SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report: August 29, 1997
(Date of earliest event reported)
-----------------------------------------------
SMART CHOICE AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
------------------------------------------------
Florida 1-14082 59-1469577
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No. )
incorporation or
organization)
5200 South Washington Avenue, Titusville, Florida 32780
(Address of principal executive offices) (Zip Code)
(407) 269-9680
Registrant's telephone number, including area code
-------------------------------------------
<PAGE>
This Amendment No. 1 supplements the Report on Form 8-K Filed with the
Securities and Exchange Commission on August 29, 1997 by Smart Choice Automotive
Group, Inc., (the "Registrant") to file (a) the financial statements of the
acquired Company and (b) the pro forma financial information relating to the
business combination of the Registrant and the acquired Company.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The following financial statements of businesses acquired are included
herein pursuant to Item 7(a):
B&B FLORIDA ENTERPRISES, INC.
Independent Auditor's Report
Balance Sheet as of December 31, 1996
Statement of Operations for the Year Ended December 31, 1996
Statement of Stockholders' Deficit for the Year Ended
December 31, 1996
Statement of Cash Flows for the Year Ended December 31, 1996
Notes to Financial Statements
B&B FLORIDA ENTERPRISES, INC.
Independent Auditor's Report
Balance Sheet as of December 31, 1995
Statement of Operations and Retained Deficit
for the Year Ended December 31, 1995
Statement of Cash Flows for the Year Ended December 31, 1995
Notes to Financial Statements
B&B FLORIDA ENTERPRISE, INC.
Balance Sheets as of June 30, 1997 and 1996 (unaudited)
Statements of Operations and Stockholders' Defict for the
Six Months Ended June 30, 1997 and 1996 (unaudited)
Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1996 (unaudited)
(b) Pro Forma Financial Information
The following pro forma financial information is included herein
pursuant to Item 7(b):
SMART CHOICE AUTOMOTIVE GROUP, INC.
Pro Forma Consolidated Financial Information -
Explanatory Headnote (unaudited)
Pro Forma Consolidated Balance Sheets as of December 31, 1996 (unaudited)
Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 1996 (unaudited)
Pro Forma Consolidated Statement of Operations for the Six Months
Ended June 30, 1997 (unaudited)
Notes to Pro Forma Consolidated Financial Information (unaudited)
2
<PAGE>
(c ) Exhibits
The Exhibits to this report are set forth in the Exhibit Index set forth
herein.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 14, 1997 SMART CHOICE AUTMOTIVE GROUP, INC.
By: /s/ Joseph E. Mohr
---------------------------
Joseph E. Mohr, Chief Financial Officer
3
<PAGE>
Exhibit Index
23.1 Consent of Rosenfield & Company, P.A.
23.2 Consent of Levine & Levine, Certified Public Accountants
99.1 Financial Statements of B&B Florida Enterprises, Inc. as of December 31,
1996, and the related statements of operations, stockholders' deficit and
cash flows for the year then ended, together with the report of Rosenfield
& Company, P.A.
99.2 Financial statements of B&B Florida Enterprises, Inc. as of December 31,
1995 and the related statements of operations, retained deficit and cash
flows for the year then ended, together with the report of Levine & Levine,
certified public accountants.
99.3 Financial Statements of B&B Florida Enterprises, Inc. as of June 30, 1997,
and 1996 and the related statements of operations, stockholders' deficit,
and cash flows for the six months then ended (unaudited).
99.4 Pro Forma Financial Statements
Consent of Rosenfield & Company, P.A., Independent Auditors
We consent to the incorporation by reference in the Registration Statements
on Form S-3 (Nos. 33-96520-A and 333-39669) of Smart Choice Automotive Group,
Inc. of our report dated April 10, 1997, (except for Note 12, as to which the
date is May 2, 1997) relating to the Financial Statements of B&B Florida
Enterprises, Inc., which appear in this Current Report on Form 8-K/A of Smart
Choice Automotive Group, Inc.
/s/ Rosenfield & Company, P.A.
------------------------------
Rosenfield & Company, P.A.
Orlando, Florida
November 14, 1997
Consent of Levine & Levine, Certified Public Accountants, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
on Form S-3 (Nos. 33-96520-A and 333-39669) of Smart Choice Automotive Group,
Inc. of our report dated January 20, 1997, (except for Note 15, as to which the
date is April 10, 1997) relating to the Financial Statements of B&B Florida
Enterprises, Inc., which appear in this Current Report on Form 8-K/A of Smart
Choice Automotive Group, Inc.
/s/ Levine & Levine, Certified Public Accountants
--------------------------------------------------
Levine & Levine, Certified Public Accountants
Jupiter, Florida
November 14, 1997
B&B FLORIDA ENTERPRISES, INC.
D/B/A STUART NISSAN
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
Independent Accountant's Report
Board of Directors
B&B Florida Enterprises, Inc.
Smart Choice Automotive Group, Inc.
We have audited the accompanying balance sheet of B & B Florida Enterprises,
Inc. (an S-Corporation) d/b/a Stuart Nissan as of December 31, 1996, and the
related statements of operations, accumulated deficit, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of B & B Florida Enterprises, Inc.
d/b/a Stuart Nissan as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $1,331,200 during the year ended December 31,
1996, and, as of that date, had a working capital deficiency of $2,925,390 and
net deficit of $2,529,355. As discussed more fully in Note 9 of the financial
statements, as of December 31, 1996, the Company was in default under certain
covenants of its Automotive Wholesale Financing and Security Agreement with
Nissan Motor Acceptance Corporation (NMAC) and other debt obligations. On
December 17, 1996, the Company entered into a reinstatement agreement with NMAC
which contains substantially the same restrictive covenants included in the
previous agreements. If the Company defaults on any of the covenants in the
reinstatement agreement, the lender may demand repayment of the loans and
terminate the wholesale credit line. No such demand has been made. Subsequent to
the balance sheet date, the Company has secured financing with an independent
lender to permit the realization of assets and the liquidation of liabilities.
Negotiations are presently under way to sell substantially all of the assets of
the Company to a party related to the new lender. The Company cannot predict the
outcome of what the negotiations will be. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
April 10, 1997
(except for NOTE 12, as
to which the date is May 2, 1997)
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/ STUART NISSAN
FINANCIAL STATEMENTS
TABLE OF CONTENTS
BALANCE SHEET.............................................................1
STATEMENT OF OPERATIONS...................................................2
STATEMENT OF STOCKHOLDERS' DEFICIT........................................3
STATEMENT OF CASH FLOWS...................................................4-5
NOTES TO FINANCIAL STATEMENTS.............................................6-12
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and contracts in transit $ 94,628
Accounts receivable - trade 162,203
Inventories 2,163,593
Prepaid expenses 11,100
----------------
TOTAL CURRENT ASSETS 2,431,524
PROPERTY AND EQUIPMENT - net 436,641
OTHER ASSETS 10,300
----------------
$ 2,878,465
================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Line of credit $ 400,000
Current maturities of obligations under capital leases 26,005
Current maturities of long-term debt 1,520,045
Floor plan notes payable 1,993,815
Due to related party 166,557
Accounts payable - trade 837,742
Other payables and accrued liabilities 412,750
---------------
TOTAL CURRENT LIABILITIES 5,356,914
OBLIGATIONS UNDER CAPITAL LEASES, less current maturities 50,906
COMMITMENTS --
STOCKHOLDERS' DEFICIT (2,529,355)
---------------
$ 2,878,465
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Sales $ 24,473,010
Cost of sales 22,294,117
------------
GROSS MARGIN 2,178,893
Other income 670,147
Operating expenses (3,667,704)
Other expenses (512,536)
--------------
NET LOSS $ (1,331,200)
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
ADDITIONAL
COMMON PAID-IN ACCUMULATED TOTAL
STOCK CAPITAL DEFICIT DEFICIT
<S> <C> <C> <C> <C>
Balance - December 31, 1995,
as previously reported 353,750 197,154 (1,709,059) (1,158,155)
Shareholder distributions - - (40,000) (40,000)
Net loss - - (1,331,200) (1,331,200)
--------- ---------- ------------ -----------
Balance - December 31, 1996 $ 353,750 $ 197,154 $ (3,080,259) $(2,529,355)
========= ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 24,711,890
Cash paid to suppliers and employees (24,783,160)
Other cash receipts 853,036
Interest paid (389,000)
--------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 392,766
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (231,103)
--------------
NET CASH USED IN INVESTING ACTIVITIES (231,103)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft (461,953)
Principal payments on obligations under capital leases (19,918)
Principal payments on debt (24,581)
Proceeds from borrowings under line of credit agreement 400,000
Distributions to stockholder (40,000)
Net payments to related parties (139,976)
--------------
NET CASH USED IN FINANCING ACTIVITIES ( 286,428)
--------------
NET DECREASE IN CASH AND CONTRACTS IN TRANSIT (124,765)
CASH AND CONTRACTS IN TRANSIT AT
BEGINNING OF YEAR 219,393
--------------
CASH AND CONTRACTS IN TRANSIT AT
END OF YEAR $ 94,628
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
STATEMENT OF CASH FLOWS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1996
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
<TABLE>
<S> <C>
Net loss $(1,331,200)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 109,465
New and used car writedowns 131,823
Decrease in accounts receivable 238,880
Decrease in inventories 1,714,537
Decrease in prepaid expenses 70,889
Decrease in customer deposits 10,000
Decrease in floor plan notes payable (1,301,795)
Increase in accounts payable and accrued liabilities 750,167
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 392,766
============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase of equipment with proceeds of capital lease obligation $ 45,262
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
NOTES TO FINANCIAL STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BUSINESS OPERATIONS
The principal business activity of B&B Florida Enterprises,
Inc. d/b/a Stuart Nissan (Company) is the retail sales of
new Nissan automobiles obtained through an exclusive dealer
agreement with the distributor. In addition, the Company
retails and wholesales replacement parts and used
automobiles and provides vehicle servicing. The Company's
operations are based in Stuart, Florida.
B) MAJOR SUPPLIER
The Company purchases substantially all of is new vehicles
and parts inventory from Nissan Motor Corporation of America
at the prevailing prices charged by the automobile
distributors to all franchised dealers.
C) INVENTORIES
New and demonstrator vehicles, parts and accessories, and
miscellaneous inventory are stated at cost, determined on
the first-in, first-out basis (FIFO), which is not in excess
of market.
Used vehicles are stated at the lower of cost or market, on
a specific unit basis.
D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the useful
lives of the assets, and the term of the lease for the asset
under the capital lease. Useful lives for purposes of
computing depreciation are:
Equipment, furniture, and fixtures - 5 and 7 years Leasehold
improvements - economic life or life of lease,
whichever is shorter
E) ACCOUNTS RECEIVABLE
Management has established a reserve for those receivables
deemed to be uncollectible.
F) REVENUE RECOGNITION OF FINANCE AND INSURANCE INCOME
The Company includes income from finance and insurance
commissions in other income and recognizes an allowance for
future finance and insurance chargebacks based on past
operating history. Prior to December 31, 1995, the Company's
financial statements did not reflect a reserve for
chargebacks. The retained earnings balance has been restated
to properly reflect the reserve for future finance and
insurance chargebacks in the amount of $52,000.
6
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G ) INCOME TAXES
The Company and its stockholders have elected to be treated
as a "Small Business Corporation" for income tax purposes
under Subchapter "S" of the Internal Revenue Code. In
accordance with the provisions of such election, the
Company's income and losses pass through to its
stockholders; accordingly, no provision for income taxes has
been made.
H) STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company
considers contracts in transit to be cash equivalents.
Additionally, the net change in floor plan financing of
inventory obtained through a captive finance company of
Nissan Motor Corporation, which is a customary financing
technique in the industry, is reflected as an operating
activity.
I) MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at December 31, 1996 and
revenues and expenses during the year then ended. Actual
results could differ from those estimates. Material
estimates that are particularly susceptible to significant
change in the near term are described in NOTES 1E and 1F.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company shares common ownership and/or management and in
certain instances engages in transactions with its stockholder and
with TAD Partnership, Inc. The transactions reflected at December
31, 1996 include the leasing of the dealership facility.
A summary of transactions with related parties is as follows:
Due to TAD Partnership, Inc. $ 166,557
Rent expense $ 223,200
TAD Partnership, Inc. advanced funds to the Company for working
capital purposes. These obligations are non-interest bearing and
are repaid by the Company as funds become available.
7
<PAGE>
NOTE 3 - ACCOUNTS RECEIVABLE
Trade $ 68,791
Due from manufacturer 74,481
Due from finance companies 43,931
-----------
187,203
Less allowance for doubtful accounts (25,000)
-----------
$ 162,203
===========
NOTE 4 - INVENTORIES
New vehicles and demonstrators $ 1,313,295
Used vehicles 557,706
Parts, accessories and other inventories 292,592
-----------
$ 2,163,593
===========
NOTE 5 - PROPERTY AND EQUIPMENT
Furniture and fixtures $ 338,763
Machinery and shop equipment 209,081
Equipment under a capital lease 120,459
Signs 8,444
Leasehold improvements 12,054
-----------
688,801
Less accumulated depreciation
and amortization, including $49,146
on equipment under a capital lease 252,160
-----------
$ 436,641
===========
Depreciation expense for the year ending December 31, 1996 was
$109,465, including the amortization of the capital lease of
$20,320.
8
<PAGE>
NOTE 6 - LINE OF CREDIT
The Company has a line of credit with a subsidiary of the entity
which has entered into an agreement to purchase substantially all
of the Company's assets (NOTE 12) bearing interest at the floating
prime rate of interest offered by Citibank, N.A. The line is
secured by the common stock of the Company.
NOTE 7 - FLOOR PLAN NOTES PAYABLE
Floor plan notes payable on new, used and demonstrator vehicles,
bearing interest at the finance company's prime rate plus 1.75%
(10% at December 31, 1996). The notes are collateralized by
substantially all new, used and demonstrator vehicles, the related
proceeds from the sales, and all other assets of the Company. The
notes are due when the vehicles are sold and are guaranteed by the
stockholder. The maximum credit available under the financing
arrangement is $4,400,000 for new vehicles including $200,000 for
demonstrator vehicles and $2,500,000 for used vehicles.
Total interest expense on all indebtedness was approximately
$389,000 for the year ended December 31, 1996.
The Company is out of trust $200,700 as of December 31, 1996 on
new and used vehicles.
NOTE 8 - OTHER PAYABLES AND ACCRUED LIABILITIES
Interest $ 223,849
Reserve for future finance and insurance chargebacks 52,000
Sales and other taxes 58,800
Payroll and payroll taxes 31,126
Customer deposits 27,194
Other accrued liabilities 9,781
------------
$ 412,750
============
NOTE 9 - LONG TERM DEBT
Note payable - manufacturer (A) $ 1,040,000
Note payable - manufacturer (B) 235,045
Note payable - individuals ( C) 245,000
-------------
$ 1,520,045
=============
9
<PAGE>
NOTE 9 - LONG TERM DEBT (CONTINUED)
(A) Note payable to manufacturer, payable in monthly principal
installments of $20,000 plus interest of prime plus 1.75%
(10% at December 31, 1996), through October 15, 2000,
collateralized by inventory, property and equipment, and
accounts receivable.
The note contains various covenants and restrictions with
respect to (1) legal requirements, (2) protection, repair,
and replacement of property, (3) taxes, (4) insurance, (5)
financial and other statements, and (6) litigation.
As of December 31, 1996, the Company was in default of its
payment obligations to the manufacturer. See NOTE 9(B).
(B) Note payable to manufacturer, payable in monthly principal
installments of $4,274 plus interest of prime plus 1.75%
(10% at December 31, 1996), through January 15, 2001,
collateralized by property and equipment with a combined
carrying value of $214,000.
As of December 31, 1996, the Company was in default of its
payment obligations to the manufacturer.
On December 17, 1996, the Company entered into a
reinstatement agreement with the manufacturer, which
contains substantially the same restrictive covenants
included in the previous agreements. If the Company defaults
on any of the covenants in the reinstatement agreement, the
lender may demand repayment of the loans and terminate the
wholesale credit line. As of the report date, no such demand
has been made.
(C) Note payable to a previous shareholder and his wife. The
original note payable provided monthly interest installments
of $2,042 at 10% through December 20, 1998 with a balloon
payment of unpaid principal and accrued interest due on that
date. The note is unsecured.
As of December 31, 1996, the Company was in default of its
payment obligations. On December 4, 1996, the Company
entered into a forbearance agreement with the individuals.
Under the agreement, the individuals will waive certain
outstanding defaults (including unpaid accrued interest
through December 20, 1996) and certain remedies as well as
modify the payment terms of the note.
The new terms under the forbearance agreement provide for
monthly interest payments of $2,144 at 10% commencing
January 20, 1997. The principal balance and any unpaid
accrued interest are due and payable on December 20, 1998.
Due to the Company's default of its payment obligations, all
of the above notes payable have been classified as current.
10
<PAGE>
NOTE 10 - COMMITMENTS
CAPITAL LEASES
The Company leases its computer equipment from a third party under
six capitalized lease agreements, which expire between 1998 and
2001. The following is a schedule, by years, of future minimum
lease payments:
Years ending December 31,
1997 $ 31,428
1998 31,190
1999 11,275
2000 9,798
2001 4,082
-----------
Total minimum lease payments 87,773
Less amount representing interest 10,862
-----------
76,911
Less current maturities 26,005
-----------
$ 50,906
===========
OPERATING LEASES
The Company leases its dealership facilities from a related party
under two operating leases expiring in June, 2000 and April, 2001,
which calls for monthly payments of approximately $24,000 plus
sales tax. The lease requires the Company to pay all maintenance,
insurance and taxes on the related property.
In addition, the Company leases office equipment under operating
leases, under 36 to 51 month leases expiring between March 1998 and
March 2003. Annual rent on this equipment is $4,908.
11
<PAGE>
NOTE 10 - COMMITMENTS (CONTINUED)
The following is a schedule by years, of aggregate future minimum
lease payments required under the operating leases:
Years ending December 31,
1997 $ 291,948
1998 291,165
1999 289,818
2000 181,632
2001 55,632
Thereafter 2,040
------------
$ 1,112,235
============
Rent expense for all operating leases was $298,856 (including
related sales tax on the monthly payments) for the year ended
December 31, 1996.
NOTE 11 - STOCKHOLDER'S DEFICIT
The number of shares authorized, issued and outstanding at December
31, 1996 are as follows:
Number of shares authorized 7,500
Number of shares issued and outstanding 7,075
Par value per share $ 50
NOTE 12 - SUBSEQUENT EVENT
On May 6, 1997, the Company signed a stock purchase agreement with
an independent third party to transfer 100 percent of the Company's
outstanding capital stock, including all stock options, warrants
and similar equity based rights of the Company, in exchange for
76,546 shares of the common capital stock of the aforementioned
third party.
12
B&B FLORIDA ENTERPRISES, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995
AS RESTATED
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT........................ 1-2
FINANCIAL STATEMENTS
BALANCE SHEET....................................... 3
STATEMENT OF OPERATIONS AND RETAINED DEFICIT........ 4
STATEMENT OF CASH FLOWS............................. 5
NOTES TO FINANCIAL STATEMENTS....................... 6-11
<PAGE>
To the Board of Directors of B & B Florida Enterprises, Inc.
We have audited the accompanying balance sheet of B & B Florida Enterprises,
Inc. as of December 31, 1995 and the related statements of operations and
retained deficit, and cash flows for the year then ended. This financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, the evidence
supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of B & B Florida Enterprises, Inc.
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
As reflected in Note 15 the financial statements have been restated to reflect
changes as a result of subsequent events.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $1,592,873 during the year ended December 31,
1995, and, as of that date, had a working capital deficiency of $174,788 and net
deficit of $1,158,157. As discussed more fully in Notes 6 & 7 the financial
statements, subsequent to December 31, 1995 the Company was in default under
certain covenants of its Automotive Wholesale Financing and security Agreement
with Nissan Motor Acceptance Corporation (NMAC) and other debt obligations. On
December 17,1996, the Company entered into a reinstatement agreement with NMAC
-1-
<PAGE>
which contains substantially the same restrictive covenants included in the
previous agreements. If theCompany defaults on any of the covenants in the
reinstatement agreement, the lender may demand repayment of the loans and
terminate the wholesale credit line. No such demand has been made. Subsequent to
the balance sheet date, the Company has secured financing with an independent
lender to permit the realization of assets and the liquidation of liabilities.
Negotiations are presently under way to sell substantially all of the assets of
the Company to a party related to the new lender. The Company cannot predict the
outcome of what the negotiations will be. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
LEVINE & LEVINE
January 20, 1997,
(except for Note 15, as to which the date is April 10, 1997)
-2-
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Current Assets:
Accounts receivable, net $ 620,476
Inventory 4,009,953
Prepaid expenses 81,989
-----------
Total current assets 4,712,418
-----------
Leasehold improvements and equipment, net 269,741
Other assets 20,300
-----------
Total Assets $ 5,002,459
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Cash overdraft $ 461,953
Notes payable floor plan 3,295,610
Current portion of long-term debt 302,866
Current maturities of obligations under capital leases 17,912
Trade accounts payable 271,573
Accrued expenses 228,751
Stockholder loans 150,000
Related party payable 156,534
-----------
Total current liabilities 4,885,199
-----------
Long-Term Liabilities
Long-Term debt 1,241,761
Obligations under capital leases 33,656
-----------
Total long-term liabilities 1,275,417
Stockholders' Deficit:
Common stock 353,750
Paid-in capital in excess of par value 197,154
Retained deficit (1,709,061)
-----------
Total stockholders' deficit (1,158,157)
-----------
Total Liabilities and Stockholders' Deficit $5,002,459
===========
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
STATEMENT OF OPERATIONS AND RETAINED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenue:
Sales $30,986,333
Interest income 64,345
-----------
Total revenue 31,050,678
Cost of sales and expenses:
Cost of sales 27,104,013
Selling, general and administrative 3,630,357
Depreciation and amortization 206,349
Interest 363,020
-----------
Total cost of sales and expenses 31,303,739
-----------
Loss before extraordinary item (253,061)
Extraordinary item 1,339,812
----------
Net loss (1,592,873)
Retained deficit, beginning of year (116,188)
-----------
Retained deficit, end of year $(1,709,061)
===========
The accompanying notes are an integral part of this financial statement
- 4 -
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
FOR THE YEAR ENDED DECEMBER 31, 1995
Cash flows from operating activities:
Net loss $ (1,592,873)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 206,349
Changes in operating assets and liabilities:
Increase in accounts receivable (235,582)
Decrease in inventory 509,551
Decrease in prepaid expenses 2,864
Increase in accounts payable 55,286
Increase in accrued expenses 78,240
Increase in related party payables 300,955
Increase in cash overdraft 461,953
----------
Total adjustments 1,379,616
Net cash provided by operating activities 213,257
Cash flows from investing activities:
Increase in deposit on contracts (10,300)
Purchase of equipment (136,244)
---------
Net cash used in investing (146,544)
---------
Cash flows from financing activities:
Decrease in notes payable - floor plan (661,896)
Increase in notes payable NMAC and Barnett Bank 719,211
Increase in loan payable - Cook 245,000
------------
Net cash provided by financing activities 302,315
------------
Net Decrease in cash (57,486)
Cash at beginning of year 57,486
-------------
Cash at end of year $ -0-
=============
Interest paid $ 363,020
============
The accompanying notes are an integral part of this financial statement
- 5 -
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
For The Year Ended December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - Organizational Nature of Business - B & B Florida Enterprises, Inc.,
D/B/A Stuart Nissan and Stuart Suzuki (the Company) is a franchised Nissan and
Suzuki automobile dealership formed in April 1990 and located in Stuart,
Florida.
As a franchised Nissan and Suzuki-Subaru dealership, the Company purchases its
new vehicles and a portion of its parts and accessories from Nissan and Suzuki
at published prices charged by Nissan and Suzuki. As a franchised dealership,
the Company also participates in various sales and services programs sponsored
by Nissan and Suzuki. There are various receivables and payables with Nissan and
Suzuki and its subsidiaries which arise in the normal course of business.
Cash overdraft - Represents checks written in excess of funds available in
banks.
Accounts receivable - All of the Company's trade accounts receivable are due
from customers or wholesale car dealers. Credit losses are not material and are
written off directly against the accounts receivable. Losses have been
consistently within management's expectations.
Inventories - All inventories are valued at the lower of cost or market. The
cost of new and used vehicles, parts and accessories, and miscellaneous
inventories are determined using the first-in, first-out method. The majority of
new and used vehicles are held as collateral for notes payable floor plan.
Prepaid expenses - These assets are composed of either items which extend past
the fiscal year or are prepaid deposits necessary to operate.
Leasehold improvements and equipment - These assets are carried at cost. Major
additions are capitalized while replacements, maintenance and repairs which do
not improve or extend the life of the respective assets are expensed currently.
When property is retired or otherwise disposed of, the cost of the property is
eliminated from the asset account, accumulated depreciation is charged with an
amount equal to the depreciation provided and the difference, if any, is charged
or credited to income.
Depreciation is provided for using accelerated methods over the
estimated useful lives which are as follows:
Leasehold improvements life of lease
Furniture and fixtures 5 - 7 years
Automotive equipment 5 - 7 years
Signs 5 years
Office Equipment 5 years
Other assets - Include Cost of Security Deposit and Deposit on Land Purchase.
Major costs - Are generally charged to operations in the year incurred and
include:
Advertising
Floor Plan Interest
Payroll
- 6 -
<PAGE>
Income taxes - The stockholders of B & B Florida Enterprises, Inc. elected to
have these entities subject to the provisions of Subchapter S of the Internal
Revenue Code. Consequently, the accompanying statement does not reflect income
tax expense for these companies because all taxable income or loss is the
responsibility of the stockholders.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates that affect certain
reported amounts and disclosures. These estimates are based on management's
knowledge and experience. Accordingly, actual results could differ from these
estimates.
Finance and insurance information - In conjunction with its automobile and truck
sales, the Company also sells insurance that provides for the payment of the
installment account in the event of the borrower's death or disability, as well
as extended mechanical warranty contract GAP and Car Care that provide coverage
of major repairs beyond amounts covered by the factory. The sales are under
pre-established arrangements with carriers who pay the Company a commission. The
Company retains no exposure to losses under such arrangements.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of other assets and liabilities are assumed to be equal to their
reported carrying amounts due to their short term nature.
3. ACCOUNTS AND NOTES RECEIVABLE - Consists of:
Contracts in Transit 219,393
Trade (vehicle parts & accessories) 122,738
Financing and Insurance 153,296
Factory Miscellaneous 125,049
-------
620,476
=======
4. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Prior Current Net Book
Cost Depr. Depr.& Amort. Value
------- -------- ------------- --------
Equipment & Furniture 412,436 134,054 31,245 247,137
Leasehold Improvements 139,433 6,725 110,104 22,604
-------- -------- -------- --------
$ 55,869 $140,779 $141,349 $269,741
-7-
<PAGE>
5. OTHER ASSETS - Consist of:
Consulting Agreement 300,000
Covenant Not to Compete 350,000
Goodwill 10,000
Deposit Contracts 10,300
----------
Total 670,300
----------
Less Amortization of Covenant and - 650,000
Consulting Agreement ----------
20,300
==========
Amortization expense of $65,000 has been reflected in the statement of
operations for the year ended December 31, 1995.
6. LONG-TERM DEBT - Consists of:
SHORT LONG
BALANCE MATURITY PAYMENTS RATE TERM TERM
------- -------- -------- ---- ----- ----
NMAC (1) $1,160,000 10/20/00 20,000 Prime $240,000 $920,000
plus interest +1.75%
Collateralized by inventory, property, and equipment, and accounts receivable.
NMAC 128,044 1/15/01 4,273.56 Prime 51,283 76,761
plus interest +1.75%
Collaterized by property and equipment
DONALD & 245,000 12/20/98 2,041.66 10% ------- 245,000
MARILYN COOK Int. only to
due date
Unsecured
BARNETT BANK 11,583 12/2/96 940.00 8% 11,583 ------
Inc. Interest
Collateralized by equipment
TOTAL $1,544,627 $302,866 $1,241,761
========== ======== ==========
(1) The note contains various covenants and restrictions with respect to (1)
legal requirements, (2) protection, repair, and replacement of property, (3)
taxes, (4) insurance, (5) financial and other statements, and (6) litigation.
Long-term debt for each of the next five years consist of the following:
1996 $302,866
1997 291,283
1998 536,283
1999 265,478
2000 240,000
-8-
<PAGE>
Subsequent events to year end revealed the following:
The company defaulted on its payment obligations under the NMAC loans. On
December 17, 1996, the company entered into a reinstatement agreement with the
manufacturer, which contains substantially the same restrictive covenants
included in the previous agreements. If the Company defaults on any of the
covenants in the reinstatement agreement, the lender may demand repayment of the
loans and terminate the wholesale credit line. As of the report date, no such
demand has been made.
The Company defaulted on its payment obligations under the Cook Note. On
December 4, 1996, the company entered into a forbearance agreement with the
individuals. Under the agreement, the individuals will waive certain outstanding
defaults (including unpaid accrued interest through December 20, 1996) and
certain remedies as well as modify the payment terms of the note.
The new terms under the forbearance agreement provide for monthly interest
payments of $2,144 at 10% commencing January 20, 1997. The principle balance and
any unpaid accrued interest are due and payable on December 20, 1998.
7. NOTES PAYABLE- FLOOR PLAN
The Company finances purchases of all new and used vehicles costing greater than
$4,000 through World Omni Financial Corp., in Deerfield Beach and NMAC in Texas.
Each vehicle is separately financed at rates ranging from 1% to 1.5% over prime.
These notes are secured by the corresponding inventories as well as by the
personal guarantee of the stockholders. The notes are paid off as vehicles are
sold. Subsequent to year end, the Company was out of trust on this note.
8. STOCKHOLDER LOANS
Loans payable to stockholders - no interest was paid or accrued $150,000
to-date. Loans were given in December 1995 and paid back
in January 1996.
9. RELATED PARTY PAYABLE - This amount represents advances made by TAD
Partnership (a related entity) in order to improve the property which the
dealership occupies. TAD is the owner of the property and B & B Florida
Enterprises, Inc. leases the property from TAD. The balance is $156,534.
10. RELATED PARTY TRANSACTIONS - The related party transactions are explained in
Note 8, 9, 11, and 14.
-9-
<PAGE>
11. COMMITMENTS
Operating Leases
The Company leases its present dealership facility from TAD Partnership (a
controlled partnership). Lease payments began on March 1, 1996. The monthly
lease is $18,000 + 6% sales tax. Future minimum lease payments by year end in
the aggregate as of December 31, 1995 are as follows:
1995 148,400
1996 1. TAD (3/1/96) - 12/31/96)
(18,000 +6% x 10) (New Facility)
2. 24,344.12 (William Chamberland) (Old Facility)
3. 7,500 + 6% x 6 (1/1/96 to 6/30/96) (Subaru Branch)
1997 (18,000 x 12 + 6%) 228,960
1998 228,960
1999 228,960
2000 228,960
Capital Leases
The company leases its computer equipment from a third party under three
capitalized lease agreements, which expire between 1998 and 1999. Amortization
expense on capital leases is included in depreciation expense. The following is
a schedule, by years, of future minimum lease payments:
Years ending December 31,
1996 $ 17,912
1997 17,912
1998 17,882
1999 5,451
----------
Total minimum lease payments 59,157
Less amount representing interest 7,589
----------
51,568
Less current maturities 17,912
----------
33,656
==========
12. COMMON STOCK AND PAID IN CAPITAL IN EXCESS OF PAR VALUE
Paid in Capital
Common in excess of
Stock par value
------- ---------------
$50 par value, 7500 shares authorized; 353,750 197,154
7075 Issued and Outstanding
13. SUBSEQUENT EVENTS - The Company and its stockholders have signed letters of
intent for the sale of substantially all of their business and assets.
Additional subsequent events are explained in Notes 6, 7, and 15.
-10-
<PAGE>
14. EXTRAORDINARY ITEM - In the sale of business and assets transaction, Loan
Receivable Stockholders has been reduced to reflect an agreement which absolves
100% of certain Loans Receivable Stockholders and therefore the amount has been
written off as an extraordinary item on the statement of operations and retained
deficit. This has become an integral part of the sale of the assets.
15. RESTATED FINANCIAL STATEMENTS - As of April 10, 1997, the Company became
aware of certain facts and circumstances which resulted in the following changes
to the December 31, 1995 financial statements. The financial statements have
been restated to reflect the following:
The stockholder note receivable of $577,427 has been expensed as an
extraordinary item as discussed in Note 14.
Depreciation and amortization has been increased by $87,148 because of
changes to property, plant and equipment useful lines.
$52,000 was recorded for future finance contract charge backs.
Equipment under capital lease were recorded and an expense of $5,197 was
reflected in the statement of operations.
If these changes had not occurred, net loss for the year ended December 31, 1995
would have been $721,772 less.
-11-
B&B FLORIDA ENTERPRISES, INC.
D/B/A STUART NISSAN
FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997 AND 1996
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A STUART NISSAN
FINANCIAL STATEMENTS (UNAUDITED)
TABLE OF CONTENTS
BALANCE SHEETS AS OF JUNE 30, 1997 AND 1996 (UNAUDITED).......................1
STATEMENT OF OPERATIONS AND ACCUMULATED
DEFICIT FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)...........2
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 (UNAUDITED)............................................3
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
BALANCE SHEETS (UNAUDITED)
JUNE 30, 1997 AND 1996
ASSETS 1997 1996
---- ----
Cash and contracts in transit $ 452,846 $ 203,728
Accounts receivable - trade 173,950 266,808
Accounts receivable - related parties -- 3,750
Inventories 2,665,813 4,937,939
Prepaid expenses 57,742 74,953
Property and equipment net 440,497 465,071
Other assets 16,758 9,998
Deposits 17,568 83,220
----------- -----------
$ 3,825,174 $ 6,045,467
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Cash overdraft $ 301,462 $ 372,636
Accounts payable 917,696 238,467
Accrued expenses 151,083 188,377
Floor plan notes payable 1,908,437 4,748,493
Due to related party 1,814,682 403,186
Notes payable 1,228,762 1,341,877
Capital lease obligations 76,910 86,424
----------- -----------
6,399,032 7,379,460
STOCKHOLDERS' DEFICIT
Common Stock 353,750 353,750
Additional paid-in capital 197,154 197,154
Accumulated deficit (3,124,762) (1,884,897)
----------- -----------
(2,573,858) (1,333,993)
----------- -----------
$ 3,825,174 $ 6,045,467
=========== ===========
1
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
Sales $10,786,548 $16,415,324
Cost of sales 9,535,333 14,560,810
----------- -----------
GROSS MARGIN 1,251,215 1,854,514
Other income 227,974 239,615
Operating expenses (1,410,934) (2,124,776)
Other expenses (112,758) (105,191)
----------- -----------
NET LOSS (44,503) (135,838)
Accumulated deficit, January 1, (3,080,259) (1,709,059)
Shareholder distributions -- (40,000)
----------- -----------
Accumulated deficit, June 30, $(3,124,762) $(1,884,897)
=========== ===========
2
<PAGE>
B&B FLORIDA ENTERPRISES, INC.
D/B/A/STUART NISSAN
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<S> <C> <C>
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (44,503) $ (135,838)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 15,332 47,159
Cash provided by (used for):
Accounts receivable (11,748) 134,275
Inventories (502,220) (927,986)
Prepaid expenses (46,642) 7,036
Other assets (17,268) (72,918)
Accounts payable 79,954 (73,478)
Accrued expenses (261,667) --
Floorplan payable (85,378) 1,452,883
------------ -----------
Net cash provided by (used for) investing activities (874,140) 431,133
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes and advances to affiliates (236,235) --
Purchase of property and equipment (11,430) (197,227)
Increase in other assets (14,516) --
------------ -----------
Net cash used for investing activities (262,181) (197,227)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft 301,462 (89,317)
Principal payments on notes payable (455,048) (213,156)
Distribution to shareholder -- (40,000)
Net advances from affiliates 1,743,826 --
Net advances (repayments) to related parties (95,701) 92,902
----------- -----------
Net cash provided by (used for) financing activities 1,494,539 (249,571)
----------- -----------
Net increase (decrease) in cash 358,218 (15,665)
Cash and contracts in transit at January 1, 94,628 219,393
---------- -----------
Cash and contracts in transit at June 30, $ 452,846 $ 203,728
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for interest $ 110,850 $ 185,650
============ ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Purchase of equipment with proceeds of capital lease obligation $ -- $ 45,262
============ ===========
</TABLE>
3
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited)
Introduction
On October 28, 1996, Eckler Industries, Inc. (Eckler) entered into an Agreement
and Plan of Reorganization (the Agreement) with Smart Choice Holdings, Inc.
(SCHI). The closing of the transaction between Eckler and SCHI occurred on
January 28, 1997. Based on the controlling interest in Eckler obtained by SCHI
as a result of this transaction, the transaction was accounted for as an
acquisition of Eckler by SCHI (a reverse acquisition in which SCHI is considered
the acquirer for accounting purposes).
SCHI was incorporated on June 21, 1996 and had no significant operations or
assets until it acquired Eckler and other companies. Prior to the Eckler
transaction, SCHI had previously entered into agreements to acquire the
outstanding capital stock or net assets of other companies. The transactions
between SCHI and the other companies closed on January 28, 1997 (prior to the
Eckler and SCHI closing), February 12, 1997 and February 14, 1997. In addition,
on June 27, 1997, Smart Choice Automotive Group, Inc. acquired certain assets
and assumed certain liabilities of Strata Holding, Inc. and Ready Finance, Inc.,
which were under common ownership. The acquisition of Eckler and the other
companies were accounted for as a purchase, with the assets acquired and
liabilities assumed recorded at their estimated fair values. These transactions
are reflected in the pro forma, as previously reported column on the pro forma
consolidated balance sheet as of December 31, 1996 and the pro forma
consolidated statements of operations for the year ended December 31, 1996 and
the six months ended June 30, 1997. These previously reported pro forma
financial statements were filed as Exhibit 99.2 in the Company's 8-K/A dated
June 27, 1997.
On August 29, 1997, Smart Choice Automotive Group, Inc. acquired the
outstanding capital stock of B&B Florida Enterprises, Inc. d/b/a Stuart Nissan.
This acquisition will be accounted for as a purchase, with the assets acquired
and liabilities assumed recorded at their estimated fair values.
The pro forma consolidated balance sheet as of December 31, 1996 assumes the
transaction was consummated as of December 31, 1996, and the pro forma
consolidated statements of operations for the year ended December 31, 1996 and
the six months ended June 30, 1997 assumes the transaction was consummated as of
January 1, 1996.
The pro forma consolidated financial statements may not be indicative of the
actual results of the transactions. In particular, the pro forma consolidated
financial statements are based on management's current estimate of the
allocations of purchase price, the actual allocation of which may differ.
In the opinion of management, all adjustments have been made that are necessary
to present fairly the pro forma data.
F-1
<PAGE>
Acquisition of B&B Florida Enterprises, Inc.
The outstanding capital stock of B&B Florida Enterprises, Inc. d/b/a Stuart
Nissan was acquired for 86,546 shares of restricted common stock valued at
$6.3125 per share ($546,322) and $55,385 in acquisition costs.
The purchase price for Stuart Nissan is anticipated to be allocated as follows:
Fair value of assets acquired $ 3,686,691
Excess of cost over net assets acquired 2,786,076
-----------
6,472,767
Fair value of liabilities assumed (5,871,060)
===========
Total purchase price of net assets acquired $ 601,707
===========
F-2
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheet
(Unaudited)
<TABLE>
Consolidated
Pro Forma, SCHI
as Previously Pro Forma Stuart Eliminating Consolidated
December 31, 1996 Reported (1) Adjustments Nissan Entries Pro Forma
------------- ----------- ------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Assets:
Cash $ 714,287 $ $ 94,628 $ $ 808,915
Accounts receivable 450,684 162,203 612,887
Notes receivable 726,700 726,700
Finance receivables 24,293,541 24,293,541
Inventories 6,939,301 2,163,593 9,102,894
Prepaid expenses 1,417,723 11,100 1,428,823
Land held for sale 1,050,000 1,050,000
Deferred tax asset 330,610 330,610
Property and equipment, net 3,042,877 436,641 3,479,518
Investment in subsidiaries 601,707 (3) (601,707)
Excess of cost over net
assets acquired 17,909,929 2,786,076 20,696,005
Debt issue costs, net of
accumulated amortization 28,889 28,889
Deferred acquisition costs 39,110 (55,385)(3) 39,110
55,385 (2)
Other assets 245,651 10,300 255,951
----------- -------- ---------- --------- -----------
$57,189,302 $601,707 $2,878,465 $2,184,369 $62,853,843
=========== ======== ========== ========== ===========
</TABLE>
See accompanying headnote and notes to pro forma consolidated
financial statements (unaudited).
F-3
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheet
(Unaudited)
<TABLE>
Consolidated
Pro Forma, SCHI
as Previously Pro Forma Stuart Eliminating Consolidated
December 31, 1996 Reported (1) Adjustments Nissan Entries Pro Forma
--------------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Liabilities and Stockholders'
Equity
Accounts payable $ 2,306,186 $ 55,385(2) $ 837,742 $ $ 3,199,313
Bank overdraft 82,884 82,884
Notes payable 40,317,517 3,990,771 44,308,288
Advance from related parties 197,237 166,557 363,794
Accrued expenses 963,555 412,750 1,376,305
Deferred income 134,571 134,571
Customer deposits 409,675 409,675
Deferred income taxes 402,814 402,814
Convertible debentures 262,000 262,000
----------- -------- ---------- -------- ----------
Total liabilities 45,076,439 55,385 5,407,820 50,539,644
Stockholders' equity
(deficit) 12,112,863 546,322(3) (2,529,355) 2,184,369 12,314,199
----------- -------- ---------- --------- ----------
$57,189,302 $601,707 $2,878,465 $2,184,369 $62,853,843
=========== ======== ========== ========== ===========
</TABLE>
See accompanying headnote and notes to pro forma
consolidated financial statements (unaudited).
F-4
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Year Ended December 31, 1996
<TABLE>
Consolidated Stuart
Pro Forma, Nissan
as Previously Stuart Pro Forma Consolidated
Reported (1) Nissan Adjustments Pro Forma
-------------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 67,196,368 $24,473,010 $ $91,669,378
Costs and expenses:
Cost of sales 44,894,454 22,294,117 67,188,571
Operating expenses 22,188,479 3,667,704 69,652(4) 25,925,835
------------ ---------- -------- -----------
67,082,933 25,961,821 69,652 93,114,406
------------ ---------- -------- -----------
Income (loss) from operations 113,435 (1,488,811) (69,652) (1,445,028)
Other income (expense):
Interest expense (3,940,104) (389,000) (4,329,104)
Other 101,042 546,611 -- 647,653
------------ ---------- -------- -----------
(3,839,062) 157,611 -- (3,681,451)
------------ ---------- -------- -----------
Net income (loss) $ (3,725,627) $(1,331,200) $ (69,652) $(5,126,479)
============ =========== ========= ===========
Income (loss) per share $ (57)
===========
Weighted average number of common shares outstanding 8,924,634
===========
</TABLE>
See accompanying headnote and notes to pro forma
consolidated financial statements (unaudited).
F-5
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30, 1997
<TABLE>
Consolidated Stuart
Pro Forma, Nissan
as Previously Stuart Pro Forma Consolidated
Reported (1) Nissan Adjustments Pro Forma
-------------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 33,770,697 $ 10,786,548 $ $ 44,557,245
Costs and expenses:
Cost of sales 22,517,391 9,535,333 32,052,724
Operating expense 15,596,791 1,410,934 34,826(4) 17,042,551
------------ ------------ ---------- ------------
38,114,182 10,946,267 34,826 49,095,275
------------ ------------ ---------- ------------
Income (loss)
from operations (4,343,485) (159,719) (34,826) (4,538,030)
------------ ------------ ---------- ------------
Other income (expense):
Interest expense (2,410,188) (112,758) (2,522,946)
Other 50,945 227,974 278,919
------------ ------------ ---------- ------------
(2,359,243) 115,216 -- (2,244,027)
------------ ------------ ---------- ------------
Net income (loss) $ (6,702,728) $ (44,503) $ (34,826) $ (6,782,057)
============ ============ ========== =============
Loss per share $ (.75)
=============
Weighted average number of common shares outstanding 9,023,739
=============
</TABLE>
See accompanying headnote and notes to pro forma
consolidated financial statements (unaudited).
F-6
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Notes to Pro Forma Consolidated Financial Information
(Unaudited)
1. Pro Forma Financial Information
The consolidated pro forma, as previously reported column represents the pro
forma consolidated balance sheet as of December 31, 1996 and the pro forma
consolidated statements of operations for the year ended December 31, 1996 and
the six months ended June 30, 1997 which were filed as Exhibit 99.2 in the
Company's 8-K/A dated June 27, 1997.
The pro forma consolidated balance sheet as of December 31, 1996 assumes the
Stuart Nissan acquisition and the other acquisitions previously reported were
consummated as of December 31, 1996 and the pro forma consolidated statements of
operations for the year ended December 31, 1996 and the six months ended June
30, 1997 assumes the Stuart Nissan acquisition and the other acquisitions
previously reported were consummated as of January 1, 1996.
2. Deferred Acquisition Costs
Reflects the accrual of acquisition costs incurred after December 31, 1996.
3. Acquisition of B&B Florida Enterprises, Inc.
The outstanding capital stock of B&B Florida Enterprises, Inc. d/b/a Stuart
Nissan was acquired for 86,546 shares of restricted common stock valued at
$6.3125 per share ($546,322) and $55,385 in acquisition costs.
The purchase price for Stuart Nissan is anticipated to be allocated as follows:
Fair value of assets acquired $ 3,686,691
Excess of cost over net assets acquired 2,786,076
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6,472,767
Fair value of liabilities assumed (5,871,060)
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Total purchase price of net assets acquired $ 601,707
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4. Amortization of Excess Cost over Fair Value of Assets Acquired
This adjustment reflects the amortization of excess cost over fair value of
assets acquired over 40 years.
F-7
