U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _______________
Commission file number 1-14082
SMART CHOICE AUTOMOTIVE GROUP, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-1469577
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5200 S. Washington Avenue, Titusville, Florida 32780
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(407) 269-9680
(Registrant's telephone number, including area code)
Eckler Industries, Inc.
-----------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X__ No ______
Indicate number or shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of November 14, 1997, 9,278,385 shares of the Registrant's Common
Stock were issued and outstanding.
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Index to Form 10-Q
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
Smart Choice Automotive Group, Inc.
Condensed Consolidated Balance Sheets as of
September 30, 1997 (unaudited) and December 31, 1996 5
Condensed Consolidated Statements of Operations for the
Three Months and Nine Months Ended
September 30, 1997 (unaudited) 7
Condensed Consolidated Statement of Stockholders' Equity
for the Nine Months Ended September 30, 1997 8
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997
and 1996 (unaudited) 9
Notes to Condensed Consolidated Financial Statements 11
Liberty Finance Company, Inc. and Affiliates
Condensed Combined Balance Sheet as of
December 31, 1996 15
Condensed Combined Statement of Operations for the
Period January 1, 1997 to February 12, 1997 (unaudited) 17
Condensed Combined Statement of Cash Flows for the
Period January 1, 1997 to February 12, 1997 (unaudited) 18
Condensed Combined Statement of Operations for the
Three Months and Nine Months Ended
September 30, 1996 (unaudited) 19
Condensed Combined Statement of Cash Flows for the
Nine Months Ended September 30, 1996 (unaudited) 20
-Continued-
1
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Index to Form 10-Q
(Continued)
Florida Finance Group, Inc., Suncoast Auto Brokers, Inc.
and Suncoast Auto Brokers Enterprises, Inc.
Condensed Combined Balance Sheet as of
December 31, 1996 21
Condensed Combined Statement of Operations for the
Period January 1, 1997 to January 28, 1997 (unaudited) 23
Condensed Combined Statement of Cash Flows for the
Period January 1, 1997 to January 28, 1997 (unaudited) 24
Condensed Combined Statement of Operations for the
Three Months and Nine Months Ended
September 30, 1996 (unaudited) 25
Condensed Combined Statement of Cash Flows for the
Nine Months Ended September 30, 1996 (unaudited) 26
Two Two Five North Military Trail Corporation d/b/a Miracle Mile
Motors and Palm Beach Finance Company, Inc.
Condensed Combined Balance Sheet as of
December 31, 1996 27
Condensed Combined Statement of Income for the
Period January 1, 1997 to February 14, 1997 (unaudited) 29
Condensed Combined Statement of Cash Flows for the
Period January 1, 1997 to February 14, 1997 (unaudited) 30
Condensed Combined Statement of Income for the
Three Months and Nine Months Ended
September 30, 1996 (unaudited) 31
Condensed Combined Statement of Cash Flows for the
Nine Months Ended September 30, 1996 (unaudited) 32
Eckler Industries, Inc.
Condensed Balance Sheet as of December 31, 1996 (unaudited) 33
Condensed Statement of Operations for the
Period January 1, 1997 to January 28, 1997 (unaudited) 35
Condensed Statement of Cash Flows for the
Period January 1, 1997 to January 28, 1997 (unaudited) 36
Condensed Statement of Operations for the Three Months and
Nine Months Ended September 30, 1996 (unaudited) 37
Condensed Statement of Cash Flows for the
Nine Months Ended September 30, 1996 (unaudited) 38
2
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Index to Form 10-Q
(Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 39
PART II-OTHER INFORMATION
Item 2. Changes in Securities 50
Item 6. Exhibits and Reports on Form 8-K 51
3
<PAGE>
PART I
SMART CHOICE AUTOMOTIVE GROUP, INC.
FINANCIAL INFORMATION
Item 1. Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
As of September 30, 1997 As of December 31, 1996
ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 897,569 $ -
Accounts Receivable 2,233,030 25,000
Finance Receivables:
Principal Balances, Net 35,766,667 -
Less: Allowance for Credit Losses (6,111,271) -
- ---------------------------------------------------------------------------------------------------------------------------
Finance Receivables, Net 29,655,396 -
Inventories, at Cost 13,301,911 -
Land Held for Resale 1,050,000 -
Property and Equipment, Net 4,983,423 22,454
Notes Receivable 4,575,612 400,000
Deferred Acquisition Costs 33,622 194,101
Deferred Debt Costs 1,142,062 24,735
Deferred Offering Costs 480,183 -
Deferred Loan Origination Costs 428,459 -
Goodwill 27,350,439 -
Prepaid Expenses 1,136,220 -
Deposits 148,122 50,000
Other Assets 126,498 -
- ---------------------------------------------------------------------------------------------------------------------------
$ 87,542,546 $ 716,290
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Condensed Consolidated Balance Sheets
- ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
As of September 30, 1997 As of December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank Overdraft $ - $ 82,884
Accounts Payable 4,017,752 438,890
Accrued Expenses 3,496,298 183,314
Deferred Income 48,476 -
Floorplan Payable 6,361,858 -
Capital Lease Obligations 424,028 -
Notes Payable 46,888,042 60,000
Convertible Debt 562,000 262,000
Acquisition Debt 10,064,475 -
Other Liabilities 73,245 -
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities 71,936,174 1,027,088
- ---------------------------------------------------------------------------------------------------------------------------
Redeemable Preferred Stock 3,939,851 385,039
Stockholders' Equity (Deficit):
Common Stock 92,784 54,884
Additional Paid In Capital 20,412,438 (46,933)
Accumulated Deficit (7,835,230) (703,788)
Unearned Compensation (1,003,471) -
- ---------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 11,666,521 (695,837)
- ---------------------------------------------------------------------------------------------------------------------------
$ 87,542,546 $ 716,290
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
Three Months And
Three Months Ended Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1997 September 30, 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Vehicle and Related Revenues:
Sales at New Car Dealerships $ 2,624,884 $ 2,624,884 $ -
Sales at Used Car Dealerships 10,941,288 22,730,067 -
Income on Finance Receivables 2,173,807 4,624,482 -
Income from Insurance & Training 352,347 1,003,603 -
Sales of Corvette Parts & Accessories 4,419,463 12,391,663 -
- ------------------------------------------------------------------------------------------------------------------------
20,511,789 43,374,699 -
- ------------------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related
Revenues:
Cost of Sales at New Car Dealerships 2,303,936 2,303,936 -
Cost of Sales at Used Car Dealerships 7,316,758 16,011,303 -
Cost of Insurance & Training 20,205 56,919 -
Cost of Corvette Parts & Accessories Sales 2,935,303 7,844,569 -
Provision for Credit Losses 862,370 2,411,181 -
- ------------------------------------------------------------------------------------------------------------------------
13,438,572 28,627,908 -
- ------------------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle
Related Activities 7,073,217 14,746,791 -
- ------------------------------------------------------------------------------------------------------------------------
Expenses:
Operating Expenses 5,332,674 15,352,522 313,397
Compensation Expense Related to
Employee Stock Options 29,848 3,244,615 -
- -------------------------------------------------------------------------------------------------------------------------
5,362,522 18,597,137 (313,397)
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Operations 1,710,695 (3,850,346) (313,397)
- -------------------------------------------------------------------------------------------------------------------------
Other Expense (Income):
Interest Expense 1,710,656 3,459,269 -
Other Income (135,689) (249,438) -
Miscellaneous Expense 1,047 71,265
- ------------------------------------------------------------------------------------------------------------------------
1,576,014 3,281,096 -
- ------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 134,681 $ (7,131,442) $ (313,397)
- ------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Per Share $ 0.01 $ (0.82) $ ( 0.08)
- ------------------------------------------------------------------------------------------------------------------------
Weighted Average Number of Shares
and Share Equivalents Outstanding 9,252,451 8,692,470 4,153,077
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1997
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Accumulated Unearned
Shares Amount Paid-in Capital Deficit Compensation Total
----------------------- --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 5,488,432 $ 54,884 $ (46,933) $ (703,788) $ -- $ (695,837)
Common stock issued for acquisitions 4,110,952 41,110 14,372,770 -- -- 14,413,880
Contribution and retirement
of common stock (331,428) (3,314) 3,314 -- -- --
Common stock options granted
to employees and directors -- -- 3,480,897 -- (1,211,099) 2,269,798
Common stock options granted to
lenders and consultants -- -- 1,054,075 -- -- 1,054,075
Treasury stock purchased
and retired (2,000) (20) (13,570) -- -- (13,590)
Issuance of common stock for
professional services 12,429 124 77,682 -- -- 77,806
Convertible debt issued at
a discount -- -- 525,000 -- -- 525,000
Common stock issued by
stockholders for cancellation
of common stock options -- -- 800,000 -- -- 800,000
Contribution to capital -- -- 159,203 -- -- 159,203
Amortization of unearned
compensation -- -- -- -- 207,628 207,628
Net Loss -- -- -- (7,131,442) -- (7,131,442)
--------- ------ ----------- ----------- ----------- -----------
Balance at September 30, 1997 9,278,385 $ 92,784 $20,412,438 $(7,835,230) $(1,003,471) $11,666,521
========= ========= =========== =========== =========== ===========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,131,442) $ (313,397)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Provision for credit losses 1,130,195 --
Common stock and options issued for consulting fees 127,806 3,808
Loss on disposal of fixed assets 16,649 --
Stock option compensation 3,244,615 --
Depreciation and amortization 1,257,016 --
Cash provided by (used for), net of effect of acquisitions: --
Accounts receivable (627,785) --
Inventory (4,432,309) --
Prepaid expenses 238,579 --
Other assets (423,190) --
Accounts payable 1,275,522 284,636
Accrued expenses 3,120,121 51,733
Deferred income (185,335) --
Other liabilities 32,813 --
Customer deposits (290,247) --
Floorplan payable 2,378,293 --
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (268,699) 26,780
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in finance receivables (6,220,717) --
Cash for acquisitions, net of cash acquired (8,100,020) --
Increase in advances to affiliate (3,184,129) --
Issuance of notes receivable (630,167) --
Increase in deposits (822,200) (16,899)
Increase in deferred acquisition costs (51,717) (63,537)
Purchase of property and equipment (656,434) (24,586)
Proceeds from sale of property and equipment 138,293 --
Increase in other assets (47,047) --
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (19,574,138) (105,022)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
9
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Continued)
- --------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from financing activities:
Principal payments on notes payable $ (2,960,890) $ --
Proceeds from issuance of Sirrom debt 7,500,000 --
Proceeds from issuance of notes payable 15,024,902 --
Increase in deferred debt and offering costs (667,132) (56,478)
Proceeds from issuance of preferred stock 590,000 135,000
Proceeds from issuance of common stock -- 1,000
Purchase of treasury stock (13,590) --
Proceeds from issuance of convertible debentures 1,350,000 --
Bank overdraft (82,884) --
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 20,740,406 79,522
- --------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 897,569 1,280
Cash and cash equivalents at beginning of period --
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 897,569 $ 1,280
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
10
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Notes to Condensed Consolidated Financial Statements
================================================================================
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements presented herein have
been prepared in accordance with the instructions to Form 10-Q, and do not
include all of the information and disclosures required by generally accepted
accounting principles. These statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1996. The
accompanying financial statements have not been audited by an independent
accountant in accordance with generally accepted auditing standards, but in the
opinion of management, such financial statements include all adjustments,
consisting only of normal recurring adjustments and accruals, to fairly report
the Company's financial position and results of operations. The results of
operations for the interim periods shown in this report are not necessarily
indicative of results to be expected for the fiscal year.
NOTE 2 - ACQUISITIONS
Smart Choice Automotive Group, Inc. (the "Company"), formerly named "Eckler
Industries, Inc.", operates new vehicle dealerships and a network of
self-financed used vehicle dealerships in Florida and underwrites, finances, and
services retail installment contracts generated from the sale of used cars by
its dealerships. The Company also operates automobile dealers training and
insurance divisions as well as Eckler's, one of the largest suppliers of
Corvette parts and accessories in the world. On January 28, 1997, pursuant to an
Agreement and Plan of Merger by and among Eckler Industries, Inc. ("EII"),
Eckler Acquisition Corporation, Ralph H. Eckler, Smart Choice Holdings, Inc.
("SCHI"), Thomas E. Conlan and Gerald C. Parker, dated December 30, 1996 (the
"Agreement"), EII acquired all of the issued and outstanding shares of common
stock of SCHI in exchange for 2,927,939 shares of EII Class A and 1,576,324.5
shares of EII Class B, common stock. Under the terms of the Agreement, the
shareholders of SCHI obtained approximately 64% of the voting rights of EII.
Although EII is the parent of SCHI following the transaction, the transaction
was accounted for as a purchase of EII by SCHI (a reverse acquisition in which
SCHI is considered the acquirer for accounting purposes), since the shareholders
of SCHI obtained a majority of the voting rights in EII as a result of the
transaction. Accordingly, the financial statements of the Company for the
periods prior to January 28, 1997 are those of SCHI, the assets and liabilities
of EII are recorded at their estimated fair values and the accounts of EII are
included in the consolidated financial statements from the date of acquisition
(January 28, 1997).
SCHI was incorporated on June 21, 1996 and was a development stage corporation
prior to January 28, 1997. On August 16, 1996, SCHI acquired the stock of First
Choice Auto Finance, Inc. ("FCAF"). On January 28, 1997, in addition to the
acquisition of EII, SCHI acquired the stock of Florida Finance Group, Inc.
("FFG"), Dealer Insurance Services, Inc. ("DIS"), and
11
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Continued)
================================================================================
Dealer Development Services, Inc. ("DDS"). FFG underwrites, finances and
services automobile retail installment contracts and was based in St.
Petersburg, Florida prior to moving to the Company headquarters in Titusville,
Florida. FCAF was incorporated on March 22, 1994 and had no significant
operations or assets until it acquired the assets of Suncoast Auto Brokers, Inc.
("SAB"), and Suncoast Auto Brokers Enterprises, Inc. ("SABE") on January 28,
1997. FCAF, based at the Company headquarters in Titusville, Florida, now
operates the three used vehicle lots in St. Petersburg and Tampa, previously
operated by SAB and SABE. DIS is based in Tampa, Florida and provides insurance
services for automobile dealers. DDS is based in Tampa and provides consulting
services and training programs to automobile dealers. The assets and liabilities
of FFG, FCAF, DIS and DDS are recorded at their estimated fair values and their
accounts are included in the consolidated financial statements from the date of
acquisition (January 28, 1997).
On February 12, 1997, the Company acquired the stock of Liberty Finance Company
("Liberty"). On the same date, FCAF acquired the stock of Wholesale
Acquisitions, Inc. ("WA"), and Team Automobile Sales and Finance, Inc. ("Team").
Liberty underwrites, finances and services automobile retail service contracts
and was based in Orlando, Florida prior to moving to the Company headquarters in
Titusville, Florida. WA and Team operate five self-financed used vehicle lots in
Orlando, Florida. The assets of Liberty, WA, and Team are recorded at their
estimated fair values and their accounts are included in the consolidated
financial statements from the date of acquisition (February 12, 1997).
On February 14, 1997, FCAF acquired the assets of Palm Beach Finance and
Mortgage Company ("PBF") and Two Two Five North Military Corp. d/b/a Miracle
Mile Motors ("MMM"). FFG services the receivables purchased from PBF, and FCAF
operates the used vehicle lot previously operated by MMM located in West Palm
Beach, Florida. The assets of PBF and MMM are recorded at their estimated fair
values and their accounts are included in the consolidated financial statements
from the date of acquisition (February 14, 1997).
On June 27, 1997, the Company acquired the assets of Strata Holdings, Inc.
("SHI") and Ready Finance, Inc. ("RFI"). FCAF operates the three used vehicle
lots previously operated by SHI in West Palm Beach, Florida and FFG services the
finance receivables purchased from RFI. The assets of RFI and SHI are recorded
at their estimated fair values and their accounts are included in the
consolidated financial statements from the date of acquisition (June 27, 1997).
On June 30, 1997, the Company acquired the assets of Roman Fedo, Inc. ("FEDO")
and Fedo Finance, Inc. ("FFI"). FCAF operates the used vehicle lot previously
operated by FEDO in West Palm Beach, Florida and FFG services the finance
receivables purchased from FFI. The assets of FEDO and FFI are recorded at their
estimated fair values and their accounts are included in the consolidated
financial statements from the date of acquisition (June 30, 1997).
12
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Continued)
===============================================================================
On August 21, 1997, the Company acquired the assets of Jack Winters Enterprises,
Inc. ("Winters"). These assets consisted of a retail automobile dealership
located in Stuart, Florida for Volvo automobiles and other consumer vehicles.
The business is being operated by First Choice Stuart 2, Inc., a 100% owned
subsidiary of the Company and is doing business as Motorcars of Stuart. The
assets of Winters are recorded at their estimated fair values and the accounts
are included in the consolidated financial statements from the date of
acquisition (August 21, 1997).
On August 29, 1997, the Company acquired the stock of B&B Enterprises, Inc.
("B&B"). B&B operates a retail automobile dealership located in Stuart, Florida
for Nissan automobiles and other consumer vehicles. The business is being
operated by First Choice Stuart 1, Inc., a 100% owned subsidiary of the Company
and is doing business as Stuart Nissan. The assets of B&B are recorded at their
estimated fair values and the accounts are included in the consolidated
financial statements from the date of acquisition (August 29, 1997).
NOTE 3 - SUMMARY OF FINANCE RECEIVABLES
The following is a summary of principal balances, net as of September 30, 1997:
September 30, 1997
-----------------
Contractually Scheduled Payments $ 48,502,838
Less: Unearned Finance Charges ( 12,736,171)
------------------
Principal Balances, Net $ 35,766,667
==================
NOTE 4 - PRESENTATION OF DEALERSHIP REVENUES AND COST OF REVENUES
Revenues from Company dealership operations consist of Sales at New Car
Dealerships, Sales at Used Car Dealerships, Income on Finance Receivables,
Income from Insurance and Training, and Sales of Corvette Parts and Accessories.
Vehicle and Vehicle Related cost of Revenues is comprised of Cost of Sales at
New Car Dealerships, Cost of Sales at Used Car Dealerships, Provision for Credit
Losses, Costs of Insurance and Training and Cost of Corvette Parts and
Accessories Sold.
13
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Continued)
===============================================================================
The prices at which the Company sells cars at its Used Car Dealerships and the
interest rate that it charges to finance these sales take into consideration
that the Company's primary customers are high-risk borrowers, many of whom
ultimately default. The Provision for Credit Losses reflects these factors and
is treated by the Company as a cost of both the future finance income derived on
the contract receivables originated at Company dealerships as well as a cost of
the sale of the cars themselves. Accordingly, unlike traditional car
dealerships, the Company does not present gross profit/margin in its Statement
of Operations calculated as Sales at New and Used Car Dealerships less cost of
sales at New and Used Car Dealerships.
NOTE 5 - EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is based upon the weighted average number of common
shares outstanding during each period. Common stock equivalents have not been
included since their effect would be antidilutive.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the nine months ended September 30, 1997 was
$2,342,707. The Company's non-cash investing and financing activities were as
follows:
Long term debt and capital lease obligations
incurred in connection with the purchase of
property and equipment $ 1,111,354
Promissory notes issued in connection with
acquisitions (see Note 2) $10,984,272
Common stock issued in connection with
acquisitions (see Note 2) $14,413,882
Common stock issued for services rendered $ 71,431
Note payable to stockholder cancelled and
contributed to capital $ 159,311
Long term debt incurred, proceeds received
in October 1997 $ 1,500,000
Preferred stock issued, proceeds received
in October 1997 $ 3,000,000
NOTE 7 - STOCKHOLDERS' EQUITY
During 1997 the Company authorized an increase in the par value of its common
stock from $.001 to $.01. All share information contained in the accompanying
financial statements have been retroactively adjusted to give effect to the
increase in par value.
14
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
Condensed Combined Balance Sheet
- ------------------------------------------------------------------------
As of December 31, 1996
- ------------------------------------------------------------------------
ASSETS
Cash and Cash Equivalents $ 163,184
Finance Receivables:
Principal Balances, Net 12,283,431
Less: Allowance for Credit Losses (900,000)
- ------------------------------------------------------------------------
Finance Receivables, Net 11,383,431
Inventories, at Cost 2,861,848
Land Held for Resale 1,050,000
Property and Equipment, Net 272,543
Other Assets 87,908
- ------------------------------------------------------------------------
$ 15,818,914
- ------------------------------------------------------------------------
15
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
Condensed Combined Balance Sheet
- ------------------------------------------------------------------------
As of December 31, 1996
- ------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 473,088
Accrued Expenses 116,077
Floorplan Payable 1,378,601
Notes Payable 13,059,981
Related Party Payable 197,237
Other Liabilities 113,781
- -----------------------------------------------------------------------
Total Liabilities 15,338,765
- -----------------------------------------------------------------------
Stockholders' Equity:
Common Stock 700
Stock Subscriptions (600)
Additional Paid In Capital 703,044
Deficit (222,995)
- ------------------------------------------------------------------------
Total Stockholders' Equity 480,149
- ------------------------------------------------------------------------
$ 15,818,914
- ------------------------------------------------------------------------
16
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
Condensed Combined Statement of Operations
(Unaudited)
- ----------------------------------------------------------------------
Period January 1, 1997
to February 12, 1997
- ----------------------------------------------------------------------
Vehicle and Related Revenues:
Sales of Used Vehicles $ 1,296,130
Income on Finance Receivables 458,028
Income from Insurance & Training 3,724
Income from Parts & Accessories 55,708
- ----------------------------------------------------------------------
1,813,590
- ----------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Used Vehicles Sold 1,394,719
Cost of Insurance & Training 2,524
Cost of Parts & Accessories Sold 49,173
Provision for Credit Losses 65,315
- ----------------------------------------------------------------------
1,511,731
- ----------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle
Related Activities 301,859
- ----------------------------------------------------------------------
Operating Expenses 434,243
- ----------------------------------------------------------------------
Loss from Operations (132,384)
- -----------------------------------------------------------------------
Other Expense:
Interest Expense 176,585
- ----------------------------------------------------------------------
176,585
- ----------------------------------------------------------------------
Net Loss $ (308,969)
- -----------------------------------------------------------------------
17
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
Condensed Combined Statement of Cash Flows
(Unaudited)
- -------------------------------------------------------------------------
Period January 1, 1997
to February 12, 1997
- -------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (308,969)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 27,846
Cash provided by (used for):
Accounts receivable (35,150)
Inventory 691,586
Prepaid expenses (25,498)
Other assets 46,244
Accounts payable 218,244
Accrued expenses 28,174
Floorplan payable (518,081)
- -------------------------------------------------------------------------
Net cash provided by operating activities 124,396
- -------------------------------------------------------------------------
Cash flows from investing activities:
Decrease in finance receivables 234,795
Purchase of property and equipment (2,410)
Increase in other assets (45,375)
- -------------------------------------------------------------------------
Net cash provided by investing activities 187,010
- -------------------------------------------------------------------------
Cash flows from financing activities:
Net repayments from related party (197,237)
Principal payments on notes payable (241,697)
Distribution to stockholder (5,000)
- -------------------------------------------------------------------------
Net cash used in financing activities (443,934)
- -------------------------------------------------------------------------
Net decrease in cash and cash equivalents (132,528)
Cash and cash equivalents at beginning of period 163,184
- -------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 30,656
- -------------------------------------------------------------------------
18
<PAGE>
<TABLE>
<CAPTION>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
Condensed Combined Statement of Operations
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vehicle and Related Revenues:
Sales of Used Vehicles $ 4,583,912 $ 12,864,005
Income on Finance Receivables 773,180 2,237,992
Income from Insurance & Training 54,390 286,255
Income from Parts & Accessories 371,267 1,138,395
- -------------------------------------------------------------------------------------------------------------------------
5,782,749 16,526,647
- -------------------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Used Vehicles Sold 4,113,771 10,728,584
Cost of Insurance & Training 41,860 132,649
Cost of Parts & Accessories Sold 257,668 733,962
Provision for Credit Losses 931,434 993,590
- -------------------------------------------------------------------------------------------------------------------------
5,344,733 12,588,785
- -------------------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle Related
Activities 438,016 3,937,862
- -------------------------------------------------------------------------------------------------------------------------
Operating Expenses 1,092,557 3,259,890
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Operations (654,541) 677,972
- -------------------------------------------------------------------------------------------------------------------------
Other Expense (Income):
Interest Expense 358,433 956,478
Other Expense (Income) 2,102 (22,977)
Miscellaneous Expense (Income) (277) 34,565
- -------------------------------------------------------------------------------------------------------------------------
360,258 968,066
- -------------------------------------------------------------------------------------------------------------------------
Net Loss $ (1,014,799) $ (290,094)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
Condensed Combined Statement of Cash Flows
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (290,094)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 43,714
Provision for credit losses 1,081,967
Cash provided by (used for):
Inventory (998,735)
Other assets (49,359)
Accounts and drafts payable 640,250
Accrued expenses (9,767)
Floorplan payable 175,423
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 593,399
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in finance receivables (2,771,381)
Purchase of property and equipment (47,996)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,819,377)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net repayments to related party (182,096)
Distributions to stockholder (305,081)
Proceeds from issuance of notes payable 2,756,690
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,269,513
- ---------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 43,535
Cash and cash equivalents at beginning of period 8,368
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 51,903
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
Condensed Combined Balance Sheet
- ---------------------------------------------------------------------------------------------------------------------
As of December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash and Cash Equivalents $ 20,272
Finance Receivables:
Principal Balances, Net 5,479,404
Less: Allowance for Credit Losses (1,095,645)
--------------------------------------------------------------------------------------------------------------------
Finance Receivables, Net 4,383,759
Inventories, at Cost 440,317
Property and Equipment, Net 111,950
Prepaid Expenses 44,705
Other Assets 2,360
- ---------------------------------------------------------------------------------------------------------------------
$ 5,003,363
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
Condensed Combined Balance Sheet
- ---------------------------------------------------------------------------------------------------------------------
As of December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Accounts Payable $ 95,093
Accrued Expenses 16,505
Deferred Income 134,571
Notes Payable 5,018,343
Stockholder Loans 345,250
Related Party Payable 811,600
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities 6,421,362
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' Deficit:
Common Stock 1,600
Additional Paid In Capital 220,129
Deficit (1,639,728)
- ---------------------------------------------------------------------------------------------------------------------
Total Stockholders' Deficit (1,417,999)
- ---------------------------------------------------------------------------------------------------------------------
$ 5,003,363
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
Condensed Combined Statement of Operations
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Vehicle and Related Revenues:
Sales of Used Vehicles $ 225,599
Income on Finance Receivables 162,203
Income from Parts & Accessories 1,235
- ---------------------------------------------------------------------------------------------------------------------
389,037
- ---------------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Used Vehicles Sold 272,312
Cost of Parts & Accessories Sold 8,970
Provision for Credit Losses 8,538
- ---------------------------------------------------------------------------------------------------------------------
289,820
- ---------------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle Related Activities 99,217
- ---------------------------------------------------------------------------------------------------------------------
Operating Expenses 152,053
- ---------------------------------------------------------------------------------------------------------------------
Loss from Operations (52,836)
- ----------------------------------------------------------------------------------------------------------------------
Other Expense:
Interest Expense 64,061
- ---------------------------------------------------------------------------------------------------------------------
64,061
- ---------------------------------------------------------------------------------------------------------------------
Net Loss $ (116,897)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
Condensed Combined Statement of Cash Flows
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (116,897)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 2,750
Cash provided by (used for):
Inventory 221,697
Prepaid expenses 650
Accounts payable (67,993)
Accrued expenses 87,749
Deferred income (4,464)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 123,492
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in finance receivables (25,306)
Increase in other assets (750)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (26,056)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on notes payable (93,087)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (93,087)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 4,349
Cash and cash equivalents at beginning of period 20,272
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 24,621
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
Condensed Combined Statement of Operations
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vehicle and Related Revenues:
Sales of Used Vehicles $ 654,557 $ 3,433,326
Income on Finance Receivables 447,974 1,231,551
- ----------------------------------------------------------------------------------------------------------------------
1,102,531 4,664,877
- ----------------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Used Vehicles Sold 517,782 2,791,134
Provision for Credit Losses 72,115 255,421
- ----------------------------------------------------------------------------------------------------------------------
589,897 3,046,555
- ----------------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle
Related Activities 512,634 1,618,322
- ----------------------------------------------------------------------------------------------------------------------
Operating Expenses 411,039 1,308,869
- ----------------------------------------------------------------------------------------------------------------------
Income from Operations 101,595 309,453
- ----------------------------------------------------------------------------------------------------------------------
Other Expense:
Interest Expense 192,188 509,309
- ----------------------------------------------------------------------------------------------------------------------
192,188 509,309
- ----------------------------------------------------------------------------------------------------------------------
Net Loss $ (90,593) $ (199,856)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
Condensed Combined Statement of Cash Flows
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (199,856)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 20,251
Cash provided by (used for):
Accounts receivable (27,774)
Inventory 315,729
Prepaid expenses (8,093)
Accounts payable (239,387)
Accrued expenses 2,391
Deferred income 68,366
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (68,373)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in finance receivables (1,299,233)
Purchase of property and equipment (3,514)
Decrease in other assets (860)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,303,607)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net advances from related party (519,937)
Proceeds from issuance of notes payable 1,852,224
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,332,287
- ---------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (39,693)
Cash and cash equivalents at beginning of period 50,701
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 11,008
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
d/b/a MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
Condensed Combined Balance Sheet
- ---------------------------------------------------------------------------------------------------------------
As of December 31, 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash and Cash Equivalents $ 192,999
Finance Receivables:
Principal Balances, Net 5,041,682
Less: Allowance for Credit Losses (984,000)
- ---------------------------------------------------------------------------------------------------------------
Finance Receivables, Net 4,057,682
Inventories, at Cost 799,358
Property and Equipment, Net 10,086
Other Assets 48,275
- ---------------------------------------------------------------------------------------------------------------
$ 5,108,400
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
d/b/a MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
Condensed Combined Balance Sheet
- -----------------------------------------------------------------------------------------------------------------
As of December 31, 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 220,887
Accrued Expenses 128,206
Notes Payable 300,000
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities 649,093
- -----------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common Stock 800
Additional Paid In Capital 20,000
Retained Earnings 4,438,507
- -----------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 4,459,307
- -----------------------------------------------------------------------------------------------------------------
$ 5,108,400
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
d/b/a MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
Condensed Combined Statement of Income
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Period January 1, 1997
to February 14, 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Vehicle and Related Revenues:
Sales of Used Vehicles $ 1,334,472
Income on Finance Receivables 178,098
- ---------------------------------------------------------------------------------------------------------------------
1,512,570
- ---------------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Used Vehicles Sold 942,541
Provision for Credit Losses 118,273
- ---------------------------------------------------------------------------------------------------------------------
1,060,814
- ---------------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle Related
Activities 451,756
- ---------------------------------------------------------------------------------------------------------------------
Operating Expenses 207,336
- ---------------------------------------------------------------------------------------------------------------------
Income from Operations 244,420
- ---------------------------------------------------------------------------------------------------------------------
Other Expense:
Interest Expense 3,694
- ---------------------------------------------------------------------------------------------------------------------
3,694
- ---------------------------------------------------------------------------------------------------------------------
Net Income $ 240,726
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
d/b/a MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
Condensed Combined Statement of Cash Flows
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------
Period January 1, 1997
to February 14, 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 240,726
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 306
Cash provided by (used for):
Inventory 16,202
Other assets 10,184
Accounts payable 9,858
Accrued expenses 9,311
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 286,587
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in finance receivables (363,699)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (363,699)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Distribution to stockholder (61,618)
Proceeds from issuance of notes payable 100,000
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 38,382
- --------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (38,730)
Cash and cash equivalents at beginning of period 192,999
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 154,269
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
d/b/a MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
Condensed Combined Statement of Income
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vehicle and Related Revenues:
Sales of Used Vehicles $ 2,542,454 $ 8,510,450
Income on Finance Receivables 311,443 905,195
- ---------------------------------------------------------------------------------------------------------------------
2,853,897 9,415,645
- ---------------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Used Vehicles Sold 1,907,731 6,706,207
Provision for Credit Losses 537,902 865,030
- ---------------------------------------------------------------------------------------------------------------------
2,445,633 7,571,237
- ---------------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle
Related Activities 408,264 1,844,408
- ---------------------------------------------------------------------------------------------------------------------
Operating Expenses 427,724 1,384,194
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) from Operations (19,460) 460,214
- ---------------------------------------------------------------------------------------------------------------------
Other Expense:
Interest Expense 5,222 13,828
- ---------------------------------------------------------------------------------------------------------------------
5,222 13,828
- ---------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (24,682) $ 446,386
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
TWO TWO FIVE NORTH MILITARY TRAIL CORPORATION
d/b/a MIRACLE MILE MOTORS
PALM BEACH FINANCE COMPANY, INC.
Condensed Combined Statement of Cash Flows
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 446,386
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,311
Cash provided by (used for):
Inventory (21,501)
Other assets (105,588)
Accounts payable and accrued expenses (154,154)
Drafts payable 6,569
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 173,023
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in finance receivables (458,140)
Purchase of property and equipment (8,851)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (466,991)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under line of credit 185,000
Repayment of stockholder loan (50,880)
Distributions to stockholder (130,479)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,641
- ---------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (290,327)
Cash and cash equivalents at beginning of period 304,914
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 14,587
- ---------------------------------------------------------------------------------------------------------------------
Non-cash investing and financing activities:
Property distributed to stockholder $ 101,027
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
ECKLER INDUSTRIES, INC.
Condensed Balance Sheet
(Unaudited)
- -----------------------------------------------------------------------------
As of December 31, 1996
- -----------------------------------------------------------------------------
ASSETS
Cash and Cash Equivalents $ 241,652
Accounts Receivable 153,285
Inventories, at Cost 1,307,525
Property, Plant and Equipment, Net 2,512,645
Deferred Tax Asset 330,610
Prepaid Expenses 1,385,398
Other Assets 108,693
- -----------------------------------------------------------------------------
$ 6,039,808
- -----------------------------------------------------------------------------
33
<PAGE>
<TABLE>
<CAPTION>
ECKLER INDUSTRIES, INC.
Condensed Balance Sheet
(Unaudited)
- -------------------------------------------------------------------------------------------------------------
As of December 31, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 545,765
Accrued Expenses 309,613
Notes Payable 2,706,206
Deferred Income Taxes 402,814
- -------------------------------------------------------------------------------------------------------------
Total Liabilities 3,964,398
- -------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Class A Common Stock: $.01 Par Value; 10,000,000
shares authorized; 1,736,750 issued and outstanding 17,367
Class B Common Stock: $.01 Par Value; 5,000,000
shares authorized; 510,375 issued and outstanding 5,104
Additional Paid In Capital 3,419,251
Note Receivable Class A Common Stock (326,700)
Deficit (1,039,612)
- -------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 2,075,410
- -------------------------------------------------------------------------------------------------------------
$ 6,039,808
- -------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
ECKLER INDUSTRIES, INC.
Condensed Statement of Operations
(Unaudited)
- -------------------------------------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Vehicle and Related Revenues:
Income from Parts & Accessories $ 853,881
- -------------------------------------------------------------------------------------------------------------
853,881
- -------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Parts & Accessories Sold 582,117
- -------------------------------------------------------------------------------------------------------------
582,117
- -------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and Vehicle
Related Activities 271,764
- -------------------------------------------------------------------------------------------------------------
Operating Expenses 432,006
- -------------------------------------------------------------------------------------------------------------
Loss from Operations (160,242)
- -------------------------------------------------------------------------------------------------------------
Other Expense (Income):
Interest Expense 23,728
Other Income (6,412)
- ------------------------------------------------------------------------------------------------------------
17,316
- -------------------------------------------------------------------------------------------------------------
Net Loss $ (177,558)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
ECKLER INDUSTRIES, INC.
Condensed Statement of Cash Flows
(Unaudited)
- ------------------------------------------------------------------------------------------------------------
Period January 1, 1997
to January 28, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (177,558)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 37,332
Cash provided by (used for):
Accounts receivable (9,325)
Inventory (113,614)
Prepaid expenses 56,229
Accounts payable 125,680
Accrued expenses 637
- ------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (80,619)
- ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (21,911)
Increase in other assets (24,687)
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (46,598)
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on notes payable (14,136)
Proceeds from issuance of notes payable 10,750
- ------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (3,386)
- ------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (130,603)
Cash and cash equivalents at beginning of period 241,652
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 111,049
- ------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
ECKLER INDUSTRIES, INC.
Condensed Statement of Operations
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vehicle and Related Revenues:
Sales of Parts & Accessories $ 3,748,599 $ 12,086,629
- ------------------------------------------------------------------------------------------------------------------------
Cost of Vehicle and Vehicle Related Revenues:
Cost of Parts & Accessories Sold 2,401,027 7,843,654
- ------------------------------------------------------------------------------------------------------------------------
Net Revenues from Vehicle Sales and
Vehicle Related Activities 1,347,572 4,242,975
- ------------------------------------------------------------------------------------------------------------------------
Operating Expenses 1,609,631 4,408,191
- ------------------------------------------------------------------------------------------------------------------------
Loss from Operations (262,059) (165,216)
- ------------------------------------------------------------------------------------------------------------------------
Other Expense (Income):
Interest Expense 108,937 258,601
Other Expense (Income) 81,298 (84,203)
- ------------------------------------------------------------------------------------------------------------------------
190,235 174,398
- ------------------------------------------------------------------------------------------------------------------------
Loss Before Income Taxes (452,294) (339,614)
- ------------------------------------------------------------------------------------------------------------------------
Income Taxes 154,500 107,700
- ------------------------------------------------------------------------------------------------------------------------
Net Loss $ (297,794) $ (231,914)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
ECKLER INDUSTRIES, INC.
Condensed Statement of Cash Flows
(Unaudited)
- -----------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (231,914)
Adjustments to reconcile net loss to
net cash used in operating activities:
Deferred income taxes (92,600)
Issuance of common stock for consulting fees 146,512
Loss on disposal of fixed assets 160
Depreciation and amortization 291,031
Cash provided by (used for):
Accounts receivable (17,306)
Inventory (429,460)
Prepaid expenses (146,458)
Accounts payable 148,837
Accrued expenses 101,439
- -----------------------------------------------------------------------------------------------------------
Net cash used in operating activities (229,759)
- -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (44,465)
Proceeds of sale of property and equipment 3,600
Increase in other assets (3,018)
- -----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (43,883)
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Bank overdraft 289,994
Principal payments on notes payable (135,375)
Payments on capital leases (29,444)
Proceeds from issuance of long-term debt 17,467
Proceeds from exercise of stock options 131,000
- ----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 273,642
- ----------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents --
Cash and cash equivalents at beginning of period --
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following analysis of the Company's financial condition as of
September 30, 1997 and the Company's results of operations for the three months
ended and nine months ended September 30, 1997 and 1996 should be read in
conjunction with the Company's financial statements and notes thereto included
elsewhere in this report.
BACKGROUND
Smart Choice Automotive Group, Inc. (the "Company"), formerly named "Eckler
Industries, Inc.", operates new vehicle dealerships and a network of
self-financed used vehicle dealerships in Florida and underwrites, finances, and
services retail installment contracts generated from the sale of used cars by
its dealerships. The Company also operates automobile dealers training and
insurance divisions as well as Eckler's, one of the largest suppliers of
Corvette parts and accessories in the world. On January 28, 1997, pursuant to an
Agreement and Plan of Merger by and among Eckler Industries, Inc. ("EII"),
Eckler Acquisition Corporation, Ralph H. Eckler, Smart Choice Holdings, Inc.
("SCHI"), Thomas E. Conlan and Gerald C. Parker, dated December 30, 1996 (the
"Agreement"), EII acquired all of the issued and outstanding shares of common
stock of SCHI in exchange for 2,927,939 shares of EII Class A and 1,576,324.5
shares of EII Class B, common stock. Under the terms of the Agreement, the
shareholders of SCHI obtained approximately 64% of the voting rights of EII.
Although EII is the parent of SCHI following the transaction, the transaction
was accounted for as a purchase of EII by SCHI (a reverse acquisition in which
SCHI is considered the acquirer for accounting purposes), since the shareholders
of SCHI obtained a majority of the voting rights in EII as a result of the
transaction. Accordingly, the financial statements of the Company for the
periods prior to January 28, 1997 are those of SCHI, the assets and liabilities
of EII are recorded at their estimated fair values and the accounts of EII are
included in the consolidated financial statements from the date of acquisition
(January 28, 1997).
SCHI was incorporated on June 21, 1996 and was a development stage corporation
prior to January 28, 1997. On August 16, 1996, SCHI acquired the stock of First
Choice Auto Finance, Inc. ("FCAF"). On January 28, 1997, in addition to the
acquisition of EII, SCHI acquired the stock of Florida Finance Group, Inc.
("FFG"), Dealer Insurance Services, Inc. ("DIS"), and Dealer Development
Services, Inc. ("DDS"). FFG underwrites, finances and services automobile retail
installment contracts and was based in St. Petersburg, Florida prior to moving
to the Company headquarters in Titusville, Florida. FCAF was incorporated on
March 22, 1994 and had no significant operations or assets until it acquired the
assets of Suncoast Auto Brokers, Inc. ("SAB"), and Suncoast Auto Brokers
Enterprises, Inc. ("SABE") on January 28, 1997. FCAF, based at the Company
headquarters in Titusville, Florida, now operates the three used vehicle lots in
St. Petersburg and Tampa, previously operated by SAB and SABE. DIS is based in
Tampa, Florida and provides insurance services for automobile dealers. DDS is
based in Tampa and provides consulting services and training programs to
automobile dealers. The assets and liabilities of FFG, FCAF, DIS and DDS are
recorded at their estimated fair values and their accounts are included in the
consolidated financial statements from the date of acquisition (January 28,
1997).
39
<PAGE>
On February 12, 1997, the Company acquired the stock of Liberty Finance Company
("Liberty"). On the same date, FCAF acquired the stock of Wholesale
Acquisitions, Inc. ("WA"), and Team Automobile Sales and Finance, Inc. ("Team").
Liberty underwrites, finances and services automobile retail service contracts
and was based in Orlando, Florida prior to moving to the Company headquarters in
Titusville, Florida. WA and Team operate five self-financed used vehicle lots in
Orlando, Florida. The assets of Liberty, WA, and Team are recorded at their
estimated fair values and their accounts are included in the consolidated
financial statements from the date of acquisition (February 12, 1997).
On February 14, 1997, FCAF acquired the assets of Palm Beach Finance and
Mortgage Company ("PBF") and Two Two Five North Military Corp. d/b/a Miracle
Mile Motors ("MMM"). FFG services the receivables purchased from PBF, and FCAF
operates the used vehicle lot previously operated by MMM located in West Palm
Beach, Florida. The assets of PBF and MMM are recorded at their estimated fair
values and their accounts are included in the consolidated financial statements
from the date of acquisition (February 14, 1997).
On June 27, 1997, the Company acquired the assets of Strata Holdings, Inc.
("SHI") and Ready Finance, Inc. ("RFI"). FCAF operates the three used vehicle
lots previously operated by SHI in West Palm Beach, Florida and FFG services the
finance receivables purchased from RFI. The assets of RFI and SHI are recorded
at their estimated fair values and their accounts are included in the
consolidated financial statements from the date of acquisition (June 27, 1997).
On June 30, 1997, the Company acquired the assets of Roman Fedo, Inc. ("FEDO")
and Fedo Finance, Inc. ("FFI"). FCAF operates the used vehicle lot previously
operated by FEDO in West Palm Beach, Florida and FFG services the finance
receivables purchased from FFI. The assets of FEDO and FFI are recorded at their
estimated fair values and their accounts will be included in the consolidated
financial statements from the date of acquisition (June 30, 1997).
On August 21, 1997, the Company acquired the assets of Jack Winters Enterprises,
Inc. ("Winters"). These assets consisted of a retail automobile dealership
located in Stuart, Florida for Volvo automobiles and other consumer vehicles.
The business is being operated by First Choice Stuart 2, Inc., a 100% owned
subsidiary of the Company and is doing business as Motorcars of Stuart. The
assets of Winters are recorded at their estimated fair values and the accounts
are included in the consolidated financial statements from the date of
acquisition (August 21, 1997).
On August 29, 1997, the Company acquired the stock of B&B Enterprises, Inc.
("B&B"). B&B operates a retail automobile dealership located in Stuart, Florida
for Nissan automobiles and other consumer vehicles. The business is being
operated by First Choice Stuart 1, Inc., a 100% owned subsidiary of the Company
and is doing business as Stuart Nissan. The assets of B&B are recorded at their
estimated fair values and the accounts are included in the consolidated
financial statements from the date of acquisition (August 29, 1997).
40
<PAGE>
RESULTS OF OPERATIONS
Comparison of consolidated three months ended September 30, 1997 to combined
three months ended September 30, 1996.
The following table sets forth revenues and expenses in aggregate
dollars and as a percentage of total revenue for the Company and its
predecessors, EII, FFG and affiliates, Liberty and affiliates, and PBF and
affiliate, for the three months ended September 30, 1997 and 1996. As a result
of the acquisitions discussed above, and the related differences in cost basis
of the assets and liabilities of the Company after the acquisitions and the cost
bases of the predecessors, the results of operations for the three months ended
September 30, 1997 and three months ended September 30, 1996 are not comparable.
Such lack of comparability is explained in the discussion below.
<TABLE>
<CAPTION>
1997 1996
-------------------- ---------------
(Dollars in Thousands)
Company (1) Combined (2)
<S> <C> <C> <C> <C>
Vehicle and Related Revenues $ 20,512 100.0% $ 13,488 100.0%
Cost of Vehicle and Related Revenues 13,439 65.5% 10,781 79.9%
-------- ---- -------- -----
Net Revenues from Vehicles Sales and
Vehicle Related Revenues 7,073 34.5% 2,707 20.1%
Operating Expenses 5,362 26.1% 3,854 28.6%
-------- ---- -------- -----
Operating Income 1,711 8.3% (1,147) (8.5%)
Interest Expense (1,711) (8.3)% (665) (4.9%)
Other Income 134 0.7% 71 .5%
-------- ----- -------- ------
Net Income (Loss) $ 134 (0.7)% $(1,741) (12.9%)
======== ===== ======= ======
</TABLE>
(1) The financial data for 1997 was derived from the unaudited consolidated
financial statements of the Company. Because the financial data for 1997
includes data of the Company and its predecessors which are presented on
different cost bases, such data is not comparable to the financial data for
1996.
(2) The financial data for 1996 is the sum of the actual results of the Company
and its four predecessors included herein. Because the financial data of
the predecessors are presented on cost bases different from those of the
Company after the acquisitions, the 1996 data is not comparable to the
financial data for 1997.
VEHICLE AND RELATED REVENUES.
The Company experienced a $7.0 million or a 52% increase in revenues for
the three months ended September 30, 1997 compared to the combined results of
the Company and its predecessors for the same period in 1996. The increase was
primarily the result of three elements: (i) the 1997 amounts include revenues
from additional acquired companies which are not reflected as Predecessors,
including $2.6 million in new car sales; (ii) income on finance receivables
increased by $0.6 million due to growth of the Company's receivables portfolio
since the merger; and (iii) used car sales increased by approximately $3.2
million due to the inclusion of revenues from additional acquired companies and
the opening of additional used car dealerships.
41
<PAGE>
COST OF VEHICLE AND RELATED REVENUES.
Cost of vehicle and related revenues was $13.4 million for the three months
ended September 30, 1997 compared to $10.8 million for the Company and its
predecessors during the same period in 1996, an increase of $2.7 million or
24.7%. The increase was primarily the result of the increase in used car sales
and an additional $2.3 million attributable to new car sales which are not
reflected in the 1996 amounts.
OPERATING EXPENSES.
Operating expenses consist of selling and marketing, general and administrative
expenses, and depreciation and amortization. Operating expenses were $5.4
million for the three months ended September 30, 1997 compared to $3.9 million
for the Company and its predecessors for the same period in 1996, an increase of
39.1%. The increase reflects additional expenses related to increased company
dealership activity, and continued development of corporate infrastructure
resulting from the merger, offset only partially by certain decreases in costs
resulting from the consolidation of the acquired companies' management
functions.
INTEREST EXPENSE.
Interest expense totaled $1.7 million for the three months ended September 30,
1997 compared to $0.7 million for the Company and its predecessors during the
same period in 1996, an increase of 157.3%. This resulted primarily from
interest on debt attributable to the merger and related acquisitions and
increased debt on the Company's revolving credit facility associated with the
increased balance of finance receivables. In addition, the Company incurred
interest expense on a $3,500,000 note and a $4,000,000 note more fully discussed
in "Liquidity and Capital Resources."
Comparison of combined nine months ended September 30, 1997 to combined nine
months ended September 30, 1996.
The following table sets forth revenues and expenses in aggregate
dollars and as a percentage of total revenue for the Company and its
predecessors, EII, FFG and affiliates, Liberty and affiliates, and PBF and
affiliate, for the nine months ended September 30, 1997 and 1996. As a result of
the acquisitions discussed above, and the related differences in cost basis of
the assets and liabilities of the Company after the acquisitions and the cost
bases of the predecessors, the results of operations for the past two years are
not comparable. Such lack of comparability is explained in the discussion below.
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------
(Dollars in Thousands)
Combined (1) Combined (2)
-------------------------- ---------------------
<S> <C> <C> <C> <C>
Vehicle and Related Revenues $ 47,944 100.0% $ 42,694 100.0%
Cost of Vehicle and Related Revenues 32,072 66.9% 31,050 72.7%
------ ----- --------- ------
Net Revenues from Vehicles Sales and
Vehicle Related Revenues 15,872 33.1% 11,644 27.3%
Operating Expenses 19,823 41.3% 10,675 25.0%
------ ---- ------ ------
Operating Income (Loss) (3,951) (8.2)% 969 2.3%
Interest Expense (3,727) (7.8)% (1,738) (4.1)%
Other Income 184 0.3% 180 0.4%
-------- ----- ---------- ------
Net Income (Loss) $ (7,494) (15.6)% $ (589) (1.4)%
======== ===== ========= =====
</TABLE>
42
<PAGE>
(1) The combined financial data for 1997 is the sum of the actual results from
the Company and its predecessors. It was derived from the unaudited
consolidated financial statements of the Company, which includes the
unaudited combined financial statements of the four predecessors from the
date of acquisition to September 30, 1997, and the financial data from the
unaudited combined financial statements included herein of the four
predecessors from January 1, 1997 to the date of acquisition. Because the
financial data for 1997 includes data of the Company and its predecessors
which are presented on different cost bases, such data are not comparable
to the financial data for 1996.
(2) The financial data for 1996 is the sum of the actual results of the Company
and its four predecessors included herein. Because the financial data of
the predecessors are presented on cost bases different from those of the
Company after the acquisitions, the 1996 data is not comparable to the
financial data for 1997.
VEHICLE AND RELATED REVENUES.
The Company (combined with its predecessors) experienced a $5.3 million or
12.3% increase in revenues for the nine months ended September 30, 1997 compared
to the combined results of the Company and its predecessors for the same period
in 1996. The increase was primarily the result of three elements: (i) the 1997
amounts include revenues from additional acquired companies which are not
reflected as predecessors, including $2.6 million in new car sales; (ii) income
on finance receivables increased by $1.1 million due to growth of the Company's
receivables portfolio since the merger; and (iii) used car sales increased by
approximately $800,000 with the acquisition and opening of additional
dealerships locations in 1997.
COST OF VEHICLE AND RELATED REVENUES.
Cost of vehicle and related revenues was $32.1 million for the nine months
ended September 30, 1997 compared to $31.1 million for the Company and its
predecessors during the same period in 1996, an increase of $1 million or 3.3%.
Cost of sales for the 1997 period includes $2.3 million attributable to new car
sales which are not reflected in the 1996 amounts. In addition, provision for
credit losses increased by $0.5 million due to management's assessment of the
increase in finance receivables and the addition of acquired finance
receivables. The cost of sales for the Company's used car dealerships decreased
slightly as the Company achieved profit margins of 33.1% for the nine months
ended September 30, 1997, compared to 27.3% for the same period in 1996.
OPERATING EXPENSES.
Operating expenses consist of selling and marketing, general and
administrative expenses, and depreciation and amortization. Operating expenses
were $19.8 million for the nine months ended September 30, 1997 compared to
$10.7 million for the Company and its predecessors for the same period in 1996,
an increase of $9.1 million. The increase included several non-recurring
charges, including: (i) the recognition of compensation expense of $3.2 million
from the issuance of stock options to attract key management personnel; (ii)
$1.7 million in settlement of various consulting agreements of the Company and
consulting agreements of its predecessors; (iii) $800,000 in settlement of
outstanding stock options; (iv) $400,000 in one-time accounting and other
professional fees for predecessors which was required for current reporting as a
merged public company; and (v) $225,000 in write-off of certain prepaid royalty
expenses. The increase also reflects additional expenses related to increased
company dealership activity, and continued development of corporate
infrastructure resulting from the merger. For example, the Company greatly
expanded the headquarters staffing in information systems, credit underwriting,
collections, and accounting during the period to provide for current and future
growth while gradually phasing out the related local dealership staffs and
equipment as the systems ran in parallel to ensure accuracy. These costs were
offset only partially by certain decreases in costs resulting from the
consolidation of the acquired companies' management functions.
43
<PAGE>
INTEREST EXPENSE.
Interest expense totaled $3.7million for the nine months ended September
30, 1997 compared to $1.7 million for the predecessors during the same period in
1996, an increase of $2.0 million or 114%. This resulted primarily from interest
on debt attributable to the merger and related acquisitions and increased debt
on the Company's revolving credit facility associated with the increased balance
of finance receivables. In addition, the Company incurred interest expense on a
$3.5 million note and a $4.0 million note more fully discussed in "Liquidity of
Capital Resources."
ALLOWANCE FOR CREDIT LOSSES.
The allowance for credit losses on finance receivables (the "Allowance") at
the Company's used vehicle dealerships was 17.1% of the outstanding principal
balance as of September 30, 1997. The following table reflects activity in the
Allowance, as well as information regarding charge off activity, on finance
receivables originated at the Company dealerships for the three and six months
ended September 30, 1997.
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
Allowance Activity:
Balance, beginning of period $ 6,165,385 $ 4,065,645
Allowance on acquired finance
receivables -- 1,920,307
Provision for credit losses 1,083,294 2,632,105
Net charge offs (1,137,408) (2,506,786)
------------ -------------
Balance, end of period $ 6,111,271 $ 6,111,271
============ =============
Charge off Activity:
Principal Balances:
Collateral Repossessed $ 2,647,897 $ 5,049,714
Other -- 36,637
------------ -------------
Total Principal Balances 2,647,897 5,086,351
Recoveries, net 1,510,489 2,579,565
------------ -------------
Net Charge Offs $ 1,137,408 $ 2,506,786
============ =============
Analysis of the portfolio delinquencies is considered in evaluating the adequacy
of the Allowance. The following table reflects the principal balances of current
and delinquent finance receivables as a percentage of total outstanding finance
receivable principal balances as of September 30, 1997.
September 30, 1997
Aging Percentages:
Principal balances current 89.13%
Principal balances 31 to 60 days 5.04%
Principal balances over 60 days 5.83%
44
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
- -------------------------------
The following table sets forth the major components of the increase
(decrease) in the Company's cash and cash equivalents:
<TABLE>
<CAPTION>
1997 1996
------------------------------------- -----------------
Company (1) Predecessors (2) Combined (3) Combined (4)
------- ------------ -------- --------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating $
activities $ (269) 453 $ 184 $ 495
Net cash used in investing activities (19,574) (250) (19,824) (4,739)
Net cash provided by (used in)
financing activities 20,740 (502) 20,238 3,959
-------- ------- --------- --------
Net increase (decrease) in cash and cash
equivalents $ 897 $ (299) $ 598 $ (285)
======== ======= ========= ========
</TABLE>
(1) The financial data for 1997 was derived from the unaudited consolidated
financial statements of the Company which includes the unaudited
combined financial statements of the four predecessors from the date of
acquisition to September 30, 1997. Because the financial data for 1997
includes data of the Company and its predecessors which are presented
on different cost bases, such data are not comparable to the financial
data for 1996.
(2) The financial data for 1997 was derived from the unaudited combined
financial statements included herein of the four predecessors from
January 1, 1997 to the date of acquisition.
(3) The combined financial data is the sum of the actual results for the
Company and its predecessors.
(4) The financial data for 1996 is the sum of the actual results of the
Company and its four predecessors included herein. Because the
financial data of the predecessors are presented on cost bases
different from those of the Company after the acquisitions, the 1996
data is not comparable to the financial data for 1997.
The Company requires capital to support increases in its finance
receivables, and vehicle inventory, parts and accessories inventory, property
and equipment, and working capital for general corporate purposes. Funding
sources available to the Company include operating cash flow, third party
investors, financial institution borrowings and borrowings against finance
receivables. The Company intends to explore selling (securitizing) its finance
receivables in the future.
Net cash used in operating activities of $268,699 for the nine months ended
September 30, 1997 is primarily due to increases in stock option compensation of
$3,244,615, accrued expenses of $3,120,121, inventory of $4,432,309; and
floorplan payable of $2,378,293. The cash provided by operating activities of
the predecessor companies of $495,070 for the same period in 1996 can be
attributed to increases in inventory, provision for credit losses and accounts
payable.
Net cash used in investing activities of $19,574,138 for the nine months
ended September 30, 1997 is the result of the increase in finance receivables of
$6,220,217, use of cash in the acquisition of the predecessors of $8,100,020,
purchase of property and equipment of $656,434, issuance of notes receivable of
$630,167 and deposits paid of $822,200. The cash used in investing activities of
the predecessor companies of $4,738,880 for the same period in 1996 is primarily
due to increases in the finance receivables.
45
<PAGE>
Net cash provided by financing activities of $20,740,406 for the nine
months ended September 30, 1997 is the result of borrowings from Sirrom Capital
Corporation ("Sirrom") of $7,500,000, notes payable on finance receivables of
$10,778,180, and issuance of preferred stock and convertible debentures of
$590,000 and $1,350,000, respectively. Net cash provided by financing activities
of the predecessor companies of $3,958,605 for the same period in 1996 is
primarily due to the issuance of notes payable and notes payable on finance
receivables.
Management of the Company has developed strategies to meet future liquidity
needs. These strategies include: (1) increasing the Company's revolving facility
with Finova Capital Corporation ("Finova") from $35 million to $100 million
effective on or about November 30, 1997; (2) obtaining additional funding
through debt and equity financing; and, (3) tighter control on overall costs.
The Company's management believes that these actions will allow the Company to
meet its future liquidity needs until December 31, 1998.
REVOLVING CREDIT FACILITIES.
The Company's Finova Revolving Facility currently has a maximum commitment
of $35 million. The Company has negotiated an increase in the maximum commitment
to $100 million, effective November 30, 1997, $10 million of which will be
allocated for the acquisition of used car inventory. Under the Finova Revolving
Facility, the Company may borrow up to 55% of the gross balance of eligible
finance contracts. The Finova Revolving Facility expires on November 1, 2000
when its renewal will be subject to renegotiation. The Finova Revolving Facility
is secured by substantially all of the Company's receivables. As of September
30, 1997, the Company's borrowing capacity under the Finova Revolving Facility
was approximately $35 million and the aggregate principal amount outstanding
under the Finova Revolving Facility was $28.8 million. The Finova Revolving
Facility bears interest at the prime rate (currently the Citibank N.A. prime
rate) plus 2%.
The Company currently finances its used car inventory through the
Manheim Facility with a maximum commitment of $3 million and an outstanding
balance at September 30, 1997 of $2.6 million. The Manheim Facility is secured
by the Company's buy here-pay here used car inventory and bears interest at 1.5%
over the prime rate. The Company intends to repay in full the Manheim Facility
at the time the maximum commitment of the Finova Facility is increased.
The Company finances its new car inventory through manufacturer floorplan
facilities. The Volvo Facility has a maximum commitment of $3.2 million, bears
interest at 1% above the prime rate, and at September 30, 1997 had an
outstanding balance of approximately $1.98 million. The Nissan Facility has a $3
million maximum commitment, bears interest at 1% above prime, and at September
30, 1997 had an outstanding balance of approximately $1.7 million. As the
Company acquires additional new car dealerships, it will incur obligations under
applicable manufacturers' floorplan financing arrangements.
LOANS.
In March and May 1997, Sirrom Capital Corporation ("Sirrom") loaned the
Company a total of $7.5 million. The Company issued a $3.5 million convertible
note, convertible until March 12, 1999 at $6.00 per share; and a $4.0 million
convertible note, convertible at $7.50 per share until May 12, 2002.
46
<PAGE>
In September 1997, the Company completed a private placement of
convertible notes in the aggregate amount of $1,050,000. The notes mature on
April 15, 1998, bear interest at the rate of 8% per annum, and, after December
14, 1997, are convertible into Common Stock of the Company at a conversion price
of 66 2/3% of the average closing bid price for the five trading dates
immediately preceding the effective date of conversion. The Company recorded
deferred interest of $525,000 as a result of the discount on the conversion
price which will be amortized from the date of issuance to the first conversion
date of the convertible debt.
In September 1997, the Eckler Subsidiary borrowed $1.5 million from
Stephens, Inc. The loan matures on October 15, 1998, bears interest at the rate
of 10% per annum, and is secured by all of the assets and common stock of the
Eckler Subsidiary. The Company guaranteed the debt.
MORTGAGE LOAN AND LINE OF CREDIT.
The Company has a mortgage payable to a bank with a current principal
balance of approximately $2.3 million at a variable rate of 1.5% above prime.
The mortgage loan is collateralized by the Company's headquarters property,
requires monthly principal payments of $13,333, plus interest, and matures on
July 1, 1998.
ACQUISITION DEBT.
On the closing of the acquisitions during the nine months ended September
30, 1997, the Company incurred debt to certain stockholders of the acquired
companies. The balance as of September 30, 1997, for the acquisition debt
totaled $10.1 million. Of this amount, $4.3 million matures at the earlier of
December 31, 1997 or when the Company successfully completes a secondary
offering of its common stock to the public. The remaining $4.9 million require
monthly principal payments of $27,112 plus interest which mature on June 27,
1999. The Company intends to repay the debt with proceeds of a contemplated
public offering of its common stock, or renegotiate the maturity dates of the
obligations
PREFERRED STOCK
In September 1997, the Company completed a $3 million private placement of
Series A Redeemable Convertible Preferred Stock (the "Series A Preferred
Stock"). The holders of the Series A Preferred Stock are committed to purchase
an additional $1 million of such Preferred Stock upon the occurrence of certain
events. The Series A Preferred Stock is convertible for a period of five years
into Common Stock at a conversion price (subject to various adjustments) which,
at the option of the holders is either fixed at a rate of 135% of the market
price of such Common Stock on September 30, 1997, or floating at a rate of 100%
of the market price of such Common Stock if converted before December 30, 1997
and 90% of the market price if converted any time on or after December 30, 1997
for a period of five years. In connection with the financing, the holders of
Series A Preferred Stock also received warrants to purchase 90,000 shares of the
Company's Common Stock at $8.10 per share (subject to various adjustments) at
any time prior to September 30, 2002.
47
<PAGE>
SEASONALITY.
Historically, the Company's predecessors, except for EII, 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 its
customers receive income tax refunds during the first half of the year, which
are a primary source of down payments on used car purchases.
EII's business is also subject to seasonal fluctuations. Historically,
EII's business has realized a higher portion 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 EII 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.
INFLATION.
Increases in inflation generally result in higher interest rates. Higher
interest rates on the Company's borrowings would decrease the profitability of
the Company's existing portfolio. The Company cannot seek to limit this risk by
increasing interest rates earned on its finance contracts since the interest
charged is the maximum permitted under Florida law. Instead, the Company will
seek to limit this risk, to the extent market conditions permit, by increasing
the profit margin on the cars sold. To date, inflation has not had a significant
impact on the Company's operations.
RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS
128"). FAS 128 establishes new standards for computing and presenting earnings
per share ("EPS"). Specifically, FAS 128 replaces the presentation of primary
EPS with a presentation of basic EPS, requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. FAS 128 is effective for financial statements issued
for periods ending after December 15, 1997, earlier application is not
permitted. EPS for the three and nine months ended September 30, 1997 and
September 30, 1996 computed under FAS 128 would not be materially different than
previously computed.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130") and No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("FAS 131"). FAS 130 establishes standards for reporting and
displaying comprehensive income, its components and accumulated balances. FAS
131 establishes standards for the way the public companies report information
about operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial statements
issued to the public. Both FAS 130 and FAS 131
48
<PAGE>
are effective for periods beginning after December 15, 1997. Adoption
of these standards is not expected to have a material adverse effect
on the Company's financial statements.
49
<PAGE>
PART II
SMART CHOICE AUTOMOTIVE GROUP, INC.
OTHER INFORMATION
-----------------
Item 2. CHANGES IN SECURITIES.
(c) During the period covered by this Report, the Company issued the
unregistered equity securities as set forth below. In each case the transaction
involved a private placement and the Company relied on exemptions from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"1933 Act") or Regulation D thereunder.
In August 1997, the Company closed on the acquisition of the assets of Jack
Winters Enterprises, Inc., a new car dealership, and in connection therewith
issued 18,322 shares of Common Stock to the seller as partial consideration for
the assets.
In August 1997, the Company closed on the acquisition of Stuart Nissan, a
new car dealership, and issued to the sellers 86,546 shares of Common Stock as
partial consideration for the aquisition.
In September 1997, the Company issued 11,429 shares of the Company's Common
Stock to Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. in consideration
of legal services rendered to the Company.
On September 9, 1997 the Company issued 1,000 shares of Common Stock to
Pepper O'Donnell & Co. in consideration of public relations services provided to
the Company.
In September 1997, the Company issued 52,500 warrants to purchase Common
Stock of the Company in connection with the issuance of convertible debt. The
warrants are exercisable at $7.00 per share through August 29, 2002. The related
$1,050,000 of convertible debt may be converted to Common Stock of the Company
at any time after December 14, 1997 at a conversion price of 66 2/3% of the
average trading price of the Common Stock for the five days preceding
conversion, with the conversion ratio decreasing to 62% and 60% respectively if
the shares are not registered by April 15, 1998 and May 15, 1998, respectively.
These securities were acquired by institutional purchasers.
On September 30, 1997, the Company issued 300 shares of newly designated
Series A Redeemable Convertible Preferred Stock at $10,000 per share, and will
issue an additional 100 shares on the occurrence of certain events. The
Preferred Stock is convertible into shares of Common Stock at a conversion price
which, at the option of the buyers, is either fixed at a rate of 135% of the
market price of the Common Stock at the date of issuance of the Preferred Stock,
or floating at a rate of 100% if the market price of such Common Stock if
converted during the period 90 days after issuance of the Preferred Stock and
90% of the market price if converted at any time after 90 days for a period of 5
years. In connection with the issuance of the Preferred Stock, the purchasers
also received warrants to purchase 90,000 shares of the Company's Common Stock
at $8.10 per share are any time prior to September 30, 2002. These securities
were acquired by institutional purchasers.
50
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C> <C>
Exhibit
List Exhibit Description Page Number or Incorporated by reference to:
Exhibit 3.1 to Form SB-2 Registration
3.1 Amended and Restated Articles of Statement, filed on September 1, 1995, File No.
Incorporation of the Company 33-96520-A.
3.2 Amended and Restated By-Laws of the Company Exhibit 3.2 to Form SB-2 Registration
Statement, filed on September 1, 1995, File
No. 33-96520-A.
3.2.1 Amendment No. 1 to Amended and Restated Exhibit 3.2.1 to Amendment No. 2 to Form SB-2
Bylaws Registration Statement, filed on November 6,
1995, File No. 33-96520-A.
3.2.2 Second Articles of Amendment to Articles of Exhibit 3.1 to Form 8-K filed on October 9,
Incorporation 1997, File No. 1-14082.
4.1 Specimen Common Stock Certificate Exhibit 4.1 to Form 8-A Registration Statement,
filed on April 16, 1997, File No. 1-14082.
4.2 Specimen of Warrant Certificate
Exhibit 4.2 to Form 8-A Registration Statement,
filed on April 16, 1997, File No. 1-14082.
4.3 Warrant Agreement between the Company and Exhibit 4.5 to Amendment No. 2 to Form SB-2
American Stock Transfer & Trust Company, as Registration Statement, filed on November 6,
Warrant Agent, dated November 9, 1995 1995, File No. 33-96520-A.
Exhibit 4.4 to Form 8-A Registration Statement,
4.3.1 Form of Amendment to Warrant Agreement filed on April 16, 1997, File No. 1-14082.
10.1 Trademark License Agreement dated effective
October 14, 1992 between the Company and Exhibit 10.17 to Amendment No. 1 to Form SB-2
Chevrolet Motor Division, General Motors Registration Statement, filed on October 13,
Corporation 1995, File No. 33-96520-A.
10.2 Trademark License Agreement dated effective Exhibit 10.2 to Amendment No. 1 to Form SB-2
October 3, 1992 between the Company and Registration Statement, filed on October 13,
General Motors Corporation 1995, File No. 33-96520-A.
10.3 Reproduction and Service Parts Tooling
License Agreement dated December 22, 1993
between the Company and Service Parts Exhibit 10.3.1 to Amendment No. 1 of Form SB-2
Operation, General Motors Corporation Registration Statement, filed on October 13,
("GM License Agreement")* 1995, File No. 33-96520-A.
10.4 Eckler Industries, Inc. Retirement and Exhibit 10.4.1 to Form SB-2 Registration
Savings Plan and Trust Agreement, as Amended Statement, Filed on September 1, 1995 File No. 33-96520-A.
and Restated on September 14, 1992
10.4.1 Amendment No. 1 to Eckler Industries,Inc. Exhibit 10.4.2 to Form SB-2 Registration
Retirement and Savings Plan Trust Agreement Statement,filed on September 1, 1995, File No.
dated March 28, 1994 33-96520-A.
10.5 Eckler Industries, Inc. Non-Qualified Stock Exhibit 10.6 to Form SB-2 Registration
Option Plan Statement, filed on September 1, 1995, File No.
33-96520-A.
10.6 Eckler Industries, Inc. 1995 Combined Exhibit 10.7 to Form SB-2 Registration
Qualified and Non-Qualified Employee Stock Statement, filed on September 1, 1995, File No.
Option Plan 33-96520-A.
51
<PAGE>
10.7 Registration Rights Agreement by and among
the Company and each of the Purchasers Exhibit 10.15 to Amendment No. 1 to Form SB-2
referred to in Schedule 1 thereto, dated Registration Statement, filed on October 13,
September 20, 1995. 1995, File No. 33-96520-A.
10.8 Unit Purchase Option Agreement between the Exhibit 1.2 to Amendment No. 2 to Form SB-2
Company and Argent Securities, Inc. and Registration Statement, filed on November 6,
Certificate dated November 15, 1995 1995, File No. 33-96520-A.
10.9 Stock Purchase Warrant in favor of Ralph H. Exhibit 10.20 to Annual Report on Form 10KSB,
Eckler dated November 15, 1995 filed on January 16, 1997, File No. 1-14082.
10.10 Stock Purchase Warrant in favor of Ronald V. Exhibit 10.21 to Annual Report on Form 10KSB,
Mohr dated November 15,1995. filed on January 16, 1997, File No. 1-14082.
10.11 Stock Purchase Warrant in favor of G. Edward Exhibit 10.22 to Annual Report on Form 10KSB,
Mills dated November 15, 1995. filed on January 16, 1997, File No. 1-14082.
10.12 Stock Purchase Warrant in favor of Robert M. Exhibit 10.23 to Annual Report on Form 10KSB,
Eckler dated November 15, 1995. filed on January 16, 1997, File No. 1-14082.
10.13 Stock Purchase Warrant in favor of Michael Exhibit 10.24 to Annual Report on Form 10KSB,
G. Wilson dated November 15, 1995. filed on January 16, 1997, File No. 1-14082.
10.14 Lease Agreement between the Company and Exhibit 10.21 to Post Effective Amendment No. 1
Titusville Chevrolet-Geo, Inc. dated March to Form SB-2 Registration Statement, filed on
4, 1996 April 10, 1996, File No. 33-96520-A.
10.15 Lease Agreement between the Company and Exhibit 10.22 to Post-Effective Amendment No. 1
Titusville Chevrolet-GEO, Inc. Dated March to Form SB-2 Registration Statement, filed on
4, 1996 April 10, 1996, File No. 33-96520-A.
10.16 Loan Agreement between the Company and Exhibit 10.19 to Post-Effective Amendment No. 2
Barnett Bank, N.A. dated September 30, 1996 to Form SB-2 Registration Statement, filed on
November 14, 1996, File No. 33-96520-A.
10.16.1 Loan Modification Agreement between the Exhibit 10.16.1 to Quarterly Report on Form
Company and Barnett Bank dated April 15, 10-Q, filed on August 19, 1997, File No.
1997. 1-14082.
10.17 Mortgage and Security Agreement between the Exhibit 10.20 to Post-Effective Amendment No. 2
Company and Barnett Bank, N.A. dated to Form SB-2 Registration Statement, filed on
September 30, 1996. November 14, 1996, File No. 33-96520-A.
10.18 Promissory Note in the amount of $2,400,000 Exhibit 10.21 to Post-Effective Amendment No. 2 to
from the Company in favor of Barnett Bank, Form SB-2 Registration Statement, filed on
N.A. dated September 30, 1996. November 14, 1996, File No. 33-96520-A.
10.19 Line of Credit Loan Agreement between the Exhibit 10.22 to Post-Effective Amendment No. 2 to
Company and Barnett Bank, N.A. dated Form SB-2 Registration Statement, filed on
September 30, 1996. November 14, 1996, File No. 33-96520-A.
Exhibit 10.23 to Post-Effective Amendment No. 2 to
10.20 Security Agreement between the Company and Form SB-2 Registration Statement, filed on
Barnett Bank, N.A. dated September 30, 1996. November 14, 1996, File No. 33-96520-A.
10.21 Promissory Note in the amount of $1,000,000 Exhibit 10.24 to Post-Effective Amendment No. 2 to
in favor of Barnett Bank, N.A. dated Form SB-2 Registration Statement, filed on
September 30, 1996 November 14, 1996, File No. 33-96520-A.
10.22 Merger Agreement between Smart Choice
Holdings, Inc., the Company, Thomas E. Conlan Exhibit 10.1 to Form 8-K, filed on February 12,
and Gerald C. Parker dated December 30, 1997. 1997, File No. 1-14082.
10.23 Non-Qualified Stock Option Agreement in favor Exhibit 4.1 to Form 8-K, filed on February 12,
of Ralph H. Eckler, dated January 28, 1997. 1997, File No. 1-14082.
10.24 Registration Rights Agreement with Ralph H. Exhibit 4.2 to Form 8-K, filed on February 12,
Eckler, dated January 28, 1997. 1997, File No. 1-14082.
10.25 Executive Employment Agreement with Ralph H. Exhibit 10.2 to Form 8-K, filed on February 12,
Eckler, dated January 28, 1997. 1997, File No. 1-14082.
10.26 First Amended and Restated Loan and Security Exhibit 4.1 to Form 10-Q, filed on May 20, 1997,
Agreement between Florida Finance Group, File No. 1-14082.
Inc. ("FFG") and Finova Capital Corporation
("Finova"), dated February 4, 1997.
52
<PAGE>
10.27 Warrant to Purchase Common Stock of the Exhibit 4.2 to Form 10-Q, filed on May 20, 1997,
Company between the Company and Finova, File No. 1-14082.
dated January 13, 1997.
10.28 Sixth Amended and Restated Promissory Note Exhibit 4.3 to Form 10-Q, filed on May 20, 1997
dated May 7, 1997, $35,000,000 principal File No. 1-14082.
amount, FFG and Liberty Finance Company,
makers, Finova, payee.
10.29 First Amended and Restated Schedule to Exhibit 4.4 to Form 10-Q, filed on May 20, 1997,
Amended and Restated Loan and Security File No. 1-14082.
Agreement, FFG, borrower, Finova, lender,
dated April 22, 1997.
10.30 Guaranty to Finova from the Company dated Exhibit 4.5 to Form 10-Q, filed on May 20, 1997,
January 13, 1997. File No. 1-14082.
10.31 Stock Purchase Agreement dated January 28, Exhibit 10.1 to Form 10-Q, filed on May 20,
1997 between SCHI and Gary Smith. 1997, File No. 1-14082.
10.32 Promissory Note dated January 28, 1997, Exhibit 10.2 to Form 10-Q filed on May 20, 1997,
First Choice Auto Finance, Inc. ("FCAF"), File No. 1-14082.
maker, Gary Smith, payee, in the principal
amount of $1,031,008.
10.33 Asset Purchase Agreement dated January 28, Exhibit 10.3 to Form 10-Q, filed on May 20,
1997 between FCAF and Gary Smith. 1997, File No. 1-14082.
10.34 Asset Purchase Agreement dated December 19, Exhibit 10.4 to Form 10-Q, filed on May 20,
1996 among FCAF, Jack Winters Enterprises, 1997, File No. 1-14082.
Inc., Jack Winters, and F. Craig Clements.
10.35 Addendum to Asset Purchase Agreement dated Exhibit 10.5 to Form 10-Q, filed on May 20,
March 24, 1997 among FCAF, Jack Winters 1997, File No. 1-14082.
Enterprises, Inc., Jack Winters, and F.
Craig Clements.
10.36 Merger Agreement dated February 12, 1997 Exhibit 10.1 to Form 8-K, filed on February 26,
among the Company, R.C. Hill Acquisition, 1997, File No. 1-14082.
Inc., and R.C. Hill, II.
10.37 Stock Purchase Agreement dated February 12, Exhibit 10.10 to Form 8-K, filed on February 26,1997,
1997 among the Company, FCAF, and R.C. Hill, File No. 1-14082.
II.
10.38 Corporate Guaranty of the Company in favor Exhibit 10.12 to Form 8-K, filed on February 26,
of R.C. Hill, II, dated February 12, 1997. 1997, File No. 1-14082.
10.39 Registration Rights Agreement between the Exhibit 4.1 to Form 8-K, filed on February 26,
Company and R.C. Hill, II, dated February 1997, File No. 1-14082.
12, 1997.
10.40 Asset Purchase Agreement among FCAF, Palm Exhibit 10.17 to Form 8-K, filed on February 26,
Beach Finance and Mortgage Company ("PBF"), 1997, File No. 1-14082.
Two Two Five North Military Corp. ("225"),
and David Bumgardner, and Amendment thereto.
10.41 Loan and Security Agreement between 225 and Exhibit 10.18 to Form 8-K, filed on February 26,
FCAF dated February 14, 1997. 1997, File No. 1-14082.
10.42 9% Secured Convertible Note of FCAF to 225 Exhibit 10.20 to Form 8-K, filed on February 26,
and PBF. 1997, File No. 1-14082.
10.43 9% Convertible Debenture of SCHI to PBF. Exhibit 10.21 to Form 8-K, filed on February 26,
1997, File No. 1-14082.
10.44 Lease between David Bumgardner as Lessor and Exhibit 10.22 to Form 8-K, filed on February 26,
FCAF, Lessee, dated 2/13/97. 1997, File No. 1-14082.
10.45 Promissory Note for $205,574 by FCAF in Exhibit 10.19 to Form 8-K, filed on February 26,
favor of David Bumgardner. 1997, File No. 1-14082.
53
<PAGE>
10.46 Indemnification Agreement in favor of Palm Exhibit 10.23 to Form 8-K, filed on February 26,
Beach Finance and Two Two Five North 1997, File No. 1-14082.
Military Trail by FCAF, dated February 14,
1997.
10.47 Executive Employment Agreement between the Exhibit 10.14 to Form 10-Q, filed on May 20,
Company and Fred E. Whaley. 1997, File No. 1-14082.
10.48 Executive Employment Agreement between the Exhibit 10.15 to Form 10-Q, filed on May 20,
Company and Gary Smith. 1997, File No. 1-14082.
10.49 Executive Employment Agreement between the Exhibit 10.16 to Form 10-Q, filed May 20, 1997,
Company and Robert Abrahams. File No. 1-14082.
10.50 Convertible Senior Promissory Note dated Exhibit 10.18 to Form 10-Q, filed May 20, 1997,
March 31, 1997, the Company, maker, Sirrom, File No. 1-14082.
payee.
10.51 Convertible Senior Promissory Note dated May Exhibit 10.19 to Form 10-Q, filed May 20, 1997,
13, 1997, the Company, maker, Sirrom, payee. File No. 1-14082.
10.52 Amended and restated Registration Rights Exhibit 10.20 to Form 10-Q, filed May 20, 1997,
Agreement between the Company and Sirrom, File No. 1-14082.
dated May 13, 1997.
10.53 Asset Purchase Agreement dated as of June
30, 1997 among the Company and Roman Fedo, Exhibit 10.1 to Form 8-K, filed on July 15,
Fedo Finance, Inc. and Roman Fedo. 1997, File No. 1-14082.
10.54 Asset Purchase Agreement dated as of June
27, 1997 among the Company, Strata Holding,
Inc., Ready Finance, Inc., Donald Cook, Exhibit 10.1 to Form 8-K filed on July 14, 1997,
Marilyn Cook and Madie A. Stratemeyer. File No. 1-14082.
10.55 $900,000 Promissory Note dated August 20,
1997 by First Choice Auto Finance, Inc. Exhibit 10.1 for Form 8-K filed on September 5,
("First Choice"). 1997, File No. 1-14082.
10.56 $300,000 Promissory Note dated August 20,
1997 by First Choice Auto Finance, Inc. Exhibit 10.2 to Form 8-K filed on September 5,
("First Choice"). 1997, File No. 1-14082.
10.57 Form of Convertible Note issued by
Registrant to High Capital Funding, LLC, Exhibit 10.1 to Form 8-K filed on October 9,
among other purchases. 1997, File No. 1-14082.
10.58 Form of Warrant issued by Registrant to High Exhibit 10.2 to Form 8-K filed on October 9,
Capital Funding, LLC, among other purchasers. 1997, File No. 1-14082.
10.59 Promissory Note by Eckler Industries, Inc. Exhibit 10.3 to Form 8-K filed on October 9,
in favor of Stephens, Inc. 1997, File No. 1-14082.
Exhibit 10.4 to Form 8-K filed on October 9,
10.60 Guaranty by Registrant to Stephens, Inc. 1997, File No. 1-14082.
10.61 Pledge and Security Agreement between Exhibit 10.5 to Form 8-K filed on October 9,
Registrant and Stephens, Inc. 1997, File No. 1-14082.
10.62 Securities Purchase Agreement between the Exhibit 10.6 to Form 8-K filed on October 9,
Registrant and certain buyers represented by 1997, File No. 1-14082.
Promethean Investment Group, L.L.C., among
others.
10.63 Form of Warrant from Registrant to certain
buyers represented by Promethean Investment Exhibit 10.7 to Form 8-K filed on October 9,
Group, L.L.C., among others. 1997, File No. 1-14082.
10.64 Registration Rights Agreement between
Registrant and certain buyers represented by
Promethean Investment Group, L.L.C., among Exhibit 10.8 to Form 8-K filed on October 9,
others. 1997, File No. 1-14082.
27 Financial Data Schedules.
</TABLE>
54
<PAGE>
(b) Reports on Form 8-K
A current report on Form 8-K Item 2 was filed by
Smart Choice Automotive Group, Inc. on August 21,
1997.
A current report on Form 8-K/A Item 2 was filed by
Smart Choice Automotive Group, Inc. on August 21,
1997.
A current report on Form 8-K Item 2 was filed by
Smart Choice Automotive Group, Inc. on August 29,
1997.
A current report on Form 8-K/A Item 2 was filed by
Smart Choice Automotive Group, Inc. on August 29,
1997.
A current report on Form 8-K Item 5 was filed by
Smart Choice Automotive Group, Inc. on September 24,
1997.
55
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on November 19, 1997.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ Gary R. Smith
--------------------------------
Gary R. Smith
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signatures Title Date
/s/ Gary R. Smith President, Chief Executive November 19, 1997
- ------------------------ Officer and Director
Gary R. Smith
/s/ Joseph E. Mohr Chief Financial Officer, November 19, 1997
- ------------------------ (Principal Financial and
Joseph E. Mohr Accounting Officer)
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