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, 1996

                                       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 12, 1997 (consisting
of  Common  Stock,  $.001  par  value  per  share)  held by  non-affiliates  was
approximately  $2,443,632.80,  based upon the average  bid and asked  prices for
such Common  Stock on said date  ($1.89),  as reported  by a market  maker.  The
issuer's  and  its  subsidiaries  had  on  a  consolidated  basis,  revenues  of
$12,884,018  for its fiscal year ended  November 30, 1996. On February 18, 1997,
there were 2,792,500 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 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, the Company  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 1995.

     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 950,000  shares of its common stock to
the public at a price of $5.00 per share and 2,000,000  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  underwriter  of the offering a warrant to purchase  95,000 shares of the
Company's  common  stock at a  purchase  price of $5.00 and  200,000  redeemable
common stock purchase warrants,  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 Stock Exchange, Inc.

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, Autokraft and AC Cars manufacture and sell two
automobiles, 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 ($115,782).

         In 1986,  the AC Ace  prototype was first  displayed at the  Birmingham
Motor show.  The AC Ace was shown at the London Motor Show in the same year.  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)66,000 ($110,748). As of February 19, 1997, AC has produced approximately
fifty  pre-production  AC Aces.  The AC Ace should go into its final  production
stage in August 1997.

                                                              2

<PAGE>
         Also 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 licensing agreement with Ford Motor Company whereby the Company has
procured a three year license,  commencing  December 7, 1996, to continue to use
the name "Cobra" on its AC Cobra model.

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 licensing  arrangement  with the Ford Motor  Company  whereby the
Company has procured a three year license to use the name "Cobra".

         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,  Thailand,  Germany and the United
Kingdom. The Company is in the process of negotiating

                                                              3

<PAGE>



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.  Although the Thailand distribution agreement became void
when AC Cars and  Autokraft  were  placed  in  receivership,  management  of the
Company  received  verbal  confirmation  that  the  Thailand  agreement  will be
continued upon consummation of the Asset Acquisitions.

         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.

Insurance

         The Company and AC are in the process of purchasing  products liability
insurance.  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.

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 has agreed to lease the premises  currently occupied by AC for
a period of one year  commencing  December  1, 1996.  The  Company  lease  costs
approximately  (pound)32,000  ($53,696) per month.  AC has an option to purchase
the premises for the purchase price of (pound)5,200,000  ($8,725,600) during the
nine month period commencing December 1, 1996 and ending August 1, 1997.


                                                              4

<PAGE>



Employees

         Autokraft  and AC Cars  together  employed  a total of 83 persons as of
March 7, 1996,  the date the two  companies  were  placed in  receivership.  The
Company retained approximately 31 of such employees upon completion of the Asset
Acquisition and has hired four additional employees to oversee the manufacturing
and marketing of the automobiles.

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.

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

                                                              5

<PAGE>



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  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.



                                                              6

<PAGE>



Subsidiaries

         The following table lists all the wholly owned subsidiaries of PMS, the
date of their formation and business operations.  These companies operate as one
unit in conducting the business affairs of the Company.

<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
          (UK) Limited                                                 Hire Limited and Master Vehicle Contracts Limited in
                                                                       February 1992 and March 1994, respectively.

         Pride  Leasing  Limited             02/22/89                  Owns property and a building in Croydon,
                                                                       England, which is leased to an unaffiliated company.

         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
          Limited                                                      all the 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 February 25,
1997, the Company had approximately 1,420 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 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.



                                                              7

<PAGE>



         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, 1995 and 1996, the Company
had two  unaffiliated  customers,  Westbury  Homes Plc. and Campbell  Distillers
Limited,  which companies  accounted for in the aggregate  approximately 18% and
17%,  respectively,  of the Company's total revenues. For the three month period
ended February 29, 1995 and the two month period January 31, 1996, revenues from
these two unaffiliated customers aggregated 18% and 12%, respectively,  of 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 milage  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  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

                                                              8

<PAGE>



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, 1996 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 year
ended  November 30, 1996 and two months ended January 31, 1997,  General  Motors
and  Renault  were  the   manufacturers  of   approximately   16.2%  and  16.2%,
respectively and 11.7% and 11.7%, 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
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

                                                              9

<PAGE>



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 used $1,000,000 of the proceeds from its Public Offering to
purchase vehicles pursuant to customer orders. The automobiles purchased will be
subsequently  utilized  as a group as  security  for bank loans  obtained by the
Company.  The principal  amount of such loans will  typically be equal to 90% of
the  value  of the  vehicles  used as  security.  For  example,  if the  Company
purchases separately 10 automobiles during a month, pursuant to customer orders,
at an aggregate  purchase  price of $200,000,  the Company would seek a loan for
$180,000,  with the 10 vehicles being used as security for the loan. The Company
believes  that by  obtaining  loans  on  groups  of  vehicles  instead  of on an
individual  basis it will be able to obtain better  financing  terms and reduced
financing costs,  based on (i) the security for each loan is a group of vehicles
instead on one individual  vehicle and (ii) there being less  administrative and
closing costs incurred by the Company  because there are fewer loans to process.
This  process will be cyclical  for the  Company,  whereby,  the proceeds of the
loans will be used to purchase additional vehicles, pursuant to customer orders,
which vehicles will in turn be financed in groups.

         The  Company  has asset  funding  lines to  acquire  revenue  producing
vehicles  with  several  institutions  in  England  in the  aggregate  amount of
$18,200,000  of which the Company has borrowed  approximately  $11,000,000 as of
January  31,  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

                                                             10

<PAGE>



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.

         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 and there have been none to date in 1997.  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 city 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 February 25, 1997, the Company had 1,420
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

                                                             11

<PAGE>



competes  for  business on the basis of both  pricing and  service.  The Company
believes that the main 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.



                                                             12

<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 will allow the Company to charge  lower
lease rates.

Employees

         As of January 31,  1997,  the Company  employed 50  full-time  persons,
eight are in management  (three of which are officers),  eleven  administrative,
three  sales  representative  and  two  drivers.   None  of  the  employees  are
represented by a union, and the Company considers employee relations to be good.


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  owns a  building  in  Croydon,
England, which it purchased in 1991 at a cost of approximately  $825,000,  which
it currently leases to an unaffiliated  company. The lease term expires in 2004,
and generates gross income of  approximately  $80,000 per annum. The annual cost
of  servicing  that  building's  mortgage  and taxes is estimated at $70,000 per
annum.

         AC currently  occupies  premises on a four acre sight 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

                                                             13

<PAGE>



office area. The Company has agreed to lease the premises  currently occupied by
AC for a period of one year commencing December 1, 1996. The Company lease costs
approximately  (pound)32,000  ($53,696) per month.  AC has an option to purchase
the premises for the purchase price of (pound)5,200,000  ($8,725,600) during the
nine month period commencing December 1, 1996 and ending August 1, 1997.

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.

         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.

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, 1996.


                                                           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

<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
9/1/95  to 11/30/96                 5       6 7/8             1 1/8    1 1/2
12/1/96  to 2/1/96                  1 3/4   4 11/16           5/16     1 1/2
----------------------
</TABLE>

         As of February 21, 1997, the number of registered  holders of record of
the Common  Stock,  $.001 par value,  of the  Company was  approximately  26, as
determined by the Company's stockholder records,

                                                             14

<PAGE>



and does not include beneficial owners at the Common Stock whose shares are held
in names of various security holders, dealers and clearing agencies. The Company
believes there are in excess of 400 beneficial holders of the Common Stock.

         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.


ITEM 6.           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, 1996 and 1995.

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. The consolidated financial
statements  are based on the  assumption  that the Company and PMS were combined
for all  periods  presented,  in a manner  similar to the  pooling of  interests
method of accounting.  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  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.

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.


<PAGE>



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 has been recorded using the purchase  method of
accounting.

Results of Operations - Years Ended November 30, 1996 and November 30, 1995:

Revenues  for the year ended  November 30, 1996 were  approximately  $12,884,000
compared to  approximately  $9,723,000  for the year ended November 30, 1995, an
increase of  $3,161,000  or 32.5%.  The primary  reason for this increase was an
increase in revenues from contract hire income and from the sales of vehicles at
lease maturity,  and an overall  increase in the contract hire fleet size. There
was also an increase in the fleet management division.

The Company's cost of sales increased both in actual dollars and as a percent of
sales,  when comparing the years ended  November 30, 1996 and 1995.  These costs
increased by approximately  $2,945,000 or 40.3%. As a percent of sales, costs of
sales for 1996 were 79.5% versus 75.1% for 1995.  Management  believes  that the
increase  was   primarily   due  to  the   continuation   of  the  more  prudent
(conservative)  approach to estimating the residual  values of vehicles  thereby
increasing  depreciation  expense and costs of sales and reducing residual value
risk.  This more  conservative  approach  reduces the residual  value of an auto
thereby increasing the amount of the auto to be depreciated.  This approach will
therefore increase depreciation expense, which costs will reduce the income from
contract  leasing.  Since the residual  value is now lower,  the income from the
ultimate sale of the vehicle is now higher.

General  and  administrative  expenses  decreased  from  $2,036,000  for 1995 to
$1,802,000 for 1996 a decrease of $234,000 or 11.5%. As a percent of sales these
expenses  represented  14.0% of sales for 1996 and  20.9%  for 1995.  Management
believes  that the  decrease in overhead  costs  relate to an  aggressive  costs
reduction program instituted by management during 1996 and 1995.

Interest  expense  increased  when comparing the year ended November 30, 1996 to
1995 from  $630,000 to  $860,000,  an increase of $230,000 or 36.5%.  Management
attributes  this  increase to a higher  volume of  borrowings  on hire  purchase
contracts.   The  Company  is  continuously  negotiating  with  various  banking
institutions  to obtain credit  lines,  all of which are secured by the vehicles
purchased.

(Loss)  before taxes for the years ended  November  30, 1996 and 1995,  prior to
amortization  of goodwill for the period  ($635,000 and $631,000,  respectively)
aggregated $20,000 and $239,000, respectively. This decrease in the net loss was
primarily due to the increased  revenues as described  above. For the year ended
November  30,  1996,  the  Company  reflected a net loss of $654,998 or $.27 per
share.  For the year ended November 30, 1995, the Company reported a net loss of
$870,145 or $.42 per share.


<PAGE>



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, 1996 and 1995,  the  Company's
balance  sheet  reflected  cash of $251,000 and $3,000,  respectively,  accounts
receivable  of  $2,022,000  and  $1,241,000,  respectively,  and total assets of
$33,690,000  and  $21,600,000,  respectively.  The  principal  reasons  for  the
increase in total assets are the  acquisition  described  above,  an increase in
contract higher vehicles available for lease and the proceeds from the Company's
initial public offering.

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 $2,166,000.

The Company's  total assets as of November 30, 1996 and 1995 include  intangible
assets of $11,700,000 and $10,300,000,  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, 1996 and 1995 would be  approximately  $700,000 and
$1,150,000, respectively.

The Company had reflected  convertible debt of $562,292 as of November 30, 1994.
These loans were to bear interest of 6% and were  repayable  five years from the
date of issue. The original debt,  which was not convertible,  arose at the time
PMS  acquired  one of its  subsidiaries  in  1992.  The  Company  acquired  this
subsidiary for $1 and assumed approximately $11,500,000 of net liabilities.  The
acquisition  resulted in goodwill of  approximately  $11,500,000.  The  ultimate
holder of the debt in 1994,  was given the option of converting  such loans into
shares of Pride,  Inc.'s (the Company's  parent) common stock at the end of such
period based upon their  guarantee  of the ultimate  sales values of the related
revenue producing vehicles.  This debtholder was the controlling  shareholder of
the Company's parent at the time of this transaction.

During the year  ended  November  30,  1995,  the  Company  determined  with the
agreement of the  debtholder,  that the estimated  ultimate  sales values of the
vehicles  were less  than  expected  and it was  agreed  that the debt  would be
written off against the debtholder guarantee. The balance of the debt, $562,292,
was  therefore  treated as an early  extinguishment  of debt. At the time of the
extinguishment,  the debt outstanding was owed to a related party. In accordance
with APB No. 26, extinguishment  transactions between related entities should be
treated as capital transactions. Accordingly, the gain on the extinguishment was
added to additional paid-in capital.




<PAGE>


During the year ended November 30, 1995,  the Company  generated cash flows from
operating aggregating approximately  $1,752,000.  During the year ended November
30,  1996,  the Company  utilized  $234,000 of cash flows from  operations.  The
utilization  of  cash  in  1996  was  primarily  due  to  currency   translation
adjustments.

Investing  activities reflect uses of cash for the years ended November 30, 1996
and 1995 of $8,759,000 and $2,526,000,  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  $18,200,000 at November 30, 1996. At November 30, 1996,
there was approximately  $11,000,000  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.

For the year ended November 30, 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).
For fiscal 1995, the Company provided cash for financing  activities  ($759,000)
primarily  due to financing  provided by bank lines of credit plus the increases
in financing of new vehicles  ($3,262,000)  net of the amounts  needed to reduce
hire purchase contract financing ($3,496,000).

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.


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.




                                                             15

<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

<S>                                                  <C>               <C>
         Alan Lubinsky                               38                President, Secretary and
                                                                       Chairman of the Board

         Peter Dixon                                 52                Vice President, Treasurer
                                                                       and Director

         Ivan Averbuch                               41                Chief Financial Officer and 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 18 years experience in the
motor vehicle industry in positions of executive management.

     Peter Dixon Mr. Dixon has been the Vice President, Treasurer and a director
of the Company  since its  inception in March 1995.  Mr. Dixon has been the Vice
President,  Treasurer and a director of Pride,  Inc. since January 14, 1994. Mr.
Dixon has experience in corporate finance, investment banking, and manufacturing
industries.  From  April  1990 to  present,  Mr.  Dixon has been a  director  of
Kingsland  Community  Services  Limited,  and  Kingsland  Developments  Limited,
companies  which own and lease  properties.  From February 1990 to present,  Mr.
Dixon has been a director of Snuggledown of Norway (UK) Limited,  a distribution
of camping  goods.  His executive  positions  have  included  being the managing
director  of the  securities  division  of Den Norske Bank from 1986 to 1990 and
Chairman of several  subsidiaries  at Berisford  International  Plc from 1977 to
1986 and from December 1990 to August 1992. From August 1994 to August 1995, Mr.
Dixon  was a  director  of Welpac  Plc,  a company  which was a  distributor  of
hardware.

     Ivan  Averbuch Mr.  Averbuch  has been a director  and the Chief  Financial
Officer of the Company  since  December  1995.  Mr.  Averbuch has been the Chief
Financial Officer of the of Pride, Inc. since December 1995. From September 1987
to November 1995, Mr. Averbuch was employed at Kessel

                                                             16

<PAGE>



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.

         The directors of the Company are elected  annually by the  shareholders
and hold office until the next annual  meeting of  shareholders,  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  shareholders  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 shareholder 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 1996 fiscal year.  The Company has no basis
to  believe  that  any  other  required  filing  by any of the  above  indicated
individuals has not been made.



                                                             17

<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,  1996,  1995 and 1994.  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          Options/
   Position (1)                     Year             Salary($)           Bonus($)       Compensation($)(2)    SARS
------------------------            ----             ---------           ------         ------------------    ------

Alan Lubinsky
<S>                                 <C>               <C>                <C>            <C>                   <C>       
  President, Secretary              1996              $160,000           -              $30,000               100,000(3)
  and Chairman of the Board         1995              $137,750           -               30,000               -
                                    1994              $135,000           -               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 1996, 1995 and 1994, 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.




                                                             18

<PAGE>



Stock Options

         The following table sets forth certain information concerning the grant
of stock  options  made  during  the year ended  November  30,  1996,  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                      100,000             100%                $5.50               8/01/08
</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".



                                                             19

<PAGE>



         The following table contains  information  with respect to employees of
the Company concerning options held as of November 30, 1996
<TABLE>
<CAPTION>

               AGGREGATED OPTION/SAR EXERCISE 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                 33,333/66,667                  0
</TABLE>


     (1) As of February 20, 1997, the average of the prior day's closing bid and
ask price was $2.63.  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.

                                                             20

<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

                                                             21

<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."

         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.

         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

                                                             22

<PAGE>



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.

         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

                                                             23

<PAGE>



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".

          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.

                                                             24

<PAGE>




         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.



                                                             25

<PAGE>



ITEM 11.          PRINCIPAL STOCKHOLDERS

         The following  table sets forth certain  information  at February 1997,
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                        53.7%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England

Alan Lubinsky (1)                                             1,600,000                        54.3%
c/o Pride House
Watford Metro Centre
Tolpits Lane
Watford Hertordshire
WD1 8SB England

Peter Dixon                                                   -                                *
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

All officers and
Directors as a group
 (4 persons) (1)(2)(3)                                      1,600,000                          54.3%

</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

                                                             26

<PAGE>



     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."


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.

         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 as of February  29, 1996.  The
principal amount of the loan,  including accrued interest thereon,  will be paid
from the proceeds of this Offering. "Use of Proceeds."

         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.


                                                             27

<PAGE>



         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 $5.00 and  200,000  redeemable  common  stock  purchase
warrants,  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 Car Group
Limited, purchased all the assets of AC Cars Limited and Autokraft Limited.

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


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

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

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-7

                  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.
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>




                                                             29

<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 26th day of February, 1997.


                          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                            2/26/97
ALAN LUBINSKY                       of the Board of Directors (Principal                         Date
                                    Executive Officer)


/s/ Ivan Averbuch                   Chief Financial Officer                                      2/26/97
IVAN AVERBUCH                                                                                    Date



/s/ Peter Dixon                     Vice-President, Treasurer and                                 2/26/97
PETER DIXON                         Director (Principal Financial Officer)                        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, 1996 and 1995                                                  F - 3
    Consolidated Statements of Operations for the Years Ended November 30, 1996 and 1995                          F - 4

    Consolidated Statement of Changes in Shareholders' Equity for the Two Years in the
    Period Ended November 30, 1996                                                                                F - 5

    Consolidated Statements of Cash Flows for the Years Ended November 30, 1996 and 1995                          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, 1996 and 1995 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,  1996.  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, 1996 and 1995 and the results of their operations
for the two years in the period  ended  November  30,  1996 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.





MARBLE ARCH HOUSE
66-68 SEYMOUR STREET
LONDON W1H 5AF                                         CIVVALS
UNITED KINGDOM                FEBRUARY 14, 1997        CHARTERED ACCOUNTANTS




                                                         F - 2


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

                              - ASSETS (Note 6(a) -
<TABLE>
<CAPTION>
                                                                                                 November 30,
                                                                                                 1996           1995
                                                                                                 -------------  -----------

ASSETS:
<S>                                                                                              <C>            <C>            
  Cash and cash equivalents                                                                      $     250,699  $         3,377
  Accounts receivable (Notes 2c and 3)                                                               2,022,011        1,241,167
  Inventories (Note 2d)                                                                              1,022,655           31,137
  Property, revenue producing vehicles and equipment - net (Notes 2e, 4, 6 and 7)                   18,681,638        9,924,318
  Intangible assets - net (Note 2f)                                                                 11,712,578       10,340,396
  Deferred offering costs                                                                              -                 59,940
                                                                                          --------------------  ---------------
TOTAL ASSETS                                                                                       $33,689,581      $21,600,335
                                                                                                   ===========      ===========

                    - LIABILITIES AND SHAREHOLDERS' EQUITY -

LIABILITIES:
  Bank line of credit (Note 6a)                                                                  $   2,964,465     $  1,093,680
  Accounts payable                                                                                     624,953        1,291,368
  Accrued liabilities and expenses (Note 5)                                                            490,915          358,892
  Bank debt (Note 6b)                                                                                1,002,571        1,070,492
  Obligations under hire purchase contracts (Note 7)                                                11,034,951        5,578,565
  Loans payable - directors (Note 9)                                                                   -                123,668
  Other liabilities (Note 8)                                                                            33,560          532,804
  Acquisition debt payable (Note 10)                                                                 5,098,470             -
                                                                                                 ---------------------------
TOTAL LIABILITIES                                                                                   21,249,885       10,049,469
                                                                                                  ------------     ------------

MINORITY INTEREST IN SUBSIDIARY (Note 18)                                                               -                  -
                                                                                          ----------------------------------

COMMITMENTS AND CONTINGENCIES (Notes 14 and 17)

SHAREHOLDERS' EQUITY (Notes 11, 12 and 19):
  Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued
    or outstanding                                                                                     -                -
  Common stock, $.001 par value, 10,000,000 shares authorized 2,652,500
    and 1,560,000 shares issued and outstanding in 1996 and 1995, respectively                           2,653            1,560
  Additional paid-in capital                                                                        14,026,758       11,741,922
  Retained earnings (deficit)                                                                       (1,456,963)        (801,965)
  Foreign currency translation (Note 2h)                                                              (132,752)         609,349
                                                                                                --------------   --------------

TOTAL SHAREHOLDERS' EQUITY                                                                          12,439,696       11,550,866
                                                                                                 -------------     ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                         $33,689,581      $21,600,335
                                                                                                   ===========      ===========
</TABLE>

                 See notes to consolidated financial statements.

                                      F - 3


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

                                                                                                  November 30,
                                                                                                  1996             1995
                                                                                                  ---------        -----------

REVENUES (Notes 2i and 14):
<S>                                                                                                <C>             <C>         
  Contract hire income                                                                             $ 6,286,677     $  4,723,539
  Sale of vehicles                                                                                   5,839,080        4,629,860
  Fleet management and other income                                                                    758,261          369,657
                                                                                                --------------   --------------

TOTAL REVENUE                                                                                       12,884,018        9,723,056
                                                                                                 -------------    -------------

COSTS AND EXPENSES:
  Cost of sales                                                                                     10,241,850        7,297,331
  General and administrative expenses                                                                1,802,111        2,035,529
  Amortization of goodwill                                                                             634,813          630,718
  Interest and other                                                                                   860,242          629,623
                                                                                                --------------   --------------

                                                                                                    13,539,016       10,593,201

(LOSS) BEFORE PROVISION FOR INCOME TAXES                                                              (654,998)        (870,145)

  Provision for income taxes (Notes 2g and 13)                                                         -                   -


NET (LOSS)                                                                                       $    (654,998)   $    (870,145)
                                                                                                 =============    =============

(LOSS) PER COMMON SHARE (Note 2j)                                                                   $(.27)            $(.42)
                                                                                                    =====             =====

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
  EQUIVALENT SHARES OUTSTANDING (Note 2j)                                                          2,405,760        2,060,000
</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>


                                       Shares                        Additional     Retained         Foreign        Total
                                       (As Restated      Common      Paid-in        Earnings         Currency       Shareholders'
                                       - See Note 1)     Stock       Capital        (Deficit)        Translation    Equity
                                       

<S>                                    <C>               <C>         <C>            <C>              <C>            <C>        
Balance at December 1, 1994            1,500,000         $1,500      $11,119,690    $   68,180       $ 407,768      $11,597,138

Compensatory stock (Note 11)              60,000             60           59,940        -              -                 60,000

Early extinguishment of debt
with related party (Note 16)             -               -               562,292        -             -                 562,292

Foreign currency translation
adjustment                               -               -               -              -              201,581          201,581

Net loss for the year ended
November 30, 1995                       -               -                  -          (870,145)      -                 (870,145)


Balance at November 30, 1995           1,560,000          1,560       11,741,922      (801,965)        609,349       11,550,866

Private offering of common stock
(Note 11)                                500,000            500          119,500       -               -                120,000

Shares and warrants sold in
initial public offering (Note 11)        592,500            593        2,165,336       -               -              2,165,929

Foreign currency translation
adjustment                               -              -                  -                 -        (742,101)        (742,101)

Net loss for the year ended
November 30, 1996                        -              -                  -           (654,998)         -             (654,998)

BALANCE AT
NOVEMBER 30, 1996                      2,652,500         $2,653      $14,026,758   $(1,456,963)      $(132,752)     $12,439,696
                                       =========         ======      ===========   ===========       =========      ===========
</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,
                                                                                                 1996             1995
                                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                              <C>              <C>           
  Net (loss)                                                                                     $    (654,998)   $    (870,145)
  Adjustments to reconcile net (loss) to net cash (utilized) provided by
     operating activities:
         Depreciation and amortization                                                               2,354,942        1,852,825
         Amortization of goodwill                                                                      594,735          630,718
         Extinguishment of debt with related party                                                     -                562,292
         (Gain) loss on disposal of fixed assets                                                      (119,030)         229,563
         Compensatory stock                                                                            -                     60
         Provision for maintenance costs                                                               (18,524)        (176,302)
         Foreign currency translation                                                                 (742,101)         201,581
  Changes in assets and liabilities:
     (Increase) in accounts receivable                                                                (599,753)        (236,681)
     (Increase) decrease in inventories                                                                (93,794)         111,382
     (Decrease) increase in accounts payable, accrued expenses and bank overdraft                     (955,172)        (553,388)
                                                                                                --------------    -------------
     Net cash (utilized) provided from operating activities                                           (233,695)       1,751,905
                                                                                                --------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets                                                                       (9,858,724)      (3,433,132)
     Acquisition of assets in new subsidiary                                                          (969,279)         -
     Proceeds from sale of fixed assets                                                              2,068,601          906,727
                                                                                                --------------   --------------
     Net cash (utilized) by investing activities                                                    (8,759,402)      (2,526,405)
                                                                                                 -------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Bank lines of credit                                                                            1,870,785        1,093,680
     Funds received from sale of common stock                                                        2,285,929          -
     Loans received from officers                                                                      -                232,500
     Loans repaid to officers                                                                         (304,759)        (108,832)
     Loans repaid to affiliate                                                                         -               (132,147)
     Principal payments of long term debt                                                              (67,921)         (92,375)
     Proceeds from hire purchase contract funding                                                   11,530,175        3,262,390
     Principal repayments of hire purchase contract funding                                         (6,073,790)      (3,495,819)
                                                                                                 -------------    -------------
     Net cash provided from financing activities                                                     9,240,419          759,397
                                                                                                 -------------  ---------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                   247,322          (15,103)

  Cash and cash equivalents, beginning of year                                                           3,377           18,480
                                                                                              ----------------   --------------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                           $     250,699   $        3,377
                                                                                                 =============   ==============
</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, 1996 AND 1995


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.  The
               accompanying  consolidated  financial statements are based on the
               assumption that the Company and PMS were combined for all periods
               presented, in a manner similar to the pooling of interests method
               of accounting.

               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), completed the acquisition of certain assets (see
               Note 10) 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 is
               being  financed  with the  proceeds of a private  offering of the
               Company's  common  stock,   (see  Note  19)  and  by  loans.  The
               acquisition  has been  recorded  using  the  purchase  method  of
               accounting. (See also Notes 2f and 10).

               The following  unaudited  pro-forma  results of operations assume
               the acquisition occurred as of March 1, 1996 (amounts in millions
               except per share data):
<TABLE>
<CAPTION>

<S>                                                                                    <C>  
                               Revenues                                                $14.2
                               Net loss                                                 (1.8)
                               Earnings per common share                               $(.75)
</TABLE>

               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.

                                                         F - 7


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


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 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.

      (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, 1996 AND 1995


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, 1996 and 1995  inventories  consisted  of the
following:
<TABLE>
<CAPTION>

                                                                                    1996                1995
                                                                               -------------          ------

<S>                                                                              <C>                   <C>    
                               Cars held for resale                              $   124,932           $31,137
                               Finished goods                                         75,510           -
                               Work-in-progress                                      684,305           -
                               Spare parts                                           137,908           -

                                                                                  $1,022,655           $31,137
                                                                                  ==========           =======
</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, 1996 AND 1995


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,
               1996 and 1995 aggregated $2,990,626 and $2,355,813, respectively.

               In November 1996, the Company  acquired  certain of the assets of
               AC Cars Limited and  Autokraft  Limited  (see Note 1 above).  The
               purchase  price  exceeded  the  tangible  net assets  acquired by
               $2,006,995.  This  amount  was  assigned  to the  brand  name and
               various  contracts  with  suppliers  and  customers  and is to be
               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 13 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, 1996 AND 1995


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.

      (j)      Earnings Per Share:

               Earnings per share are computed  based upon the weighted  average
               shares  and  common  equivalent  shares  outstanding.  The shares
               issued in connection  with the  reorganization  (see Note 1), the
               shares issued in lieu of compensation  for legal services and the
               shares sold during the year ended  November 30, 1996 in a private
               offering (see Note 11), 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.

      (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.

      (l)      Lease Agreements:

               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, 1997                                $  5,103,977
                               November 30, 1998                                   4,390,779
                               November 30, 1999                                   2,634,819
                               November 30, 2000                                   1,007,729
                                                                               -------------
               Total minimum lease payments receivable
               net of executory costs                                            $13,137,304
</TABLE>



      (m)      Accounting Changes:

               As   permitted   by  SFAS   123,   Accounting   for   Stock-Based
               Compensation,  which  becomes  effective  for the  Company  as of
               December  1,  1996,  and  which  encourages  companies  to record
               expense  for  stock  options  and  other   stock-based   employee
               compensation  awards  based on their fair value at date of grant,
               the Company will continue to apply its current  accounting policy
               under Accounting Principles Board Opinion No. 25 and will include
               the   necessary   disclosures   in  its  fiscal  1997   financial
               statements.

                                                         F - 11


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


NOTE 3 - ACCOUNTS RECEIVABLE:

               Accounts receivable consist of the following:
<TABLE>
<CAPTION>

                                                                                  1996                1995
                                                                              --------------    ----------

<S>                                                                               <C>              <C>        
                               Trade receivables                                  $1,192,949       $   955,437
                               Lease maintenance receivables                         330,902            69,182
                               Value added tax                                       102,114            97,707
                               Due from related companies                             95,125           -
                               Other                                                 300,921           118,841
                                                                                ------------      ------------
                                                                                  $2,022,011        $1,241,167
</TABLE>


     Included in the above trade receivables is $59,002 due on a long term basis
as of November 30, 1996.

     Based upon past  experience,  the Company has deemed that no allowance  for
uncollectible accounts receivable is necessary.


NOTE 4 - FIXED ASSETS AND DEPRECIATION:

               Fixed assets consist of the following:
<TABLE>
<CAPTION>

                                                                                  1996                1995
                                                                            ----------------   -----------

<S>                                                                             <C>               <C>         
                      Buildings and improvements                                $  1,719,415      $  1,719,415
                      Revenue producing vehicles                                  17,282,095        11,989,192
                      Furniture, fixtures, plant and equipment                     2,247,430           519,753
                      Aircraft                                                     1,331,493              -
                                                                               ----------------------------
                                                                                  22,580,433        14,228,360

                      Less: accumulated depreciation (including
                            $3,388,495 and $3,853,753 of accumulated
                            depreciation on revenue producing vehicles,
                            for 1996 and 1995, respectively)                       3,898,795         4,304,042
                                                                               -------------     -------------
                                                                                 $18,681,638      $  9,924,318
                                                                                 ===========      ============
</TABLE>


               Depreciation  expense for the years ended  November  30, 1996 and
               1995 aggregated $2,295,164 and $2,415,117, respectively.

               One of the buildings  owned by Pride  Management is not currently
               being  utilized by the Company.  This building is being leased to
               an unrelated party at an annual rent of approximately $80,000 per
               annum.

                                                         F - 12


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


NOTE 5 - ACCRUED LIABILITIES AND EXPENSES:

               Accrued liabilities and expenses consist of the following:
<TABLE>
<CAPTION>

                                                                                     1996             1995
                                                                                 -----------       -------

<S>                                                                                 <C>               <C>     
                      Taxes other than income taxes                                 $418,082          $333,586
                      Miscellaneous accrued expenses                                  72,833            25,306
                                                                                  ----------        ----------
                                                                                    $490,915          $358,892
                                                                                    ========          ========

</TABLE>

NOTE   6   -          BANK LOANS/LINE OF CREDIT:

      (a)      The  Company  has a  $2,684,800  line of credit with a bank at an
               interest rate of 3% in excess of the base rate (6% as of November
               30,  1996).  This  line of  credit is  payable  on demand  and is
               secured by all assets of the Company other than revenue producing
               vehicles and  buildings  which are already  pledged (see Notes 6b
               and 7). As of November 30, 1996, the bank had granted a temporary
               increase to $2,965,000 at similar terms.

      (b)      At November 30, 1996,  bank loans  consisted of $1,002,571 due to
               two banks at rates of 3% and 5% in excess of the banks' base rate
               (6% as of  November  30,  1996).  These  loans are secured by the
               freehold properties (buildings) owned by Pride Management and its
               subsidiaries, and mature in 2001 and 2017.

               The scheduled principal payments of this bank debt as of November
30, 1996 are as follows:

                      For the Year Ended November 30,

                               1997                     $   98,890
                               1998                         98,890
                               1999                         98,890
                               2000                         98,890
                               2001                         98,890
                               Thereafter                  508,121
                                                       -----------
                                                        $1,002,571


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
               $18,200,000  as of November 30,  1996.  These  funding  lines are
               utilized to acquire revenue  producing  vehicles,  which vehicles
               collateralize the outstanding obligations.


                                                         F - 13


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


NOTE 7 - HIRE PURCHASE CONTRACTS/EQUIPMENT FINANCING (Continued):

               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,  1996,  obligations  under  hire  purchase  contracts  are as
               follows:

               For the Year Ended November 30,

                      1997                            $  4,951,662
                      1998                               3,977,882
                      1999                               1,878,445
                      2000                                 226,962
                                                    --------------
                                                       $11,034,951

               The annual interest rates on these  obligations  range from 7.25%
to 15.6%.


NOTE 8 - OTHER LIABILITIES:

               At November  30,  1996 and 1995 other  liabilities  consisted  of
               $33,560 and  $532,804,  respectively  due to other  creditors  at
               interest  rates   approximating  the  current  market  rates  and
               repayable on a demand basis.


NOTE 9 - RELATED PARTY TRANSACTIONS:

               At November 30, 1995,  the Company was indebted to its  President
               in the aggregate  amount of $123,668.  These unsecured loans were
               repayable  on demand at an  interest  rate of 2 1/2% in excess of
               the  base  lending  rate  (6.75%  at  November  30,  1995) of the
               Company's  bank.  The  loan was  repaid  during  the  year  ended
               November 30, 1996.


NOTE 10 - ACQUISITION DEBT PAYABLE:

     As of November 30, 1996, acquisition debt payable (see Note 1) consisted of
the following:

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

     Notes  payable in 18 monthly  installments  of $46,611 plus  interest at 2%
above the base rate 839,000

     Other  short-term  notes  payable  (see  Note  19)  2,581,470   -----------
$5,098,470 
<PAGE>

                 PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


NOTE   11 -           COMMON STOCK/RECAPITALIZATION:

               In March 1995,  the  Company  issued  1,500,000  shares of common
               stock in connection with a reorganization (see Note 1).

               In March 1995,  the Company  issued 60,000 shares of common stock
               in lieu of compensation for legal services rendered.

               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.

               In addition, the Company entered into a consulting agreement with
               one of the Under- writers 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.


NOTE 12 - 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.

               As of November  30,  1996,  the  Company  had granted  options to
               purchase  100,000  shares of common stock at an exercise price of
               $5.50  per  share,  none of which had been  exercised  as of that
               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.

               See also Note 2(m) re: Accounting Changes.


                                                         F - 15


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


NOTE 13 - INCOME TAXES:

               The  provisions  for United  Kingdom  income taxes  utilizing the
               requirements  of SFAS No 109  consisted of the  following for the
               years ended November 30, 1996 and 1995:
<TABLE>
<CAPTION>

                                                                                   1996               1995
                                                                              --------------     ---------

<S>                                                                                <C>              <C>       
                      Current tax expense                                          $ 763,350        $  860,000
                      Deferred tax expense                                           174,650           -
                      Investment tax credits on vehicles                            (938,000)         (860,000)
                                                                                   ---------        ----------
                                                                             $       -        $        -
                                                                             ===============  ==========
</TABLE>

               At November 30, 1996,  investment  tax credits being carried over
               to future periods aggregated approximately $11,904,000.

               The  components  of the deferred tax asset,  pursuant to SFAS No.
               109,  as of  November  30,  1996 and 1995,  respectively,  are as
               follows:
<TABLE>
<CAPTION>


                                                                                      1996              1995
                                                                                    --------         -------

<S>                                                                                 <C>               <C>     
                      Operating loss carryforward                                   $ 52,000          $ 23,000
                      Valuation allowance                                            (52,000)          (23,000)
                                                                                    --------         ---------
                                                                                    $    -           $     -
</TABLE>


               The Company has available operating losses  carryforwards for tax
               purposes  aggregating  approximately  $148,000 as of November 30,
               1996,  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.


NOTE 14 - ECONOMIC DEPENDENCY:

               For the years ended  November 30, 1996 and 1995,  the Company had
               two unaffiliated  customers,  which accounted for an aggregate of
               approximately 17% (1995 - 18%) and 12% (1995 - 15%) 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 - 16


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


NOTE 15 - 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, 1996 and 1995 amounted to $33,264 and $55,817,
               respectively.


NOTE 16 - CONVERTIBLE DEBT:

               The  Company  had  reflected  convertible  debt of $562,292 as of
               November  30, 1994.  These loans were to bear  interest at 6% and
               were repayable five years from date of issue.  The original debt,
               which was not convertible,  arose at the time PMS acquired one of
               its  subsidiaries  in 1992. The Company  acquired this subsidiary
               for $1 and assumed approximately  $11,500,000 of net liabilities.
               This   acquisition   resulted  in   goodwill   of   approximately
               $11,500,000.  The ultimate holder of the debt, in 1994, was given
               the option of  converting  such loans into shares of Pride Inc.'s
               (the  Company's  parent)  common stock at the end of such period,
               based upon their  guarantee of the  ultimate  sales values of the
               related  revenue  producing  vehicles.  The debt  holder  was the
               controlling  shareholder  of the Company's  parent at the time of
               this transaction.

               During the year ended November 30, 1995, the Company  determined,
               with  the  agreement  of the  debt  holder,  that  the  estimated
               ultimate sales values of the vehicles were less than expected and
               it was agreed that the debt would be written off against the debt
               holder's  guarantee.  The  balance  of the  debt,  $562,292,  was
               therefore treated as an early extinguishment of debt. At the time
               of  extinguishment,  the debt  outstanding  was owed to a related
               party. In accordance with APB No 26, extinguishment  transactions
               between   related   entities   should  be   treated   as  capital
               transactions.  Accordingly,  the gain on the  extinguishment  was
               added to additional paid-in capital.


NOTE 17 - COMMITMENTS:

      (a)      Leases:

               The Company has 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.  The  Company  has an
               option to purchase this facility at a cost of $8,700,000, through
               August 1997. This lease expires in December 1997.

      (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 12).



                                                         F - 17


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 1996 AND 1995


NOTE 17 - COMMITMENTS (Continued):

      (b)      Employment Agreements (continued):

               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
               and provides for an annual  salary of $55,000,  subject to review
               by the Board of Directors.

      (c)      Rental Income:

               The Company leases one of its owned facilities to an unaffiliated
               company.  The lease,  which expires in 2004,  provides for rental
               income of  approximately  $80,000  per annum.  The annual cost of
               servicing  the mortgage  and real estate  taxes on this  building
               approximates $70,000.


NOTE 18 - MINORITY INTEREST IN SUBSIDIARY:

               The Company owns 70% of AC Automotive  Group,  Inc. ("AC Group").
               As of  November  30,  1996,  losses  applicable  to the  minority
               shareholders  exceeded  their  interest  in AC  Group,  which was
               reduced to zero, and as such,  excess losses were charged against
               the operations of the Company.  Future  earnings  attributable to
               the minority interest in AC Group, if any, will first be credited
               to the operations of the Company,  to the extent that such excess
               losses were previously absorbed by the Company.


NOTE 19 - SUBSEQUENT EVENT:

               In December 1996, the Company completed a private placement of 14
               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 gross proceeds
               of $1,400,000 were used to satisfy a portion of the debt owed re:
               the acquisition of AC Car Group (see Notes 1 and 10).

               In December  1996, the Company also entered into a loan agreement
               with its bank  for  $755,000,  with  interest  payable  at 8% per
               annum,  secured  by a first  lien on the  aircraft  owned  by the
               Company as a result of the acquisition  described in Note 1. This
               loan  is to be  repaid  from  the  proceeds  of the  sale  of the
               aircraft.

                                                         F - 18


<PAGE>
                  PRIDE AUTOMOTIVE GROUP, INC. AND SUBSIDIARIES
                                   EXHIBIT 27
                             FINANCIAL DATA SCHEDULE
                          ARTICLE 5 OF REGULATIONS S-X



The  schedule  contains  summary  financial   information   extracted  from  the
consolidated  financial  statements  for the year ended November 30, 1996 and is
qualified in its entirety by reference to such statements.

<TABLE>
<CAPTION>
<S>                                                                                                    <C>    
   Period type                                                                                         12 Mos.
   Fiscal year end                                                                               Nov. 30, 1996
   Period start                                                                                  Dec. 01, 1995
   Period end                                                                                    Nov. 30, 1996
   Cash                                                                                                250,699
   Securities                                                                                           0
   Receivables                                                                                       2,022,011
   Allowances                                                                                           0
   Inventory                                                                                         1,022,655
   Current assets                                                                                       0
   PP&E                                                                                             22,580,433
   Depreciation                                                                                      3,898,795
   Total assets                                                                                     33,689,581
   Current liabilities                                                                                  0
   Bonds                                                                                                0
   Common                                                                                                2,653
   Preferred mandatory                                                                                  0
   Preferred                                                                                            0
   Other SE                                                                                        12,437,043
   Total liability and equity                                                                       33,689,581
   Sales                                                                                            12,884,018
   Total revenues                                                                                   12,884,018
   CGS                                                                                              10,241,850
   Total costs                                                                                      10,241,850
   Other expenses                                                                                       0
   Loss provision                                                                                       0
   Interest expense                                                                                    860,242
   Income pretax                                                                                      (654,998)
   Income tax                                                                                           0
   Income continuing                                                                                  (654,998)
   Discontinued                                                                                         0
   Extraordinary                                                                                        0
   Changes                                                                                              0
   Net income                                                                                         (654,998)
   EPS primary                                                                                            (.27)
   EPS diluted                                                                                            (.27)
</TABLE>



                                                   - Exhibit 27 -