liabilities  consisted  of
               $52,707 and  $33,560,  respectively,  due to other  creditors  at
               interest  rates  approximating  the current  market rates and are
               repayable on a demand basis.


NOTE   9   -   ACQUISITION DEBT PAYABLE:

               Acquisition debt payable (see Note 1) consists of the following:
<TABLE>
<CAPTION>

                                                                                    1997             1996
                                                                             ---------------    ---------
<S>                                                                                  <C>               <C>    
               Unsecured  notes  payable on demand after May 31, 1998;  interest
               payable quarterly at 2% above the
               base rate                                                             837,500           839,000

               Unsecured notes payable on demand after May 31,
               1998; interest payable at 10% per annum (see Note 10)               1,615,000           -

               Unsecured notes payable on demand after October 31,
               1999; interest payable quarterly at 8% per annum                   $1,675,000        $1,678,000

               Other short-term notes payable                                         71,000         2,581,470
                                                                               -------------       -----------
                                                                                  $4,198,500        $5,098,470

</TABLE>

NOTE   10 -    COMMON STOCK/RECAPITALIZATION:

               In  December  1995,  the Company  completed  a private  placement
               offering selling 20 units,  each unit consisting of 25,000 shares
               of common stock,  at $6,000 per unit for aggregate gross proceeds
               of $120,000.

               In April 1996,  the  Company  successfully  completed  an initial
               public  offering  ("IPO")  of its  common  stock  whereby it sold
               592,500  shares of common stock at a price of $5.00 per share and
               2,300,000  common stock purchase  warrants at a price of $.10 per
               warrant.  This  offering  yielded net  proceeds of  approximately
               $2,166,000.

               The  warrants  are  exercisable  at a price of $5.75  per  share,
               subject to  adjustment,  one year from the date of the  offering,
               for a period of four years.  The warrants are  redeemable  by the
               Company  at any time  commencing  one  year  from the date of its
               prospectus,  upon 30 days notice,  at a redemption  price of $.05
               per warrant.


                                     F - 15


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 10 - COMMON STOCK/RECAPITALIZATION (Continued):

               In addition, the Company entered into a consulting agreement with
               one of the Underwriters as a financial consultant for a period of
               two  years at a  monthly  fee of  $2,500  payable  in full at the
               closing of the offering.  The Underwriters have also been granted
               warrants  to acquire  95,000  shares of Common  Stock and 200,000
               warrants at 150% of the public offering prices or $7.50 per share
               and $.15 per Warrant, respectively.

               In 1997, the Company  completed a private  placement of 17 units,
               each unit  consisting of a 10%  promissory  note in the amount of
               $95,000 and 10,000  shares of the  Company's  common stock for an
               aggregate  price of $100,000  per unit.  The notes are payable on
               the  earlier of 18 months  from the date of issuance or a closing
               of an  underwritten  public  offering of the Company's (or any of
               its subsidiaries) securities (see Note 18a). The promissory notes
               are classified as acquisition debt (see also Note 9).

               The Company has reflected deferred financing costs based upon the
               difference  between  the deemed  fair value of the shares and the
               market  value  at the  time  of  issuance.  These  costs  will be
               recognized  as additional  interest  expense over the term of the
               notes.


NOTE  11  -    STOCK OPTION PLANS:

               In September 1995, the board of directors adopted the 1995 Senior
               Management  Incentive  Plan  (the  "Management  Plan")  which was
               adopted  by  shareholder  consent.  The  Plan  provides  for  the
               issuance of up to 300,000 shares of the Company's common stock in
               connection  with the  issuance  of stock  options and other stock
               purchase rights to executive officers and other key employees.

               During the year ended  November  30,  1996,  the Company  granted
               options to purchase 100,000 shares of common stock at an exercise
               price of $5.50 per share (fair value of $2.60), none of which has
               been  exercised to date.  These  options are  exercisable  over a
               five-year  period  pursuant  to  a  three-year  vesting  schedule
               (331/3% per annum) beginning in August 1996.

               In May 1997,  the Company  granted an aggregate of 60,528 options
               to three employees  exercisable at $2.54 per share. These options
               vest at the rate of 331/3% per annum commencing May 1998.

               The  Company  applies  APB  25  and  related  Interpretations  in
               accounting for the Management Plan. Accordingly,  no compensation
               cost  has  been   recognized   for  the   Management   Plan.  Had
               compensation  cost of the Management Plan been  determined  using
               the fair  value-based  method,  as  defined in SFAS 123 (see Note
               2m), the  Company's net earnings  (loss) and earnings  (loss) per
               share would have been adjusted to the pro forma amounts indicated
               below:
<TABLE>
<CAPTION>
                                                                                    1997              1996
                                                                             ---------------      --------
<S>                                                                              <C>                 <C>                           
Net earnings (loss):
                        As reported                                              $(4,455,400)        $(600,622)
                        Pro forma                                                 (4,745,000)         (906,622)
                      Earnings (loss) per share:
                        As reported                                                    (1.59)             (.25)
                        Pro forma                                                      (1.69)             (.38)
</TABLE>

                                     F - 16


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 11 - STOCK OPTION PLANS (Continued):

               The fair value of each option grant was  estimated on the date of
               the grant using the Black-Scholes  option-pricing  model with the
               following  weighted  average   assumptions  for  1997  and  1996;
               respectively; expected volatility of 1.2% and 1.1%, respectively;
               risk-free  interest  rate of 6.5%;  and expected  lives of 3 to 5
               years.

               The  effects  of  applying  SFAS  123  in  the  above  pro  forma
               disclosures  are not  necessarily  indicative of future  amounts.
               Additionally,  future  amounts  are likely to be  affected by the
               number of grants  awarded since  additional  awards are generally
               expected to be made at varying amounts.


NOTE 12 - INCOME TAXES:

               The Company has available operating losses  carryforwards for tax
               purposes aggregating  approximately $5,028,000 as of November 30,
               1997,  which may result in a deferred tax asset.  The Company has
               recognized this asset but has provided a valuation  allowance for
               the full amount since there is no assurance that such losses will
               be utilized in the near future.

               The  components  of the deferred tax asset,  pursuant to SFAS No.
               109,  as of  November  30,  1997 and 1996,  respectively,  are as
               follows:
<TABLE>
<CAPTION>

                                                                                    1997                1996
                                                                             ---------------        --------

<S>                                                                               <C>                 <C>     
                      Operating loss carryforward                                 $1,709,000          $ 52,000
                      Valuation allowance                                         (1,709,000)          (52,000)
                                                                                 -----------         ---------
                                                                           $         -           $     -
                                                                           =================     =======
</TABLE>



NOTE 13 - ECONOMIC DEPENDENCY:

               For the years ended  November 30, 1997 and 1996,  the Company had
               two unaffiliated  customers,  which accounted for an aggregate of
               approximately 17% (1996 - 17%) and 7% (1996 - 12%)  respectively,
               of the Company's total revenues.

               The Company  purchases all of the  automobiles  that it leases to
               its clients from  automotive  dealerships,  usually  several at a
               time.  The Company does not depend on any one  dealership for its
               purchase of automobiles and does not have any written  agreements
               with any of the  dealerships  it  purchases  vehicles  from.  The
               Company  believes  that it will  continue  to be able to purchase
               automobiles at competitive prices and terms into the future.


                                     F - 17


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996



NOTE 14 - PENSION PLAN:

               PMS  and  its'   subsidiaries   have  a  fully  insured   defined
               contribution   plan   for   all   of  its   eligible   employees.
               Contributions to the plan, which are discretionary, for the years
               ended November 30, 1997 and 1996 amounted to $65,726 and $33,264,
               respectively.


NOTE 15 - COMMITMENTS:

      (a)      Leases:

               In November  1996,  the  Company  entered  into a one-year  lease
               agreement for the  manufacturing  facility being utilized for its
               new subsidiary at a cost of approximately $54,000 per month, with
               an option to  purchase  this  facility  at a cost of  $8,700,000,
               through August 1997. In August 1997, the Company sold this option
               to purchase for $673,750 and negotiated a new lease for a smaller
               portion of this  facility at an  approximate  cost of $31,000 per
               month.

      (b)      Employment Agreements:

               In August 1995, the Company entered into an employment  agreement
               with  its  President/Chairman  of the  Board of  Directors.  This
               three-year  agreement  provides for an annual  salary of $160,000
               with  annual   escalations  of  10%  and  also  contains  certain
               non-compete restrictions.  This employee was also granted 100,000
               stock options (see Note 11).

               In  September  1995,  the  Company  entered  into  an  employment
               agreement  with an  officer/director  for a period of twenty-four
               months   commencing   December  1,  1995.   This   agreement   is
               automatically  extendable for a further twenty  four-month period
               subject to review by the Board of  Directors.  For the year ended
               November 30, 1997, the annual salary amounted to $71,000

      (c)      Rental Income:

               The Company leased one of its owned facilities to an unaffiliated
               company for an annual rental of approximately  $80,000 per annum.
               The annual cost of  servicing  the mortgage and real estate taxes
               on this building was  approximately  $70,000.  In November  1997,
               this property was sold for $400,000 (see Note 4).


                                     F - 18


<PAGE>
                 PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 16 - MINORITY INTEREST IN SUBSIDIARIES:

               The Company owns 70% of AC Automotive  Group, Inc. ("AC Group") -
               see Note 1. As of November  30,  1996,  the  Company  reflected a
               charge of  $539,370  to  additional  paid-in  capital in order to
               properly reflect the minority interest liability at $482,486. For
               the year  ended  November  30,  1997,  losses  applicable  to the
               minority  shareholder  exceeded its interest,  accordingly,  such
               losses were charged against the operations of the Company. Future
               earnings  attributable  to the minority  interests,  if any, will
               first be credited to the  operations of the Company to the extent
               that such losses  were  previously  absorbed by the Company  (see
               also Note 18b).


NOTE 17 - BUSINESS SEGMENT INFORMATION:

               The Company's  operations  have been classified into two business
               segments;  Contract Hire and Leasing and Automobile  Manufacture.
               The Contract Hire and Leasing is the business of Pride Management
               Services  Plc and its  subsidiaries  and  utilizes  the resale of
               automobiles  at  the  end  of  the   contracts.   The  Automobile
               manufacturer  is the  business  of AC  Car  Group  Limited.  This
               segment began operations in December 1996.

               Summarized  financial  information  by  business  segment for the
               years ended November 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>

                                                                                   1997               1996
                                                                            ----------------   -----------
<S>                                                                              <C>               <C>        
                      Revenue:
                        Pride Management Services Plc                            $16,249,338       $12,884,018
                        AC Car Group Limited                                       1,209,937            -
                                                                               --------------------------
                                                                                 $17,459,275       $12,884,018
                      Income (Loss) Before Minority Interests:
                        Pride Management Services Plc                          $    (830,056)    $    (654,998)
                        AC Car Group Limited                                      (4,111,664)            -
                                                                               ------------- -------------
                                                                                $ (4,941,720)    $    (654,998)
                                                                                ============     =============
                      Total Assets:
                        Pride Management Services Plc                            $35,686,989       $27,680,689
                        AC Car Group Limited                                       4,613,596         6,008,893
                                                                               -------------    --------------
                                                                                 $40,300,585       $33,689,582
                      Depreciation and Amortization:
                        Pride Management Services Plc                           $  4,155,846      $  2,929,977
                        AC Car Group Limited                                         422,996             -
                                                                              ----------------------------
                                                                                $  4,578,842       $ 2,929,977
                                                                                ============       ===========
                      Capital Expenditures:
                        Pride Management Services Plc                            $15,298,608       $ 8,002,360
                        AC Car Group Limited                                       1,196,116         1,856,364
                                                                               -------------     -------------
                                                                                 $16,494,724      $  9,858,724
                                                                                 ===========      ============

</TABLE>

                                     F - 19


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1997 AND 1996


NOTE 18 - SUBSEQUENT EVENTS:

      (a)      In  January  1998,  the  Company  filed  a  Form  SB-2  with  the
               Securities and Exchange  Commission,  registering for the sale of
               1,000,000 shares of common stock. The estimated net proceeds from
               this offering is expected to be $4,100,000.  The Company  intends
               to use these proceeds to repay existing debt.


      (b)      In February  1998,  AC  Automotive  issued  additional  shares to
               certain  individuals and an entity  affiliated with the Company's
               President  for  aggregate  cash of $7,076,  thereby  diluting the
               Company's  ownership in this  subsidiary  to 20%.  The  following
               condensed  pro-forma balance sheet assumes this dilution occurred
               as of November 30, 1997:
<TABLE>
<CAPTION>
<S>                                                                           <C>           
                      Assets:
                          Cash                                                $       76,516
                          Accounts receivable - net                                4,200,035
                          Inventory                                                  132,369
                          Fixed assets - net                                      24,489,646
                          Intangible assets - net                                  9,074,865
                          Investment in affiliate                                  1,800,000
                                                                               -------------
                                                                                 $39,773,431

                      Liabilities and Shareholder's Equity:
                          Bank line of credit                                   $  5,297,687
                          Accounts payable and accrued expenses                    2,022,057
                          Bank debt                                                  695,782
                          Obligations under hire purchase contracts               18,341,778
                          Loans payable                                            1,738,703
                          Shareholders' equity                                    11,677,424
                                                                                ------------
                                                                                 $39,773,431
</TABLE>


               The  following  pro forma  statement  of  operations  assumes the
               disposition  occurred at the beginning of the year ended November
               30, 1997:

                          Revenue                              $16,249,338
                          Expenses                              17,079,394
                          Net loss                                (830,056)
                          Loss per share                              (.30)

               The pro-forma financial information is not necessarily indicative
               of the  results  that  would  have  occurred  had  this  dilution
               occurred as of the dates indicated above nor are they necessarily
               indicative of future operating results.

                                     F - 20