1,825,000 SHARES
SMART CHOICE AUTOMOTIVE GROUP, INC.
COMMON STOCK
This Prospectus relates to an offering (the "Offering") of up to
1,825,000 shares of common stock, par value $.01 per share (the "Common Stock"),
of Smart Choice Automotive Group, Inc., a Florida corporation formerly known as
Eckler Industries, Inc. (the "Company"), consisting of (i) 1,200,000 shares of
Common Stock issuable upon exercise of Redeemable Common Stock Purchase Warrants
(the "Public Warrants") issued in connection with the Company's 1995 initial
public offering (the "Initial Public Offering"), (ii) 84,000 shares of Common
Stock issuable upon exercise of an underwriter's unit purchase option issued in
connection with the Initial Public Offering (the "Underwriter Unit Purchase
Option"), (iii) 84,000 shares of Common Stock issuable upon exercise of Public
Warrants underlying the Underwriter Unit Purchase Option, and (iv) 457,000
shares of Common Stock beneficially held by certain shareholders of the Company.
The Public Warrants and the Underwriter Unit Purchase Option are sometimes
collectively referred to herein as the "Warrants," and the shares of Common
Stock issuable upon exercise of the Warrants are sometimes collectively referred
to herein as the "Warrant Shares." The holders of such Warrants are hereinafter
referred to as "Warrantholders." The Company will receive proceeds from the
exercise of the Warrants, if and to the extent exercised, but will not receive
any proceeds from any subsequent sale of the Warrant Shares by the
Warrantholders.
The proposed sale from time to time of up to 457,000 shares of Common
Stock, in the amount and in the manner and on terms and conditions described
herein, relates to persons or entities who are currently shareholders of the
Company (the "Selling Shareholders"). See "Selling Shareholders" and "Plan of
Distribution."
The Company will pay all of the expenses, estimated to be approximately
$20,000, in connection with this Offering, other than underwriting and brokerage
commissions, discounts, fees and counsel fees and expenses incurred by the
Warrantholders. See "Use of Proceeds," "Selling Shareholders," and "Plan of
Distribution."
The Company's Common Stock is currently quoted on the Nasdaq SmallCap
Market ("Nasdaq") under the symbol "SMCH." On August 29, 1997, the last reported
sale price of the Common Stock as quoted on Nasdaq was $6.31 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Each Public Warrant entitles the holder thereof to purchase, at any
time through November 9, 2000, one share of Common Stock at a price of $6.50 per
share. The Company has the right to call the Public Warrants for redemption at
$.05 per Public Warrant on 30 days' written notice if the average of the closing
bid and asked prices of the Common Stock, as reported on Nasdaq, equals or
exceeds $8.75 per share for 20 consecutive trading days ending within three days
prior to the date of the notice of redemption. In the event that the Company
elects to exercise its right to redeem the Public Warrants, such Public Warrants
will be exercisable until the close of business on the date for redemption fixed
in such notice. If any Public Warrant called for redemption is not exercised by
such time, it will cease to be exercisable and the holder will be entitled only
to the redemption price. The Underwriter Unit Purchase Option entitles the
holder thereof to purchase, at any time through November 9, 2000, one unit
consisting of one share of Common Stock and one Public Warrant at a price of
$6.00 per unit. The Public Warrants issuable upon exercise of the Underwriter
Unit Purchase Option have an exercise price of $6.50 per share and are
substantially identical to the outstanding Public Warrants, except that the
Company does not have the right to call such Public Warrants. The exercise
prices of the Warrants are all subject to adjustment pursuant to their
respective anti-dilution provisions.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 15, 1997
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Available Information
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such materials can be obtained upon written request
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Quotations relating to the
Company's Common Stock appear on the NASDAQ SmallCap Market and such reports and
proxy statements and other information concerning the Company can also be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement. Each
statement made in this Prospectus concerning a document filed as part of the
Registration Statement is qualified in its entirety by reference to such
document for a complete statement of its provisions. Copies of the Registration
Statement may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the
Commission, at the address set forth above, or on the World Wide Web through the
Commission's Internet address at "http://www.sec.gov."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-14082)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1996;
2. All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since September 30, 1996,
consisting of (i) the Company's Quarterly Reports on Form
10-QSB and Form 10-Q for the fiscal quarters ended December
31, 1996, March 31, 1997 and June 30, 1997, respectively, (ii)
the Company's Current Reports on Form 8-K dated October 28,
1996, December 30, 1996, January 28, 1997, February 12, 1997,
March 20, 1997, June 27, 1997, two current reports dated June
30, 1997, August 21, 1997 and August 29, 1997, and (iii) the
Company's Amendment on Form 8-K/A to the Current Report on
Form 8-K dated February 12, 1997 and the Company's Amendment
on Form 8-K/A to the Current Report on Form 8-K dated June 27,
1997;
3. The Company's definitive Proxy Statement filed on February 27,
1997; and
4. The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A, filed on
April 16, 1997.
All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the Offering shall be deemed incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified shall
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not be deemed to constitute a part of this Prospectus except as so modified, and
any statement so superseded shall not be deemed to constitute a part of this
Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner of the Warrants or the Warrant Shares, to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents which are incorporated herein by reference
(other than exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests for such copies should be directed
to the Company's principal executive offices: Shareholder Relations Department,
Smart Choice Automotive Group, Inc., 5200 South Washington Avenue, Titusville,
Florida 32780, telephone: (407) 269-9680.
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE.
THE COMPANY. Smart Choice Automotive Group, Inc. (the "Company") is an
active acquiror of new and used-car dealerships and used-car finance companies
in the southeastern United States. The Company currently operates in several
major markets in Florida and intends to expand into the southeastern United
States. The Company targets its used-car products and services to the sub-prime
segment of the automobile financing industry, which focuses on selling and
financing the sale of used-cars to persons who have limited credit histories,
low incomes, or past credit problems ("Sub-Prime Borrowers"). In connection with
its sale of used-cars, the Company underwrites, finances, and services retail
installment contracts ("Finance Contracts"). The Company also operates insurance
and dealer consulting divisions, as well as Eckler Industries, Inc.
("Eckler's"), one of the nation's leaders in Corvette parts and accessories
sales with more than 95,000 customers.
The Company expanded significantly in the first quarter of 1997 by
acquiring three used-car dealerships and three used-car finance companies,
having an aggregate of $33.3 million in gross Finance Contracts. The Company
operates two new car dealerships, has contracted to purchase one additional new
car dealership, operates 16 used-car dealerships, holds and services
approximately $46 million in gross Finance Contracts, and intends to continue
its expansion through acquisitions and internal growth. For the six months ended
June 30, 1997, the Company incurred losses of approximately $6.1 million,
reflecting start up costs, development of its infrastructure, and expansion of
its operations.
DEALERSHIP OPERATIONS. The Company operates two new car dealerships in
Florida that have franchises to sell Nissan and Volvo vehicles. The Company has
contracted to purchase another new dealership in Florida that has franchises to
sell Acura, Audi, Volkswagen, and Subaru vehicles. The Company intends to focus
its growth during the remainder of 1997 on acquiring and opening additional new
and used-car dealerships. See "Growth Strategy" below.
The Company sells used-cars through 16 wholly owned used-car
dealerships in Florida and finances such sales through Finance Contracts that
the Company originates and services. The Company's competition for its used-car
dealerships primarily consists of the numerous independent used-car dealerships
that sell and finance sales of used-cars to Sub-Prime Borrowers
("Dealer/Financers"). The Company distinguishes its dealerships from those of
typical Dealer/Financers by providing multiple locations, upgraded facilities,
large inventories of used automobiles, a captive finance company, centralized
purchasing, value-added marketing programs, and dedication to customer service.
Most of the Company's dealerships maintain inventories of approximately 50-125
used-cars and feature a wide selection of makes and models (with ages generally
ranging from three to six years). The Company has developed underwriting
guidelines and techniques that combine established underwriting criteria with
managerial discretion, to facilitate prompt credit decisions and utilizes
networked computer systems to monitor and service large volumes of Finance
Contracts.
The Company is seeking to develop widespread brand name recognition for
its "First Choice" used-cars through extensive television, radio, and billboard
advertising. The Company emphasizes its network of dealerships, its wide
selection of quality used-cars, and its ability to finance most Sub-Prime
Borrowers.
GROWTH STRATEGY. The Company's strategy has been to increase sales
revenue and finance income by opening additional used-car dealerships and
acquiring existing new and used-car dealerships and Dealer/Financers, in
selected markets. The Company intends to focus its growth in the remainder of
1997 on acquiring new car dealerships and intends to expand its used-car
dealerships by year end. To facilitate inventory quality, the Company also
intends to open a used-car reconditioning facility in Lakeland, Florida. The
Company expects to finance its expansion through operating cash flow,
supplemental borrowings, and capital markets transactions. Although the Company
believes its current management team, monitoring and collection operations, and
corporate infrastructure are capable of supporting the planned expansion of its
operations and services, the start-up costs and incremental overhead created by
such expansion could adversely affect the Company's results of operations in the
short-term.
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RISK FACTORS
IN CONSIDERING THE MATTERS SET FORTH IN THIS PROSPECTUS, PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH BELOW AS WELL AS
OTHER INFORMATION SET FORTH AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
FORWARD LOOKING STATEMENTS
This Prospectus and/or certain documents incorporated herein by
reference contain certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act, which represent the Company's expectations or
beliefs, including, but not limited to, statements concerning gross margins and
sales of the Company's products. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company's
control, and actual results may differ materially depending on a variety of
important factors, including the level of acquisition opportunities available to
the Company and the Company's ability to efficiently price and negotiate such
acquisitions on a favorable basis, sources for sufficient additional capital to
meet the Company's growth and operations, the financial condition of the
Company's customers, the failure to properly manage growth and successfully
integrate acquired companies and operations, changes in economic conditions,
demand for the Company's products and changes in competitive environment.
The Company cautions that the factors described above could cause
actual results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
effect of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
LIMITED COMBINED OPERATING HISTORY AND LOSSES
The Company began operations as a combined business unit with Eckler's
in January of 1997 and incurred a loss of approximately $6.1 million for the six
months ended June 30, 1997, reflecting startup costs, development of its
infrastructure, and expansion of its operations. In addition, for the year ended
September 30, 1996 and for the three months ended December 31, 1996, Eckler's
sustained losses of $866,568 and $196,209, respectively. There can be no
assurance that the Company will not continue to incur losses in the results of
its operations.
RISKS ASSOCIATED WITH ACQUISITIONS
A significant component of the Company's recent growth has come through
acquisitions of existing car dealerships and related businesses, including
used-car Dealer/Financers lending primarily to Sub-Prime Borrowers. The
Company's future growth will depend in large part on its ability to acquire
additional dealerships, manage expansion, control costs in its operations and
consolidate acquisitions into existing operations. The Company will have to
review acquired dealership operations, management infrastructure and systems and
financial controls, and make those adjustments or complete reorganizations as
appropriate. Unforeseen capital and operating expenses, or other difficulties,
complications and delays frequently encountered in connection with the expansion
and integration of acquired operations could inhibit the Company's growth. The
full benefits of a significant acquisition will require the integration of
administrative, finance, sales and marketing organizations, as well as the
coordination of common sales and marketing efforts and the implementation of
appropriate operational, financial and management systems and controls.
Acquisitions and related integration issues will require substantial attention
from the Company's senior management team, whose acquisition experience to date
has consisted primarily of dealerships at single locations. The diversion of
management attention required by the acquisition and integration of multiple
dealerships, as well as any other difficulties which may be encountered in the
transition and integration process, could have an adverse effect on the revenue
and operating results of the Company. There can be no assurance that the Company
will identify suitable acquisition candidates, that manufacturers' consents will
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be obtained (if required), that acquisitions will be consummated on acceptable
terms or that the Company will be able to integrate successfully the operations
of any acquisition. The Company's ability to continue to grow through the
acquisition of additional dealerships will also be dependent upon the
availability of suitable candidates, the Company's ability to attract and retain
competent management, and the availability of capital to complete the
acquisitions. The Company intends to finance acquisitions through a combination
of its available cash resources, borrowings from financial institutions and, in
appropriate circumstances, the issuance of equity and/or debt securities.
Acquiring additional dealerships and Dealer/Financers will have a significant
effect on the Company's financial position, and could cause substantial
fluctuations in the Company's quarterly and yearly operating results.
Acquisitions are also likely to result in the recording of significant goodwill
and intangible assets on the Company's financial statements, the amortization of
which would reduce reported earnings in subsequent years. In addition, the
issuance of additional shares of Common Stock in connection with acquisitions
may substantially dilute the interests of existing shareholders.
RISKS ASSOCIATED WITH ENTERING NEW INDUSTRIES
Although the Company has an operating history since 1973, it has a
limited history of operating car dealerships and financing the sales of
used-vehicles and related services, particularly to Sub-Prime Borrowers.
Consequently, the Company is subject to a variety of risks associated with
entering a new business, such as the lack of prior operating history in the
Sub-Prime lending and new and used-car sales markets, integrating the new
businesses into the Company, and hiring the necessary personnel. There can be no
assurance that the Company will achieve profitability in the future. The
Company's ability to become and remain profitable as it pursues its business
strategy will depend upon its ability to: (i) assimilate and manage its
acquisitions; (ii) expand its revenue generating operations while not
proportionately increasing its administrative overhead; (iii) originate Finance
Contracts with an acceptable level of credit risk; (iv) locate sufficient
financing with acceptable terms to fund the expansion of car sales and the
origination of additional Finance Contracts; (v) adapt to the increasingly
competitive market in which it operates; and (vi) obtain and purchase adequate
supplies of cars. Outside factors, such as the economic, regulatory, and
judicial environments in which it operates, also will have an effect on the
Company's business. The Company's inability to achieve or maintain any or all of
its goals could have a material adverse effect on the Company's operations,
profitability, and growth.
NEED FOR ADDITIONAL CAPITAL
In order to grow its business, the Company will require significant
capital resources, both to fund acquisitions and for working capital. In the
past, the Company has utilized borrowings from financial institutions and its
Common Stock as a currency for acquiring businesses. Depending on the value of
an acquired business, the Company may be required to issue a large number of
additional shares of Common Stock, thereby diluting existing shareholders.
Potential sources of capital for the Company include existing and
proposed credit facilities as well as public and private offerings of the
Company's capital stock. There can be no assurance that the proceeds from these
sources of capital will be sufficient to satisfy all of the Company's cash
requirements or fund combined operating losses, should they occur, beyond the
next 12 months. Moreover, there can be no assurance that any additional
financing will be available to the Company on acceptable terms, or at all. To
the extent the Company is not able to generate sufficient cash flow or obtain
additional financing and its cash requirements were to exceed its available
capital and financing, the Company would be forced to reduce or delay additional
expenditures or otherwise delay, curtail or discontinue some or all of its
operations. Further, if the Company is able to access such capital through
borrowing, such debt will increase the already substantial obligations of the
Company, which could have a material adverse effect on the Company's financial
condition and results of operations.
The operation of automobile dealerships and Dealer/Financers is capital
intensive. The Company requires capital to acquire and maintain inventories of
vehicles and parts, to originate Finance Contracts, to purchase and maintain
service equipment, to maintain its facilities and, in the case of new car
dealerships, to satisfy manufacturers' minimum capital requirements. The Company
finances the purchase of all of its new and used-car inventory and leases all of
the properties underlying its dealerships. Consequently, the Company incurs
significant
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operating, borrowing and fixed occupancy costs. Should the Company's expansion
plans require additional funding or should its capital requirements exceed
current estimates, the Company could be required to seek additional financing in
the future. There can be no assurance that the Company will be able to raise
such financing when needed or on acceptable terms. As a result, the Company may
be unable to achieve its goals, including anticipated growth.
CREDITWORTHINESS OF SUB-PRIME BORROWERS
The Sub-Prime Borrower automobile finance market is comprised of
customers who are deemed to be relatively high credit risk due to various
factors, including, among other things, the manner in which they have handled
previous credit, the absence or limited extent of their prior credit history
and/or their limited financial resources. Consequently, the Company's Finance
Contracts have a higher probability of delinquency and default and greater
servicing costs than loans made to consumers who pose lesser credit risks. The
Company's profitability depends in part upon its ability to evaluate properly
the creditworthiness of Sub-Prime Borrowers and efficiently service its loans.
There can be no assurance that satisfactory credit performance of Sub-Prime
Borrowers will be maintained or that the rate of future defaults and/or losses
will be consistent with prior experience or at levels that will allow the
Company to achieve profitability. Most borrowers' ability to remit payments in
accordance with the terms of the loans is dependent on their continued
employment. An economic downturn resulting in increased unemployment could cause
a significant rise in delinquencies and defaults, which could materially
adversely affect the Company's financial condition and results of operations.
Moreover, increases in the delinquency and/or loss rates in the Company's loan
portfolio could adversely affect the Company's ability to obtain or maintain its
financing sources.
COMPETITION AND MARKET CONDITIONS
The Company's competitors include local, regional and national
automobile dealers, Dealer/Financers and service and repair shops, many of which
are larger and have greater financial and marketing resources than the Company.
The Company also competes with private market buyers and sellers of used-cars,
used-car dealers, franchised dealers, service center chains and independent
shops for service, repair and parts business. Industry wide gross profit margins
on sales of new vehicles, used-vehicles and sales and service generally have
been declining since 1980, and the new and used-car market faces increasing
competition from non-traditional sources such as independent leasing companies,
brokers, buying services, internet companies and used-car "superstores." Some of
the recent market entrants may be capable of operating on smaller gross margins
than the Company. The Company expects that there will be increasing competition
in the acquisition of other dealerships as industry participants become larger.
There can be no assurance that the Company will be able to maintain or increase
its size relative to its competitors or to increase profit margins in the face
of increased competition.
The Sub-Prime Borrower automobile finance market is highly competitive.
The level of competition has increased significantly in recent years and this
trend is expected to continue. Historically, commercial banks, savings and loan
associations, credit unions, captive finance subsidiaries of automobile
manufacturers and other consumer lenders, many of which have significantly
greater resources than the Company, have not competed for Sub-Prime Borrower
business. To the extent that such lenders expand their activities in the
Sub-Prime Borrower market, the Company's financial condition and results of
operations could be materially adversely affected. During the past two years,
several companies have devoted considerable resources to the Sub-Prime Borrower
market, including well-capitalized public companies. Specifically, Ford Motor
Credit Company announced that it intends to finance Sub-Prime Borrowers; General
Electric Capital Corporation established alliances with several regional
Sub-Prime Borrower automobile Dealer/Financers; and KeyCorp acquired AutoFinance
Group, Inc., which is a Sub-Prime Borrower Dealer/Financer.
The Company, through its Eckler Industries Division, sells parts and
accessories for Corvettes. Under a Reproduction and Service Part Tooling License
Agreement (the "GM Agreement") between the Company and General Motors
Corporation ("GM"), the Company is permitted to manufacture Corvette parts under
the GM Restoration Parts label and to acquire additional inventory from GM.
However, the GM Agreement does not
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prohibit the Company's competitors from manufacturing and selling parts that are
compatible to those manufactured and sold by the Company.
GENERAL ECONOMIC CONDITIONS
The Company's business is directly related to sales of used-cars, which
is affected by employment rates, prevailing interest rates, and other general
economic conditions. A future economic slowdown or recession could lead to
increased delinquencies, repossessions, and credit losses that could hinder the
Company's business and planned expansion. Because of the Company's focus on
Sub-Prime Borrowers, its actual rate of delinquencies, repossessions, and credit
losses on Finance Contracts could be higher under adverse conditions than those
experienced in the used-car sales and finance industry in general. Economic
changes are uncertain, and sluggish sales of used-cars and weakness in the
economy could have an adverse effect on the Company's business.
CHANGING NATURE OF AUTOMOTIVE RETAILING
The automobile retailing industry has experienced significant change in
the past several years. A number of dealership groups have conducted, or are in
the process of conducting, public offerings of capital stock to enhance their
capital structures and their ability to issue capital stock in acquisitions.
These companies and other well-capitalized dealership groups have begun to
acquire a significant number of other dealers, including dealers in the
Company's markets, in a trend toward the consolidation of the retail automobile
industry. In addition, several companies have opened chains of used-car
"superstores" that offer a large variety and number of used-cars at each of
their locations. A common goal for each of these groups is to create a
recognized national dealership brand. Further, several large, well capitalized
dealer groups are utilizing "one price" and other marketing strategies to
attract consumers away from smaller, more traditional dealers. Other dealers
have formed auto malls and multi-brand dealerships in which multiple makes and
models are sold side by side. Dealers also face increased competition in the
sale of new vehicles from independent brokers and leasing companies, on-line
purchasing services and warehouse clubs. In recent years the number of vehicles
coming off leases has increased significantly, resulting in an increased supply
of high-quality used-vehicles available for resale. These vehicles and vehicles
from other sources have become available to franchised new car dealers and
non-franchised dealers of used-cars, resulting in increased competition in the
used-car market. Automobile dealers are also facing new forms of competition in
the sale of service and parts. In the 1980s, several new national chains of
service and repair shops and aftermarket parts stores appeared, offering faster
service and lower prices. The Company expects that the automobile retailing
industry will continue to experience significant change in the next several
years as new and stronger sources of competition affect the industry. There can
be no assurance that the Company will be able to respond effectively to changes
in the industry.
GEOGRAPHIC CONCENTRATION
As of June 30, 1997, the Company's car sales and financing operations
are concentrated in the southwest, central and southeast areas of Florida. An
economic slowdown or recession, or a change in the regulatory or legal
environment in Florida could have a material adverse effect on the Company's
financial condition and results of operations.
HIGH LEVERAGE
The Company is highly leveraged. At June 30, 1997, the Company's total
indebtedness was approximately $51.4 million. The majority of such debt is
collateralized by the Company's Finance Contracts, new and used car inventory
and all property, plant and equipment. The Company's substantial leverage could
have important consequences, including limiting its ability to obtain additional
financing, requiring the Company to use substantial portions of operating cash
flow to meet interest and principal repayment obligations, exposing the Company
to interest rate fluctuations due to floating interest rates, increasing the
Company's vulnerability to changes in general economic conditions and
competitive pressures, and limiting the Company's ability to realize some or all
of the benefits of significant business opportunities. In addition, various loan
agreements for the Company's obligations contain financial covenants and various
other covenants that limit, among other things, the Company's ability to engage
in certain mergers and acquisitions, incur additional indebtedness or further
encumber
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its assets, or pay dividends or make other distributions without the prior
consent of the lender(s). The covenants also require the Company to meet certain
financial tests. Although the Company believes that it is currently in
compliance with the terms and conditions of its borrowing arrangements, a
default thereunder could have a material adverse effect on the Company's
financial condition and results of operations.
SENSITIVITY TO INTEREST RATES; EFFECT OF USURY LAWS
A substantial portion of the Company's Finance Contract income results
from the difference between the rate of interest it pays on the funds it borrows
and the rate of interest it earns under the Finance Contracts in its portfolio.
While the Finance Contracts the Company services bear interest at a fixed rate,
the Company's indebtedness and other credit arrangements bear interest at
floating rates. In the event the Company's interest expense increases, it would
seek to compensate for such increases by raising the interest rates on its
Finance Contracts, or raising the retail sales price of its cars. To the extent
the Company were unable to do so, the Company's net margins would decrease,
thereby adversely affecting the Company's results of operations.
Currently, the Company's used-car sales activities are conducted, and a
majority of the Finance Contracts the Company services are originated, in
Florida, which imposes limits on the rate which a lender may charge.
SEASONALITY
Historically, the Company's dealerships that sell and finance cars to
Sub-Prime Borrowers, have experienced higher revenues in the first two quarters
of the calendar year than in the latter half of the year. Management believes
that these results are due to seasonal buying patterns resulting in part from
the fact that many of the Company's customers receive income tax refunds during
the first half of the year, which are a primary source of down payments on
used-car purchases.
Eckler's, the Company's Corvette parts and accessories division, also
is subject to seasonal fluctuations. Historically, Eckler's business has
realized a higher portion of its revenues (on average, in excess of 55% of its
revenues) in the second and third quarters of the calendar year and the lowest
portion of its revenues in the fourth quarter. The business of Eckler's is
particularly dependent on sales to Corvette enthusiasts during the spring and
summer months. This is the time of year that Corvette enthusiasts are preparing
for upcoming car shows that are held in the late summer and early fall.
CYCLICALITY
Sales of motor vehicles, particularly new vehicles, historically have
been cyclical, fluctuating with general economic cycles. During economic
downturns, the automotive retailing industry tends to experience similar periods
of decline and recession as the general economy. The Company believes that the
industry is influenced by general economic conditions and particularly by
consumer confidence, the level of personal discretionary spending, interest
rates and credit availability. There can be no assurance that the industry will
not experience sustained periods of decline in vehicle sales in the future. Any
such decline would have a material adverse effect on the Company.
REGULATION AND LITIGATION
The Company's business is subject to extensive federal, state and local
regulation and supervision. Such regulation, among other things, requires the
Company to obtain and maintain licenses and qualifications, to limit interest
rates, fees and other charges related to Finance Contracts, require specified
disclosures by dealers to consumers and to limit rights to repossess and sell
collateral. Such regulations exist primarily for the benefit of consumers,
rather than for the protection of dealers or Dealer/Financers, and could limit
the Company's discretion in operating its business. Various federal, state and
local regulatory agencies, such as the Occupational Safety & Health
Administration ("OSHA"), the Federal Trade Commission ("FTC") and their state
counterparts, have jurisdiction over the Company's operations with respect to
such matters as worker's safety and consumer protection. Future acquisitions by
the Company may also be subject to regulation, including antitrust review.
Noncompliance with any applicable statutes or regulations could result in
suspension or revocation of any license
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<PAGE>
or registration at issue, as well as the imposition of civil fines and criminal
penalties. To the extent that the rates charged by the Company are limited by
the application of maximum allowable interest rates that may be lower than those
currently charged by the Company, the Company will suffer adverse effects on its
results of operations. In addition, due to the consumer-oriented nature of the
automobile finance industry, Dealer/Financers are frequently named as defendants
in litigation involving alleged violations of federal and state consumer lending
or other laws and regulations. There can be no assurance that the Company will
not become subject to such litigation in the future. A significant judgment
against the Company could have a material adverse effect on the Company's
financial condition and results of operations.
DEPENDENCE UPON KEY PERSONNEL
The Company's future success will depend upon the continued services of
the Company's senior management as well as the Company's ability to attract
additional members to its management team with experience in the used-car sales
and financing industry. The unexpected loss of the services of any of the
Company's key management personnel or its inability to attract new management
when necessary, could have a material adverse effect upon the Company.
CONTROL BY MAJORITY SHAREHOLDERS
As of June 30, 1997, the Company's management currently beneficially
owns and/or has voting control of approximately 50.8% of the issued and
outstanding Common Stock of the Company. Assuming exercise of all of the Public
Warrants and Underwriter Unit Purchase Option, management would control
approximately 44.8% of the voting stock. Consequently, management may be able to
direct the election of the Company's directors, effect significant corporate
events and generally direct the affairs of the Company. Investors will have only
limited participation in the management of the Company. The concentration of
ownership by such holders may have the effect of preventing a sale or takeover
of the Company.
NO ASSURANCE OF CONTINUED MARKET FOR SECURITIES; "PENNY STOCK" REGULATIONS
Although the Company's Common Stock and Public Warrants are listed on
the Nasdaq SmallCap Market, there can be no assurance that a public trading
market for the securities will be sustained. If for any reason the Company fails
to maintain sufficient qualifications for continued listing on the Nasdaq
SmallCap Market, purchasers of the securities may have difficulty in selling
their securities should they desire to do so because certain restrictions (the
"penny stock" rules) may be placed upon the sale of securities unless the
securities qualify for an exemption from the "penny stock" rules. The Commission
has adopted regulations which generally define "penny stock" to be any equity
security that has a market price of less than $5 per share or an exercise price
of less than $5 per share, subject to certain exceptions. Since the Common Stock
and Public Warrants are quoted on Nasdaq, they are exempt from the definition of
"penny stock." If they are later removed from listing by Nasdaq and are traded
at a price below $5 per share, the securities may become subject to the "penny
stock" rules that impose burdensome sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and institutional accredited investors. The "penny stock" rules may
restrict the ability or desirability of broker-dealers to sell the Company's
Common Stock. Some brokerage firms will not effect transactions in the
securities if they trade below $5 per share and it is unlikely that any bank or
financial institution will accept the securities as collateral, which could have
an adverse effect in developing or sustaining any market for the securities and
may affect the ability of purchasers in this Offering to sell the Common Stock
in the secondary market.
LISTING MAINTENANCE CRITERIA FOR NASDAQ SYSTEM.
The Company's Common Stock and Public Warrants are listed on the Nasdaq
SmallCap Market. Continued inclusion on the Nasdaq SmallCap Market requires the
Company to maintain certain criteria such as among others market value, public
float, capital and surplus. Nasdaq has recently proposed revisions to its
listing and maintenance criteria which, if adopted, would make it more difficult
for the Company to maintain its listing. If the Company fails to maintain the
Nasdaq minimum threshold requirements, it would lose Nasdaq listing and trading
in the securities would be conducted in the over-the-counter market known as the
NASD OTC Electronic Bulletin Board, or more commonly referred to as "pink
sheets", whereupon trading in the Company's securities
-10-
<PAGE>
will be subject to the "penny stock" regulations. As a result, an investor may
find it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's Common Stock if it were to lose its Nasdaq
SmallCap Market listing.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the Common Stock has been and may continue to be
highly volatile, and could in the future be subject to wide fluctuations in
response to the timing and size of acquisitions, quarter to quarter variations
in operating results, changes in earnings estimates by analysts, market
conditions in the industry, and general economic conditions. Investors in the
Common Stock must be willing to bear the risk of such fluctuations in earnings
and stock price.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, ordinances and
regulations which establish various health and environmental quality standards,
and liability related thereto, and provide penalties for violations of those
standards. Under certain laws and regulations, a current or previous owner or
operator of real property may be liable for the cost of removal and remediation
of hazardous or toxic substances or wastes on, under, in or emanating from such
property. Such laws typically impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances or wastes. Certain laws, ordinances and regulations may impose
liability on an owner or operator of real property where onsite contamination
discharges into waters of the state, including groundwater. Under certain other
laws, generators of hazardous or toxic substances or wastes that send such
substances or wastes to disposal, recycling or treatment facilities may be
liable for remediation of contamination at such facilities. Other laws,
ordinances and regulations govern the generation, handling, storage,
transportation and disposal of hazardous and toxic substances or wastes, the
operation and removal of underground storage tanks, the discharge of pollutants
into surface waters and sewers, emissions of certain potentially harmful
substances into the air and employee health and safety. The business operations
of the Company are subject to such laws, ordinances and regulations including
the use, handling and contracting for recycling or disposal of hazardous or
toxic substances or wastes, including environmentally sensitive materials such
as motor oil, transmission fluid, antifreeze, freon, waste paint and lacquer
thinner, batteries, solvent, lubricants, degreasing agents, gasoline and diesel
fuels. The Company is subject to other laws, ordinances and regulations as the
result of the past or present existence of underground storage tanks at many of
the Company's properties.
Certain laws and regulations, including those governing air emissions
and underground storage tanks, have been amended to require compliance with new
or more stringent standards as of future dates. The Company cannot predict what
other environmental legislation or regulations will be enacted in the future,
how existing or future laws or regulations will be administered or interpreted
or what environmental conditions may be found to exist in the future. Compliance
with new or more stringent laws or regulations, stricter interpretation of
existing laws or the future discovery of environmental conditions may require
expenditures by the Company, some of which may be material.
ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of Florida law and the Company's Articles of
Incorporation ("Articles") could, together or separately, discourage potential
acquisition proposals, delay or prevent a change in control of the Company, and
limit the price that certain investors might be willing to pay in the future for
the Company's Common Stock. The Company is subject to the "affiliated
transactions" and "control share acquisition" provisions of the Florida Business
Corporation Act and pursuant to its Articles. Those provisions require, subject
to certain exceptions, that an "affiliated transaction" be approved by the
holders of two-thirds of the voting shares other than those beneficially owned
by an "interested shareholder" or by a majority of disinterested directors.
Voting rights must also be conferred on "control shares" acquired in specified
control share acquisitions, generally only to the extent conferred by resolution
approval by the shareholders, excluding holders of shares defined as "interested
shares." In addition, the Company's Articles, among other things, provide that
(i) any action required or permitted to be taken by the shareholders of the
Company may be effected only at an annual or special meeting of shareholders,
and not
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<PAGE>
by written consent of the shareholders, (ii) any special meeting of the
shareholders may be called only by the Chairman of the Board, the President or
Chief Executive Officer, or upon the written demand of the holders of not less
than 25% of the votes entitled to be cast at a special meeting, (iii) an advance
notice procedure must be followed for nomination of directors and for other
shareholder proposals to be considered at annual shareholders' meetings, and
(iv) a director may be removed only for cause upon approval of holders of not
less than 66-2/3% of the Company's voting stock. In addition, the Company is
authorized to issue up to five million shares of preferred stock in one or more
series, having terms fixed by the Board of Directors without shareholder
approval, including voting, dividend or liquidation rights that could be greater
than or senior to the rights of holders of Common Stock. Issuance of additional
shares of Common Stock or new shares of preferred stock could also be used as an
anti-takeover device. Although the Company has no present intentions or plans to
issue preferred stock other than in connection with acquisitions, there can be
no assurance that the Company will not do so in the future.
NO ANTICIPATED DIVIDENDS
The Company does not intend to pay any dividends on its Common Stock
for the foreseeable future. Any earnings which the Company may realize in the
foreseeable future will be retained to finance the development and expansion of
its business. In addition, under certain loan covenants, the Company is
prohibited from paying dividends without the prior consent of the lender.
USE OF PROCEEDS
In the event that all of the Warrants are exercised, the Company will
receive proceeds of up to $7,800,000 from the exercise of the Public Warrants,
$504,000 from the exercise of the Underwriter Unit Purchase Option, and $546,000
from the exercise of the Public Warrants underlying the Underwriter Unit
Purchase Option. Accordingly, the maximum net proceeds which the Company would
receive from such exercise would be approximately $8,830,000. Although the
Company currently intends to utilize the net proceeds of the Offering for
working capital and general corporate purposes, such net proceeds may be
expended for other corporate purposes, including acquisitions, at the discretion
of the Company's management. The Company will not receive any proceeds from any
sales of Warrant Shares by the holders of the Warrants or from sales of shares
by the Selling Shareholders.
DILUTION
The net tangible book value of the Company at June 30, 1997 was ($1.19)
per share of Common Stock. Net tangible book value per share is determined by
dividing the net tangible book value of the Company (total tangible assets less
total liabilities) by the number of shares of Common Stock outstanding. The net
tangible book value of the Company will not change as a result of this Offering
and therefore there will be immediate and substantial dilution for investors
purchasing securities in this Offering.
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<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to
persons for whom the Company is registering the Common Stock for resale to the
public. The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Shareholders.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OWNERSHIP OFFERED
PRIOR TO HEREBY OWNERSHIP
NAME OFFERING (1)(2)(3)(13) AFTER OFFERING
- ------------------------------------------------------- ---------------------------- ------------- -------------------------
SHARES PERCENTAGE(4) SHARES PERCENTAGE(4)
---------------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Thomas DeRita(5)................................ 82,879 * 6,333(6) 76,546 *
Gary R. Ostoski................................. 11,231 * 6,333(6) 4,898 *
Louis V. Cianfrogna............................. 11,436 * 6,334(6) 5,102 *
Daryl Leehaug................................... 7,000 * 7,000 * *
Quad Capital Partners........................... 3,500 * 3,500 * *
OK Associates, Inc.............................. 3,500 * 3,500 * *
R. William Timberman............................ 14,000 * 14,000 * *
Caldwell Johnson Winston & Massengill, PC
Profit Sharing Trust Account.................. 3,500 * 3,500 * *
Caldwell Johnson Winston & Massengill, PC
Pension Trust Account......................... 3,500 * 3,500 * *
Alex Theriot, Jr................................ 3,500 * 3,500 * *
Paul Wall Farm Service Center, Inc.............. 3,500 * 3,500 * *
Kitty Geldrich.................................. 17,500 * 17,500 * *
Putich Sales, Inc. Defined Benefit Pension
Plan, Frank Putich, Trustee................... 14,000 * 14,000 * *
George J. Hoffman & Kimberly B. Hoffman......... 3,500 * 3,500 * *
Edward M. Kalinowski, Sr........................ 3,500 * 3,500 * *
David M. Ford................................... 3,500 * 3,500 * *
Howard S. Leyser................................ 7,000 * 7,000 * *
Craig S. Jennings............................... 3,500 * 3,500 * *
Baywood Pension Plan & Trust, Charles Fletcher,
Trustee....................................... 3,500 * 3,500 * *
Charles Fletcher................................ 3,500 * 3,500 * *
Myers Massengill................................ 7,000 * 7,000 * *
Dolores Hamrick................................. 3,500 * 3,500 * *
James R. Pinke, M.D............................. 7,000 * 7,000 * *
David Dueffley.................................. 3,500 * 3,500 * *
Frank J. Todora................................. 3,500 * 3,500 * *
M. Jenkins Cromwell, Jr......................... 3,500 * 3,500 * *
Revel L. Anderson, Jr........................... 3,500 * 3,500 * *
-13-
<PAGE>
NUMBER OF
SHARES
OWNERSHIP OFFERED
PRIOR TO HEREBY OWNERSHIP
NAME OFFERING (1)(2)(3)(13) AFTER OFFERING
- ------------------------------------------------------- ---------------------------- ------------- ------------------------
SHARES PERCENTAGE(4) SHARES PERCENTAGE(4)
------------- ------------- ------- -------------
<S> <C> <C> <C>
Greyhouse Service Corporation(7)................ 100,000 1.1% 100,000 * *
Jerry Brown..................................... 75,000 * 75,000 * *
Thomas Brown.................................... 75,000 75,000 * *
Ralph H. Eckler(8)(10).......................... 1,601,000 16.5% 10,000 1,591,000 16.4%
Ronald V. Mohr(9)(10)........................... 10,000 * 10,000 * *
G. Edward Mills(9)(10).......................... 10,000 * 10,000 * *
Michael G. Wilson(9)(10)........................ 10,000 * 10,000 * *
Robert M. Eckler(11)(12)........................ 15,000 * 15,000 * *
---------- --------- ----------
TOTAL 2,134,546 457,000 1,677,546
========== ========= ==========
</TABLE>
- ---------------------
* Less than 1%
(1) These shares were originally included in the prior registration statements
to which this Registration Statement is a fourth amendment. Some of the
selling shareholders may have sold all or part of their shares under
prior registration statements or subsequently under exemptions claimed
under Rule 144 promulgated under the Securities Act.
(2) All shares are issued and outstanding unless otherwise indicated in a
footnote.
(3) Since the Selling Shareholders may offer all or part of the shares of
Common Stock which they hold pursuant to this Prospectus or may hold upon
exercise of options or warrants, and since this offering is not being
underwritten on a firm commitment basis, no estimate can be given as to the
amount of shares of Common Stock to be offered for sale by the Selling
Shareholders. See "Plan of Distribution".
(4) In accordance with Rule 13d-3 promulgated under the Exchange Act, the
percentage calculations were made on the basis of the amount of outstanding
securities plus, for each person or group, any securities that person or
group has the right to acquire within 60 days pursuant to options,
warrants, conversion privileges or other rights. If the directors or
officers do not own shares, or options or warrants exercisable within the
next 60 days, percentage ownership is deemed to be zero.
(5) Mr. DeRita is an employee of the Company.
(6) These shares are held by Mr. DeRita, Mr. Ostoski, and Mr. Cianfrogna as
tenants-in-common.
(7) Thomas E. Conlan and Gerald C. Parker, affiliates of the Company, are
shareholders of Greyhouse Services Corporation. Mr. Conlan is an employee
of the Company and beneficially owns 1,457,389 shares of Common Stock,
which includes (i) a currently exercisable option for 200,000 shares of
Common Stock which he holds jointly with Mr. Parker and Ralph H. Eckler,
(ii) a currently exercisable option for 75,000 shares of Common Stock, and
(iii) 5,000 shares of Common Stock held in trust for which he is co-trustee
with Mr. Parker. However, the amount Mr. Conlan is deemed to beneficially
own does not include 710,000 shares held in trusts of which he is a
beneficiary but over which he does not have voting or dispositive control.
Mr. Parker is a member of the Board of Directors of the Company and
beneficially owns 2,423,233 shares of Common Stock, which includes (i) a
currently exercisable option for 200,000 shares of Common Stock which he
holds jointly with Mr. Conlan and Mr. Eckler, (ii) currently exercisable
options for 87,500 shares of Common Stock, (iii) 5,000 shares of Common
Stock held in trust for an unaffiliated party for which he is co-trustee
with Mr. Conlan, and (iv) 1,410,000 shares of Common Stock held in trusts
of which Mr. Parker is a beneficiary and for which he is a co-trustee with
Gary R. Smith, an officer and director of the Company.
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<PAGE>
(8) Ralph H. Eckler is a member of the Board of Directors and is Chairman of
the Corvette Parts and Accessories Division of the Company. Includes 5,000
shares of Common Stock issuable upon exercise of a warrant; 215,000 shares
of Common Stock issuable upon exercise of stock options, and 200,000 shares
of Common Stock issuable upon exercise of a stock option Mr. Eckler holds
jointly with Thomas E. Conlan and Gerald C. Parker.
(9) Ronald V. Mohr, G. Edward Mills, and Michael G. Wilson are members of
Senior Management of the Corvette Parts and Accessories Division of the
Company.
(10) Represents 5,000 issued and outstanding shares of Common Stock and
5,000 shares of Common Stock issuable upon exercise of a warrant.
(11) Represents 7,500 issued and outstanding shares of Common stock and
7,500 shares of Common stock issuable upon exercise of a warrant.
(12) Robert M. Eckler is Ralph Eckler's brother.
(13) The Selling Shareholders acquired their 457,000 shares being offered
hereby in various transactions, including: (i) 152,000 shares of Common
Stock issued in a private placement; (ii) 102,500 shares of Common Stock
issued to independent investors and certain executives of the Company in
consideration for the cancellation of $205,000 of promissory notes in
respect of loans made to the Company (the "Bridge Loans"); (iii) 102,500
shares of Common Stock underlying warrants exercisable at $3.63 per share
($6.00 after December 31, 1996) issued as additional consideration for
cancellation of the Bridge Loans; and (iv) 100,000 shares of Common Stock
underlying a stock option issued to a consultant as partial consideration
for services rendered to the Company. The Company will not receive any
proceeds from any sale of the Common Stock by the Selling Shareholders.
-15-
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to the issuance of Common Stock upon exercise
of the Warrants and the offering of shares of Common Stock beneficially held by
certain shareholders of the Company. The Company may solicit the exercise of the
Warrants at any time by reducing the various exercise prices of the Warrants.
The Company also has the right to call the Public Warrants (other than the
Public Warrants issuable upon exercise of the Underwriter Warrants), upon the
occurrence of certain events, which could have the effect of encouraging the
exercise of such Warrants.
The Selling Shareholders may sell or distribute some or all of the
Shares from time to time through underwriters or dealers or brokers or other
agents or directly to one or more purchasers, including pledgees, in
transactions (which may involve block transactions) on the Nasdaq SmallCap
Market, privately negotiated transactions (including sales pursuant to pledges)
or in the over-the-counter market, or in a combination of such transactions.
Such transactions may be effected by the Selling Shareholders at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. Brokers,
dealers, agents or underwriters participating in such transactions as agent may
receive compensation in the form of discounts, concessions or commissions from
the Selling Shareholders (and, if they act as agent for the purchaser of such
shares, from such purchaser). Such discounts, concessions or commissions as to a
particular broker, dealer, agent or underwriter might be in excess of those
customary in the type of transaction involved. This Prospectus also may be used,
with the Company's consent, by donees of the Selling Shareholders, or by other
persons acquiring shares and who wish to offer and sell such shares under
circumstances requiring or making desirable its use.
The Selling Shareholder and any such underwriters, brokers, dealers or
agents that participate in such distribution may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, commissions or
concessions received by any such underwriters, brokers, dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither the Company nor the Selling Shareholders can presently estimate the
amount of such compensation. The Company knows of no existing arrangements
between any Selling Shareholders and any other Selling Shareholder, underwriter,
broker, dealer or other agent relating to the sale or distribution of the
shares.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of any of the shares may not simultaneously
engage in market activities with respect to the Common Stock for a period of
nine business days prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which provisions may limit the timing of
purchases and sales of any of the shares by the Selling Shareholders. All of the
foregoing may affect the marketing of the Common Stock.
The Company will pay substantially all of the expenses incident to this
Offering of the shares by the Selling Shareholders to the public other than
commissions and discounts of underwriters, brokers, dealers or agents. Each
Selling Shareholder may indemnify any broker, dealer, agent or underwriter that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
In order to comply with certain states' securities laws, if applicable,
the shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Common Stock may
not be sold unless the Common Stock has been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
is complied with.
The Company will receive no portion of the proceeds from the sale of
the shares of Common Stock and will bear all expenses related to the
registration of this offering of the shares of Common Stock. The Selling
-16-
<PAGE>
Shareholders will also be indemnified by the Company against certain civil
liabilities, including certain liabilities which may arise under the Securities
Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. The law
firm holds for its own account 11,429 shares of the Company's Common Stock and
attorneys within the law firm are the beneficial owners of 55,000 shares of the
Company's Common Stock.
EXPERTS
The financial statements incorporated by reference in this Prospectus
have been audited by BDO Seidman, LLP, Osburn, Henning and Company, Certified
Public Accountants, P.A. and Spence, Marston, Bunch, Morris & Co., independent
certified public accountants, to the extent and for the periods set forth in the
respective reports of such firms incorporated herein by reference, and are
incorporated herein in reliance upon such reports given upon the authority of
such firms as experts in auditing and accounting.
-17-
<PAGE>
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to make any representation not contained in this Prospectus in
connection with this offering, and any information or representation not
contained herein must not be relied upon as having been authorized by the
Company or any other person. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
registered securities to which it relates or an offer to or solicitation of any
person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus at any time nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein contained is correct as of any time subsequent to the date of
this Prospectus.
-------------
TABLE OF CONTENTS
PAGE
----
Available Information...............................2
Incorporation Of Certain Documents By Reference.....2
Summary.............................................4
Risk Factors........................................5
Use Of Proceeds....................................12
Dilution...........................................12
Selling Shareholders...............................13
Plan Of Distribution...............................16
Legal Matters......................................17
Experts............................................18
1,825,000 SHARES
SMART CHOICE
AUTOMOTIVE GROUP, INC.
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
September 15, 1997
================================================================================
